8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 3, 2005

CADENCE DESIGN SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation) 1-10606
(Commission file number) 77-0148231
(I.R.S. Employer
Identification Number)

2655 Seely Avenue, Building 5
San Jose, California
(Address of principal executive offices)  
95134
(Zip Code)

Registrant’s telephone number, including area code:            (408) 943-1234

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 2.02. Results of Operations and Financial Condition.
	Item 9.01. Financial Statements and Exhibits.
SIGNATURES
EXHIBIT INDEX
EXHIBIT 99.1

Item 2.02. Results of Operations and Financial Condition.

     The financial results of Cadence Design Systems, Inc. (“Cadence”) for the fourth quarter and fiscal year ended January 1, 2005 are provided in Exhibit 99.1 and incorporated by reference herein.

     The presentation of Cadence’s financial results for the fourth quarter and fiscal year ended January 1, 2005 included in this Current Report on Form 8-K is qualified by a detailed discussion of associated material risks set forth in Cadence’s filings with the Securities and Exchange Commission. These include Cadence’s Annual Report on Form 10-K for the year ended January 3, 2004 and Quarterly Report on Form 10-Q for the quarter ended October 2, 2004.

     The information in this report shall be deemed incorporated by reference into any registration statement heretofore or hereafter filed under the Securities Act of 1933, as amended, except to the extent that such information is superceded by information as of a subsequent date that is included in or incorporated by reference into such registration statement. The information in this report shall be treated as filed for purposes of the Securities Exchange Act of 1934, as amended.

Item 9.01. Financial Statements and Exhibits.

(c)   Exhibits

Exhibit

Description

99.1

Cadence Design Systems, Inc. financial results for the fourth quarter and fiscal year ended January 1, 2005. This exhibit shall be deemed incorporated by reference into any registration statement heretofore or hereafter filed under the Securities Act of 1933, as amended, except to the extent that such information is superceded by information as of a subsequent date that is included in or incorporated by reference into such registration statement. The information in this report shall be treated as filed for purposes of the Securities Exchange Act of 1934, as amended.

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 hereunto duly authorized.

Dated: February 3, 2005
	CADENCE DESIGN SYSTEMS, INC.
	By:	/s/ William Porter
		William Porter
		Senior Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit	Description
99.1	Cadence Design Systems, Inc. financial results for the fourth quarter and fiscal year ended January 1, 2005.

EX-99.1

Exhibit 99.1

Cadence Design Systems, Inc.
Consolidated Balance Sheets
January 1, 2005 and January 3, 2004
(In thousands)

	January 1, 2005		January 3, 2004
Current Assets:
Cash and cash equivalents	$	556,766	$	384,525
Short-term investments		36,241		33,898
Receivables, net of allowance for doubtful accounts of $8,151 and $10,967, respectively		384,114		348,680
Inventories		20,481		16,926
Prepaid expenses and other		87,702		58,212
Total current assets		1,085,304		842,241
Property, plant and equipment, net		390,367		403,847
Goodwill		995,065		922,797
Acquired intangibles, net		195,655		237,508
Installment contract receivables, net		96,038		121,627
Other assets		242,799		289,882
Total Assets	$	3,005,228	$	2,817,902
Current Liabilities:
Accounts payable and accrued liabilities		277,992		243,450
Current portion of deferred revenue		270,966		238,478
Total current liabilities		548,958		481,928
Long-term Liabilities:
Long-term portion of deferred revenue		20,847		16,287
Convertible notes		420,000		420,000
Other long-term liabilities		313,043		327,406
Total long-term liabilities		753,890		763,693
Stockholders’ Equity		1,702,380		1,572,281
Total Liabilities and Stockholders’ Equity	$	3,005,228	$	2,817,902

Cadence Design Systems, Inc.
Consolidated Statements of Operations
For the Quarters and Years Ended January 1, 2005 and January 3, 2004
(In thousands, except per share amounts)

	Quarters Ended						Years Ended
	January 1, 2005			January 3, 2004			January 1, 2005			January 3, 2004
	(Unaudited)
Revenue:
Product	$	226,730		$	202,319		$	729,783		$	663,513
Services		32,982			30,187			137,046			131,149
Maintenance		83,384			78,585			330,651			324,822
Total revenue		343,096			311,091			1,197,480			1,119,484
Costs and Expenses:
Cost of product		23,421			17,373			82,011			67,036
Cost of services		21,467			21,624			90,993			93,153
Cost of maintenance		13,236			13,061			53,049			56,460
Marketing and sales		87,806			79,586			325,937			326,579
Research and development		87,713			82,444			351,254			340,121
General and administrative		20,524			16,968			83,414			82,566
Amortization of acquired intangibles		11,028			16,310			55,700			62,573
Amortization of deferred stock compensation		9,484			15,566			31,408			41,124
Legal settlements		—			—			—			(14,500	)
Restructuring and other charges		4,142			2,610			13,542			66,836
Write-off of acquired in-process technology		—			—			9,000			7,500
Total costs and expenses		278,821			265,542			1,096,308			1,129,448
Income (loss) from operations		64,275			45,549			101,172			(9,964	)
Interest expense		(1,378	)		(1,296	)		(6,198	)		(5,002	)
Other income (expense), net		1,479			(5,400	)		(8,537	)		(15,599	)
Income (loss) before provision (benefit) for income taxes		64,376			38,853			86,437			(30,565	)
Provision (benefit) for income taxes		4,581			23,621			11,963			(12,999	)
Net income (loss)	$	59,795		$	15,232		$	74,474		$	(17,566	)
Basic net income (loss) per share	$	0.22		$	0.06		$	0.27		$	(0.07	)
Diluted net income (loss) per share	$	0.20		$	0.05		$	0.25		$	(0.07	)
Weighted average common shares outstanding		270,734			264,178			271,328			266,794
Weighted average common and potential common shares outstanding—assuming dilution		303,858			301,203			305,774			266,794

Cadence Design Systems, Inc.
Consolidated Statements of Cash Flows
For the Years Ended January 1, 2005 and January 3, 2004
(In thousands)

	Year Ended
	January 1,			January 3,
	2005			2004
Cash and Cash Equivalents at Beginning of Year	$	384,525		$	371,327
Cash Flows from Operating Activities:
Net income (loss)		74,474			(17,566	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		179,205			191,608
Amortization of deferred stock compensation		31,407			41,124
Equity in loss from investments, net		16,944			10,875
Gain on sale of investments		(12,467	)		—
Write-off of long-term investment securities		4,236			4,785
Write-off of acquired in-process technology		9,000			7,500
Non-cash restructuring and other charges		4,142			18,438
Tax benefits from employee stock transactions		17,260			14,875
Deferred income taxes		(30,772	)		(60,048	)
Proceeds from the sale of receivables		30,070			87,355
Provisions for losses on trade accounts receivable and sales returns		775			11,428
Other non-cash items		(1,070	)		3,678
Changes in operating assets and liabilities, net of effect of acquired and disposed businesses:
Receivables		(49,361	)		(1,326	)
Inventories		(3,555	)		(7,312	)
Prepaid expenses and other		(3,410	)		(6,820	)
Installment contract receivables		20,556			(107,929	)
Other assets		16,417			31,941
Accounts payable and accrued liabilities		193			(106,687	)
Deferred revenue		34,878			14,642
Other long-term liabilities		31,791			40,440
Net cash provided by operating activities		370,713			171,001
Cash Flows from Investing Activities:
Proceeds from sale and maturities of short-term investments—available-for-sale		8,301			—
Proceeds from the sale of long-term investments		9,900			3,274
Proceeds from sale of equipment		3,625			9,147
Purchases of property, plant and equipment		(61,779	)		(82,881	)
Purchases of software licenses		(4,157	)		(33,507	)
Investment in venture capital partnerships and equity investments		(22,773	)		(39,761	)
Net cash paid in business combinations		(115,170	)		(182,247	)
Net cash used for investing activities		(182,053	)		(325,975	)
Cash Flows from Financing Activities:
Proceeds from credit facility		—			45,000
Principal payments on credit facility and capital leases		(372	)		(98,856	)
Proceeds from issuance of convertible notes		—			420,000
Payment of convertible notes issuance costs		(1,920	)		(11,463	)
Proceeds from sale of common stock warrants		—			56,441
Purchase of call options		—			(134,637	)
Proceeds from issuance of common stock		77,126			86,567
Purchases of treasury stock		(94,103	)		(213,832	)
Net cash provided by (used for) financing activities		(19,269	)		149,220
Effect of exchange rate changes on cash		2,850			18,952
Net increase in cash and cash equivalents		172,241			13,198
Cash and Cash Equivalents at End of Year	$	556,766		$	384,525

Cadence Design Systems, Inc.
(Unaudited)

Revenue Mix by Geography (% of Total Revenue)

	2003																2004
GEOGRAPHY	Q1			Q2			Q3			Q4			Year			Q1			Q2			Q3			Q4			Year
North America		55	%		54	%		59	%		64	%		58	%		53	%		57	%		56	%		45	%		52	%
Europe		17	%		15	%		19	%		16	%		17	%		16	%		19	%		20	%		30	%		22	%
Japan		20	%		22	%		13	%		13	%		17	%		22	%		14	%		15	%		14	%		16	%
Asia		8	%		9	%		9	%		7	%		8	%		9	%		10	%		9	%		11	%		10	%
Total		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%

Revenue Mix by Product Group (% of Total Revenue)

	2003																2004
PRODUCT GROUP	Q1			Q2			Q3			Q4			Year			Q1			Q2			Q3			Q4			Year
Functional Verification		20	%		18	%		18	%		20	%		19	%		20	%		20	%		18	%		19	%		19	%
Digital IC Design		24	%		22	%		27	%		20	%		23	%		25	%		21	%		24	%		27	%		24	%
Custom IC Design		27	%		28	%		27	%		27	%		27	%		27	%		24	%		27	%		27	%		27	%
Design for Manufacturing		9	%		10	%		7	%		13	%		10	%		6	%		9	%		12	%		8	%		9	%
System Interconnect		8	%		9	%		8	%		10	%		9	%		10	%		9	%		8	%		9	%		9	%
Services & Other		12	%		13	%		13	%		10	%		12	%		12	%		17	%		11	%		10	%		12	%
Total		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%

Note: Product Group total revenue includes Product + Maintenance