-----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, SxciOpK+jUlCS7H+YbCDI5vjjQMxP6aR34TZ2GhOuLfB/fdqzcFmTPW31wbmp2m5 Az1kVV5eCjf9wzGg92NrwQ== 0000891618-95-000126.txt : 19950615 0000891618-95-000126.hdr.sgml : 19950615 ACCESSION NUMBER: 0000891618-95-000126 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19950310 SROS: NYSE 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/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-10606 FILM NUMBER: 95519856 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/A 1 AMENDMENT NO. 1 TO FORM 10-Q 1 FORM 10-Q/A AMENDMENT NO. 1 ------------- 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 March 31, 1994 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 0-10606 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 March 31, 1994 there were 41,227,171 shares of the registrant's Common Stock, $0.01 par value outstanding. 1 2 CADENCE DESIGN SYSTEMS, INC. INDEX
PART I. FINANCIAL INFORMATION PAGE NO. Item 1. Financial Statements Condensed Consolidated Balance Sheets: March 31, 1994 and December 31, 1993 3 Condensed Consolidated Statements of Income: Three Months Ended March 31, 1994 and 1993 4 Condensed Consolidated Statements of Cash Flows: Three Months Ended March 31, 1994 and 1993 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Signature 11
2 3 CADENCE DESIGN SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
March 31, December 31, 1994 1993 ----------- ------------ ASSETS (Unaudited) Current Assets: Cash and cash investments $ 62,259 $ 61,382 Short-term investments 43,550 31,423 Accounts receivable, net 88,580 101,890 Inventories 5,187 5,744 Prepaid expenses and other assets 15,865 18,036 -------- -------- Total current assets 215,441 218,475 -------- -------- Property, plant and equipment, net 94,601 61,477 Software development costs, net 31,401 31,265 Purchased software and other intangibles, net 10,935 12,787 Other assets 10,970 15,297 -------- -------- Total assets $363,348 $339,301 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes payable and current portion of long-term obligations $ 27,540 $ 3,962 Accounts payable 12,234 13,513 Accrued liabilities 56,870 51,352 Income taxes payable 2,595 6,541 Deferred revenue 46,104 38,111 -------- -------- Total current liabilities 145,343 113,479 -------- -------- Long-term obligations 2,378 4,001 Lease liabilities 9,109 10,722 Deferred income taxes 2,008 2,243 Other noncurrent liabilities 2,981 2,734 -------- -------- Total long-term liabilities 16,476 19,700 -------- -------- Stockholders' Equity: Common stock 462 460 Additional paid-in capital 251,177 250,501 Treasury shares at cost (4,964,853 and 4,857,200 shares, respectively) (53,886) (52,178) Retained earnings 4,210 8,527 Accumulated translation adjustment (434) (1,188) -------- -------- Total stockholders' equity 201,529 206,122 -------- -------- Total liabilities and stockholders' equity $363,348 $339,301 ======== ========
The accompanying notes are an integral part of these statements. 3 4 CADENCE DESIGN SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended ----------------------------- March 31, March 31, 1994 1993 --------- --------- REVENUE: (Unaudited) Product $61,147 $ 47,114 Maintenance 35,631 29,003 ------- -------- Total revenue 96,778 76,117 ------- -------- COST OF REVENUE: Product 19,716 16,889 Maintenance 3,825 3,958 ------- -------- Total cost of revenue 23,541 20,847 ------- -------- Gross margin 73,237 55,270 ------- -------- OPERATING EXPENSES: Marketing and sales 39,024 37,499 Research and development 16,989 16,918 General and administrative 10,599 9,477 Provision for settlement of litigation 12,104 -- Restructuring costs -- 13,450 Loss from operations of disposed division -- 478 Total operating expenses 78,716 77,822 ------- -------- LOSS FROM OPERATIONS (5,479) (22,552) Other income, net 347 504 ------- -------- Loss before benefit for income taxes (5,132) (22,048) Benefit for income taxes 1,283 5,732 ------- -------- NET LOSS $(3,849) $(16,316) ======= ======== NET LOSS PER SHARE $ (.09) $ (.37) ======= ======== Weighted average common and common equivalent shares outstanding 41,208 44,136 ======= ========
The accompanying notes are an integral part of these statements. 4 5 CADENCE DESIGN SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Three Months Ended ----------------------------------- March 31, March 31, 1994 1993 --------- --------- (Unaudited) CASH AND CASH INVESTMENTS AT BEGINNING OF PERIOD $ 61,382 $ 78,976 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss (3,849) (16,316) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 10,600 10,873 Lease liabilities (1,619) (1,174) Deferred income taxes, noncurrent (235) 1,253 Write-offs of capitalized software development costs and purchased software and intangibles 807 377 Accruals for severance and facilities restructure costs -- 9,573 Increase in other noncurrent liabilities 247 82 Write down and reserve of assets related to restructure -- 3,500 Net changes in current assets and liabilities, net of purchase of third-party interests in partnerships- Decrease in accounts receivable 14,891 33,590 Decrease (increase) in inventories 560 (1,604) Decrease (increase) in prepaid expenses and other assets 2,267 (6,516) Decrease in accrued liabilities and payables (735) (11,949) Increase in deferred revenue 7,698 4,621 -------- -------- Net cash provided by operating activities 30,632 26,310 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Increase in short-term investments (12,127) (3,499) Purchase of property and equipment (2,340) (5,012) Capitalization of software development costs (3,362) (3,760) Decrease (increase) in other assets and purchased software and intangibles 593 (333) Payment for purchase of third-party interests in partnerships, net of cash acquired (8,729) -- -------- -------- Net cash used for investing activities (25,965) (12,604) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term obligations (2,057) (1,978) Sale of common stock, net of notes receivable from stockholders 678 5,597 Purchase of treasury stock, net (1,708) (4,245) -------- -------- Net cash used for financing activities (3,087) (626) -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (703) (1,044) -------- -------- INCREASE IN CASH AND CASH INVESTMENTS 877 12,036 -------- -------- CASH AND CASH INVESTMENTS AT END OF PERIOD $ 62,259 $ 91,012 ======== ========
The accompanying notes are an integral part of these statements. 5 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, 1993. 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. 2. ACQUISITION OF THIRD-PARTY INTERESTS IN REAL ESTATE PARTNERSHIPS In March 1994 the Company acquired all third-party interests in two real estate partnerships in which it was a 46.5% and 80% limited partner, respectively, for approximately $9 million in cash and the assumption of a secured construction loan of approximately $23.5 million. The Company leases buildings from one of the limited partnerships and the second limited partnership owns unencumbered land adjacent to the leased property. The Company paid off the construction loan with its cash reserves in May 1994. 3. LOSS FROM OPERATIONS OF DISPOSED DIVISION In December 1993 the Company sold its Automated Systems ("ASI") division. In prior filings, the Company had reported the operating results of ASI as a discontinued operation in the statements of income. In connection with the filing of a registration statement on Form S-3 to register common stock issued to the shareholders of Comdisco, the Securities and Exchange Commission ("SEC") reviewed the Company's 1993 financial statements and requested that the results of operations and the loss on disposal of ASI be reclassified as components of continuing operations since ASI was not deemed by the SEC to be a major line of business. As a result, the Company has classified the loss from operations of the disposed division within operating expenses in the accompanying statement of income. Revenue of the disposed division was $3,223,000 for the quarter ending March 31, 1993. 4. PURCHASE OF COMDISCO SYSTEMS, INC. In June 1993 the Company acquired the business and certain assets of Comdisco Systems, Inc. ("Comdisco"), a subsidiary of Comdisco, Inc. in exchange for 1,050,000 shares of the Company's common stock and a warrant to purchase 1,300,000 shares of the Company's common stock. The acquisition was accounted for as a purchase. Accordingly, the results of Comdisco from the date of acquisition forward have been recorded in the Company's consolidated financial statements. Comparative pro forma financial information has not been presented as the results of operations for Comdisco are not material to the Company's consolidated financial statements for 1993. 6 7 5. DISCLOSURE OF NONCASH INVESTING ACTIVITIES As discussed in Note 2 the Company purchased all third-party interests in two real estate partnerships for approximately $9 million. In connection with the acquisition, net assets acquired were as follows (in thousands): Property and other assets $ 36,083 Liabilities assumed (23,576) Less cash acquired (3,778) -------- Total $ 8,729 ========
6. INVESTMENTS IN DEBT AND EQUITY SECURITIES Effective January 1, 1994 the Company adopted Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities". There was no effect on the Company's operating results due to the adoption. The Company classifies its investments as "held-to-maturity" for the purposes of this statement. The investments mature at various dates through December 1994. 7. NET LOSS PER SHARE Net loss per share is calculated by dividing net loss by the weighted average number of shares of common stock. 8. 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):
March 31, December 31, 1994 1993 ---------- ----------- (Unaudited) Raw materials and supplies $1,361 $2,240 Work-in-progress 2,661 2,214 Finished goods 1,165 1,290 ------ ------ Total $5,187 $5,744 ====== ======
9. COMMITMENTS AND CONTINGENCIES Stockholder 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 suits were subsequently consolidated into a single lawsuit and the class period changed to include purchasers of the Company's common stock during the period from October 18, 1990 through April 3, 1991. The lawsuit 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 June 2, 1993 the District Court granted in part and denied in part the Company's motion to dismiss the complaint in the class action originally filed in April 1991. The effect of this ruling was to limit the class period to include purchasers of the Company's common stock between January 29, 1991 and April 3, 1991. Trial of this matter was scheduled to commence August 8, 1994. 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. Two additional complaints identical to the complaint filed on March 23, 1993 except for the identities of the plaintiffs, were filed later in March and in April 1993. All three complaints 7 8 were consolidated into a single lawsuit which seeks unspecified damages on behalf of all purchasers of the Company's common stock between October 12, 1992 and March 19, 1993. The lawsuit 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. The agreements are subject to negotiation and execution of final settlement agreements, final court approval and certain contingencies. The tentative agreements provide for payment by the Company, net of insurance proceeds, of approximately $11 million in the second quarter of 1994. The Company is seeking to recover a portion of this payment from one of its insurers. The provision for settlement of litigation recorded in the first quarter includes the above settlement amount as well as legal costs associated with the settlement. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Revenue for the first quarter ended March 31, 1994 was $96.8 million compared with $76.1 million for the same period of the prior year, an increase of 27%. This increase was partially due to improved economic conditions, increased demand for the Company's products including the addition of the business of Comdisco and higher maintenance revenue from a larger installed product base. Also, revenue for the first quarter of 1993 was adversely impacted by a shift in the Company's systems product strategy. This shift in strategy refocused the Company's development efforts on a product previously developed and marketed by an acquired company. This product had been discontinued near the time of the acquisition due to an overlap of products in the newly combined company. As a result of this change, a significant portion of the Company's selling efforts were focused on explaining this shift in product strategy to the Company's existing and potential customers rather than engaging in normal sales activities, resulting in a reduction in revenue in 1993. Maintenance revenue increased in absolute dollars by $6.6 million for the three months ended March 31, 1994 as compared to the same period in 1993, in part because of a larger customer base, the increased focus on customer renewals and the addition of Comdisco operations. Total cost of revenue was $23.5 million for the three months ended March 31, 1994 as compared to $20.8 million for the same period in 1993, an increase of 13%. Cost of product was $19.7 million for the first quarter of 1994 as compared to $16.9 million for the same period in 1993. This increase in cost of product was partially due to an increase in the amortization and write-off of purchased software and intangibles, as well as increased expenses related to the addition of Comdisco operations. Cost of maintenance decreased in absolute dollars for the first quarter of 1994 as compared to the same period in the prior year. The slight decrease was due to the streamlining of the maintenance renewal process which includes a more cost-effective update program and lower cost media. Gross margin was 76% and 73% for the first quarter ended March 31, 1994 and 1993, respectively. Marketing and sales expenses were $39.0 million for the first quarter ended March 31, 1994 compared with $37.5 million in the same period of the prior year, an increase of 4%. This increase was primarily due to the addition of Comdisco operations. 8 9 Research and development expenses for the first quarter ended March 31, 1994 were $17.0 million compared with $16.9 million in the same period of the prior year. Capitalization of software development costs for the quarters ended March 31, 1994 and 1993 was $3.4 million and $3.8 million, which represented 17% and 18% of total research and development expenditures made in each of those periods, respectively. Gross research and development expenditures decreased from $20.7 million to $20.4 million for the three months ended March 31, 1993 as compared to March 31, 1994. The decrease was due to reduced equipment maintenance and facility costs partially offset by increased expenses related to the addition of Comdisco operations. General and administrative expenses increased to $10.6 million for the first quarter ended March 31, 1994 from $9.5 million in the same period of 1993, an increase of 12%. This increase was primarily due to increases in legal expenses, expenses related to the addition of Comdisco operations and increased bad debt expense. 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 includes costs related to the settlement payments as well as legal costs associated with the settlement. In March 1993 the Company recorded restructuring costs of $13.5 million associated with a planned restructure of certain areas of sales, operations and administration due to business conditions. The restructuring charge primarily reflects costs associated with excess facilities, the write-off of software development costs and purchased software and intangibles and employee terminations arising from required adjustments to the Company's cost structure necessitated by lower revenue levels. The Company sold its ASI division in December 1993 and has reclassified the financial information of prior periods to report the operating results of ASI as a separate line item within operating expenses in the consolidated statement of income. In the first quarter of 1993 the Company recorded a $.5 million loss related to the operating results of the disposed division. Net other income for the first quarter ended March 31, 1994 was $.3 million compared with $.5 million for the same period in 1993. This decrease was primarily due to increased expense related to foreign exchange loss and other expenses which were partially offset by an increase in interest income. The Company's estimated annual effective tax rate for fiscal 1994 is 25% as compared to 26% for the same period in the prior year. 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. 9 10 LIQUIDITY AND CAPITAL RESOURCES During the three months ended March 31, 1994 the Company's cash and cash investments and short-term investments increased $13.0 million from $92.8 million to $105.8 million. This increase was primarily due to net cash generated from operating activities ($30.6 million) exceeding net cash used for investing activities ($13.8 million, excluding the $12.1 million increase in short-term investments) and net cash used for financing activities ($3.1 million). In addition to $105.8 million in cash and cash investments and short-term investments at March 31, 1994, the Company had available $15.0 million under equipment lease lines and $17.5 million under bank lines of credit. The Company was not in compliance with certain covenants related to its lines of credit at March 31, 1994. The Company subsequently obtained waivers of the noncompliance from the banks. The bank lines of credit expire in May and June 1994. The Company anticipates it will obtain new bank lines of credit to replace the expiring lines. Anticipated cash requirements in 1994 include payments related to the pay off of the $23.5 million construction loan (paid in May 1994), the settlement of the class action lawsuits (approximately $11 million to be paid during the second quarter), the purchase of treasury stock, contemplated additions of capital equipment and restructure costs accrued at March 31, 1994. Prior to 1993, the Company authorized the repurchase of up to 2.8 million shares of common stock in the open market over the next several years to satisfy its estimated requirements for shares to be issued under its employee stock option and stock purchase plans. In April 1993 the Company authorized the repurchase of an additional 4.0 million shares of common stock from time to time in the open market. In addition, in February 1994 the Company authorized the repurchase of an additional 2.9 million shares. In total, as of March 31, 1994 approximately 5.9 million shares had been repurchased. The Company anticipates that current cash and short-term investment balances, cash flows from operations and unused balances on equipment lease lines and lines of credit will be sufficient to meet its working capital and capital expenditure requirements for at least the next year. 10 11 SIGNATURE 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: March 9, 1995 By: /s/ H. Raymond Bingham --------------------------- H. RAYMOND BINGHAM Executive Vice President and Chief Financial Officer 11 -----END PRIVACY-ENHANCED MESSAGE-----