-----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, dPdlWBZC3X3nOgakBZIDZcjO2XoCVXYLt2tX1k7Guag0D1A6v4ZgUxlRqMgyREho dJ5RnVyXLTAAFfH5RNB+Gg== 0000891618-95-000127.txt : 19950615 0000891618-95-000127.hdr.sgml : 19950615 ACCESSION NUMBER: 0000891618-95-000127 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 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: 95519857 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 QRTLY REPORT ENDING 6/30/94 1 FORM 10-Q/A AMENDMENT NO. 2 --------------- 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 June 30, 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 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 August 5, 1994 there were 39,240,810 shares of the registrant's Common Stock, $0.01 par value outstanding. 2 CADENCE DESIGN SYSTEMS, INC. INDEX PART I. FINANCIAL INFORMATION PAGE NO. Item 1. Financial Statements Condensed Consolidated Balance Sheets: June 30, 1994 and December 31, 1993 3 Condensed Consolidated Statements of Income: Three and Six Months Ended June 30, 1994 and 1993 4 Condensed Consolidated Statements of Cash Flows: Six Months Ended June 30, 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 12 3 CADENCE DESIGN SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
June 30, December 31, 1994 1993 ---------- ------------ (Unaudited) ASSETS Current Assets: Cash and cash investments $ 68,387 $ 61,382 Short-term investments 28,412 31,423 Accounts receivable, net 74,156 101,890 Inventories 5,204 5,744 Prepaid expenses and other assets 15,185 18,036 --------- --------- Total current assets 191,344 218,475 --------- --------- Property, plant and equipment, net 93,421 61,477 Software development costs, net 30,484 31,265 Purchased software and other intangibles, net 10,189 12,787 Other assets 11,227 15,297 --------- --------- Total assets $ 336,665 $ 339,301 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term obligations $ 2,792 $ 3,962 Accounts payable 13,598 13,513 Accrued liabilities 52,317 51,352 Income taxes payable 5,548 6,541 Deferred revenue 52,731 38,111 --------- --------- Total current liabilities 126,986 113,479 --------- --------- Long-term obligations 2,292 4,001 Lease liabilities 9,819 10,722 Deferred income taxes 2,202 2,243 Other noncurrent liabilities 2,558 2,734 --------- --------- Total long-term liabilities 16,871 19,700 --------- --------- Put warrants 44,270 --- --------- --------- Stockholders' Equity: Common stock 465 460 Additional paid-in capital 209,599 250,501 Treasury shares at cost (6,512,380 and 4,857,200 shares, respectively) (76,750) (52,178) Retained earnings 14,292 8,527 Accumulated translation adjustment 932 (1,188) --------- --------- Total stockholders' equity 148,538 206,122 --------- --------- Total liabilities and stockholders' equity $ 336,665 $ 339,301 ========= =========
The accompanying notes are an integral part of these statements. 4 CADENCE DESIGN SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Six Months Ended ---------------------- ------------------------- June 30, June 30, June 30, June 30, 1994 1993 1994 1993 -------- -------- --------- -------- (Unaudited) (Unaudited) REVENUE Product $ 62,685 $60,301 $123,832 $107,415 Maintenance 38,358 28,513 73,989 57,516 -------- ------- -------- -------- Total revenue 101,043 88,814 197,821 164,931 -------- ------- -------- -------- COST OF REVENUE Product 19,260 18,894 38,976 35,783 Maintenance 3,309 3,845 7,134 7,803 -------- ------- -------- -------- Total cost of revenue 22,569 22,739 46,110 43,586 -------- ------- -------- -------- Gross margin 78,474 66,075 151,711 121,345 -------- ------- -------- -------- OPERATING EXPENSES Marketing and sales 39,418 38,968 78,442 76,467 Research and development 18,299 16,134 35,288 33,052 General and administrative 9,807 9,370 20,406 18,847 Provision for settlement of litigation (2,050) --- 10,054 --- Restructuring costs --- --- --- 13,450 Loss from operations of disposed division --- 1,077 --- 1,555 -------- ------- -------- -------- Total operating expenses 65,474 65,549 144,190 143,371 -------- ------- --------- -------- INCOME (LOSS) FROM OPERATIONS 13,000 526 7,521 (22,026) Other income, net 443 598 790 1,102 -------- ------- --------- -------- Income (loss) before provision (benefit) for income taxes 13,443 1,124 8,311 (20,924) Provision (benefit) for income taxes 3,361 292 2,078 (5,440) -------- ------- --------- -------- NET INCOME (LOSS) $ 10,082 $ 832 $ 6,233 $(15,484) ======== ======= ========= ======== NET INCOME (LOSS) PER SHARE $ .23 $ .02 $ .14 $ (.36) ======== ======= ========= ======== Weighted average common and common equivalent shares outstanding 44,576 43,011 44,973 43,573 ======== ======= ========= ========
The accompanying notes are an integral part of these statements. 5 CADENCE DESIGN SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Six Months Ended -------------------- June 30, June 30, 1994 1993 -------- -------- (Unaudited) CASH AND CASH INVESTMENTS AT BEGINNING OF PERIOD $ 61,382 $ 78,976 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) 6,233 (15,484) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 23,967 22,123 Lease liabilities (960) (1,709) Deferred income taxes, noncurrent (41) 5,573 Write-offs of capitalized software development costs, purchased software and intangibles 807 --- Accruals for severance and facilities restructure costs --- 6,833 Decrease in other noncurrent liabilities (196) (9) Write down and reserve of assets related to restructure --- 6,617 Net changes in current assets and liabilities, net of purchase of third-party interests in partnerships: Decrease in accounts receivable 30,855 40,666 Decrease (increase) in inventories 506 (1,177) Decrease (increase) in prepaid expenses and other assets 3,075 (10,044) Decrease in accrued liabilities and payables (770) (10,359) Increase in deferred revenue 14,003 5,942 -------- -------- Net cash provided by operating activities 77,479 48,972 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of short-term investments (28,074) (42,846) Sale of short-term investments 31,085 20,059 Purchase of property and equipment (8,356) (11,780) Capitalization of software development costs (6,124) (7,911) Increase in other assets and purchased software and intangibles (229) (532) Payment for purchase of third-party interests in partnerships, net of cash acquired (8,729) --- Sale of put warrants 5,801 --- Purchase of call options (5,801) --- -------- -------- Net cash used for investing activities (20,427) (43,010) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on notes payable and long-term obligations (27,170) (6,069) Sale of common stock, net of notes receivable from stockholders 3,373 4,925 Purchase of treasury stock, net (25,040) (27,460) -------- -------- Net cash used for financing activities (48,837) (28,604) -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,210) (980) -------- -------- INCREASE (DECREASE) IN CASH AND CASH INVESTMENTS 7,005 (23,622) -------- -------- CASH AND CASH INVESTMENTS AT END OF PERIOD $ 68,387 $ 55,354 ======== ========
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, 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 leased buildings from one of the limited partnerships and the second limited partnership owned unencumbered land adjacent to the leased property. The Company paid off the secured 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 statements of income. Revenue of the disposed division was approximately $2.9 million and $6.1 million for the quarter and six months ended June 30, 1993, respectively. 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. 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 of this statement. 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 INCOME (LOSS) PER SHARE The number of shares used in the computation of 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. 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 shares of common stock. Fully diluted net income (loss) per share is substantially the same as primary net income (loss) per share. 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):
June 30, December 31, 1994 1993 ----------- ------------ (Unaudited) Raw materials and supplies $1,070 $2,240 Work-in-progress 2,669 2,214 Finished goods 1,465 1,290 ------ ------ Total $5,204 $5,744 ====== ======
9. 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 8 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. The agreements are subject to negotiation and execution of final settlement agreements and final court approval. The Company remitted into escrow approximately $13.2 million during the second quarter of 1994 and will remit the remaining $3.3 million in the third quarter of 1994. In May 1994 the Company concluded negotiations on the second lawsuit with its secondary insurance carrier, who agreed to provide coverage on the settlement. Accordingly, net income for the second quarter included a credit to operating expenses of approximately $2.1 million for additional insurance proceeds and the reduction of accruals for legal expenses relating to the provision taken in the first quarter for settlement of the two shareholder class action suits. 10. PUT WARRANTS During the second quarter, the Company, through private placement, sold three million put warrants that entitle the holder of each warrant to sell one share of common stock to the Company at a specified price ranging from $13.13 to $16.58 per share. Additionally, the Company purchased 2,250,000 call options that entitle the Company to buy one share of common stock at prices ranging from $14.94 to $17.83 per share. These put warrants and call options outstanding at June 30, 1994 expire on various dates between April 1995 and June 1995. The amount related to the Company's maximum potential repurchase obligation under the put warrants at June 30, 1994 has been reclassified from stockholders' equity to put warrants in the accompanying balance sheet. The Company has the right to settle these put warrants with stock, or a cash settlement equal to the difference between the exercise price and market value at the date of exercise. These securities had no significant dilutive effect on net income per share for the periods presented. 11. SUBSEQUENT EVENT In July 1994, the Company and Redwood Design Automation, Inc. ("Redwood") entered into a definitive merger agreement which provides that approximately 500,000 shares of the Company's common stock will be issued in exchange for all of the outstanding stock of Redwood. The merger will be accounted for as a purchase. The acquisition of Redwood is expected to be completed during the third quarter and is not expected to have a material impact on the financial position or results of operations of the Company. In addition, the Company has loaned Redwood $2.5 million in the form of a $1.0 million note payable due August 30, 1996 and a $1.5 million note payable due September 30, 1996. Interest on both notes is compounded monthly at a prime rate. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Revenue for the second quarter ended June 30, 1994 was $101.0 million compared with $88.8 million for the same period of the prior year, an increase of 14%. For the six months ended June 30, 1994, revenue was $197.8 million, an increase of 20% from revenue of $164.9 million recorded for the same period of 1993. Product revenue increased $2.4 million from $60.3 million for the quarter ended June 30, 1993 to $62.7 million for the quarter ended June 30, 1994. For the six month period ended June 30, 1994, product revenue was $123.8 million as compared to $107.4 million for the same period in 1993. The increase in product revenue for the six month period is partially due to improved economic conditions and increased demand for the Company's products resulting partly from the addition of Comdisco operations. Also, revenue for the first six months of 1993 was adversely impacted by a shift in the Company's systems product strategy. This shift in strategy refocused 9 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 $9.8 million and $16.5 million for the three and six month periods ended June 30, 1994, respectively, as compared to the same periods in 1993, in part because of a larger customer base, continued focus on customer renewals and the addition of Comdisco operations. Cost of product was $19.3 million and $39.0 million for the three and six month periods ended June 30, 1994, respectively, as compared to $18.9 million and $35.8 million for the same periods in 1993. Cost of product for the quarter ended June 30, 1994 was $.4 million greater than cost of product for the quarter ended June 30, 1993. Increased expenses related to the addition of Comdisco operations were partly offset by decreased royalty and purchased software expense. The increase in cost of product for the six month period ended June 30, 1994 is partially the result of increased expenses related to the addition of Comdisco operations, as well as increased amortization and write-off of purchased software and intangibles. Cost of maintenance decreased in absolute dollars from $3.8 million and $7.8 million for the quarter and six month period ended June 30, 1993, respectively, to $3.3 million and $7.1 million for the same periods in 1994. These decreases resulted primarily from utilizing a more cost-effective update program and lower cost media in 1994. As a result of the factors discussed above, gross margin increased from 74% for the three and six month periods ended June 30, 1993, respectively, to 78% and 77% for the same periods in 1994. Marketing and sales expenses were $39.4 million for the quarter ended June 30, 1994 as compared to $39.0 million for the same period in 1993. For the six months ended June 30, 1994, as compared to the same period in the prior year, marketing and sales expenses increased from $76.5 million to $78.4 million. This increase in marketing and sales expense was primarily due to the addition of Comdisco operations and increased facilities costs. Research and development expenses for the second quarter ended June 30, 1994 were $18.3 million as compared to $16.1 million for the same period of the prior year, an increase of 13%. Capitalization of software development costs for the quarters ended June 30, 1994 and 1993 was $2.8 million and $4.2 million, which represented 13% and 20% of total research and development expenditures made in each of those periods, respectively. For the six months ended June 30, 1994, research and development expenses were $35.3 million compared with $33.1 million for the same period in 1993, after capitalization of $6.1 million and $7.9 million, which represented 15% and 19% of total research and development expenditures made in those periods, respectively. Gross research and development expenditures increased from $20.3 million for the three months ended June 30, 1993 to $21.1 million for the same period in the current year and increased to $41.4 million for the six months ended June 30, 1994 from $41.0 million for the same period in the prior year. These increases were primarily due to increased costs related to the addition of Comdisco operations partially offset by cost savings resulting from the purchase of facilities in the first quarter of 1994. General and administrative expenses increased to $9.8 million for the second quarter ended June 30, 1994 from $9.4 million for the same period in 1993, an increase of 5%. This increase resulted primarily from increased costs associated with the addition of Comdisco operations. For the six months ended June 30, 1994, general and administrative expenses were $20.4 million as compared to $18.8 million for the same period in 1993, an increase of 8%. The year over year increase for the six month period was primarily the result of increased costs related to the addition of Comdisco operations, increased professional services and provisions for bad debt partly offset by cost savings resulting from the purchase of facilities in 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 $12.1 million provision was comprised of $17.9 million for settlement payments and legal costs offset by $5.8 million of receivables due from the Company's insurance 10 carriers. In May 1994 the Company concluded negotiations on the second lawsuit with its secondary insurance carrier, who agreed to provide coverage on the settlement. 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. 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 reflects costs associated with employee terminations, excess facilities and the write-off of purchased software and intangibles arising from required adjustments to the Company's cost structure necessitated by lower revenue levels. Also included in the restructuring charge was an additional provision for doubtful accounts and the write-off of certain software development costs resulting from changes in the systems product strategy. 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 statements of income. For the three and six months ended June 30, 1993, the Company recorded losses of $1.1 million and $1.6 million, respectively, related to the operating results of the disposed division. Net other income for the second quarter ended June 30, 1994 was $.4 million compared with $.6 million for the same period in 1993. For the six months ended June 30, 1994, net other income was $.8 million as compared to $1.1 million for the same period in 1993. There were no material fluctuations in the components of other 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. LIQUIDITY AND CAPITAL RESOURCES During the six months ended June 30, 1994 the Company's cash and cash investments and short-term investments increased $4.0 million from $92.8 million to $96.8 million. This increase was primarily due to net cash generated from operating activities exceeding net cash used for investing and financing activities. Cash used for financing activities included approximately $25.0 million of net treasury stock purchases and an approximate $23.5 million payment of a construction loan. As part of its authorized stock repurchase program, the Company has the maximum potential obligation at June 30, 1994 to buy back three million shares of its common stock at an aggregate price of $44.3 million. The Company has the right to settle these put warrants with stock, or a cash settlement equal to the difference between the exercise price and market value at the date of exercise. In addition to the $96.8 million in cash and cash investments and short-term investments at June 30, 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 financial covenants under its lines of credit as of June 30, 1994, primarily due to its stock repurchase activity. The items of noncompliance related to net worth, stock repurchase and current ratio levels. Subsequent to June 30, 1994, the Company obtained waivers of the noncompliance from the banks. The Company is currently in the process of renegotiating the bank lines of credit and has obtained extensions of the current lines of credit through May and June 1995. 11 Anticipated cash requirements in 1994 include the purchase of treasury stock, the settlement of the class action lawsuits (approximately $3.3 million to be paid during the third quarter) and contemplated additions of capital equipment. Prior to 1993, the Company authorized the repurchase of up to 2.8 million shares of common stock in the open market to satisfy its estimated requirements for shares to be issued under its employee stock option and stock purchase plans. In April 1993, February 1994 and June 1994, the Company authorized the repurchase of an additional 4.0 million shares, 2.9 million shares and 5.2 million shares, respectively, of common stock from time to time. Some purchases are necessary to satisfy estimated requirements for shares to be issued under the Company's employee stock option and stock purchase plans. 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 the foreseeable future. 12 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 -----END PRIVACY-ENHANCED MESSAGE-----