EX-99.01 2 f57166exv99w01.htm EX-99.01 exv99w01
Exhibit 99.01
Cadence Reports Q3 2010 Financial Results
SAN JOSE, Calif. — October 27, 2010 — Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the third quarter of fiscal year 2010.
     Cadence reported third quarter 2010 revenue of $238 million, compared to revenue of $216 million reported for the same period in 2009. On a GAAP basis, Cadence recognized net income of $127 million, or $0.48 per share on a diluted basis in the third quarter of 2010, compared to a net loss of $14 million, or $(0.05) per share on a diluted basis, in the same period in 2009. Cadence’s third quarter 2010 net income includes a $148 million income tax benefit related to the settlement of an Internal Revenue Service examination of Cadence’s federal income tax returns for the tax years 2000 through 2002.
     Using Cadence’s non-GAAP measure, net income in the third quarter of 2010 was $11 million, or $0.04 per share on a diluted basis, as compared to net income of $7 million, or $0.03 per share on a diluted basis, in the same period in 2009.
     “Cadence had a successful third quarter. Momentum for Cadence solutions is building at our key customers, driven by the combination of leading and competitive technology and solid performance from the Cadence team. Revenue and operating margin continue to grow. There is still more work to do, but I am pleased with our results to date,” said Lip-Bu Tan, president and chief executive officer.

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     In addition to using GAAP results to evaluate Cadence’s business, management believes it is useful to measure results using a non-GAAP measure of net income or net loss, which excludes, as applicable, amortization of intangible assets, stock-based compensation expense, integration and acquisition-related costs, acquisition-related income tax benefits, shareholder litigation costs, gains or losses and expenses or credits related to non-qualified deferred compensation plan assets, executive severance costs, restructuring charges and credits, amortization of discount on convertible notes, losses on extinguishment of debt, equity in losses or income from investments, write-down of investments, and gains or losses on the sale of investments. Non-GAAP net income or net loss is adjusted by the amount of additional taxes or tax benefit that the company would accrue if it used non-GAAP results instead of GAAP results to calculate the company’s tax liability. See “GAAP to non-GAAP Reconciliation” below for further information on the non-GAAP measure.
     The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.
Business Outlook
     For the fourth quarter of 2010, the company expects total revenue in the range of $230 million to $240 million. Fourth quarter GAAP net loss per diluted share is expected to be in the range of $(0.06) to $(0.04). Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.03 to $0.05.
     For the full year 2010, the company expects total revenue in the range of $917 million to $927 million. On a GAAP basis, net income per diluted share for fiscal 2010 is expected to be in the range of $0.55 to $0.57. Using the non-GAAP measure defined below, net income per diluted share for fiscal 2010 is expected to be in the range of $0.16 to $0.18.
     A schedule showing a reconciliation of the business outlook from GAAP net income or net loss and diluted net income or net loss per share to non-GAAP net income and diluted net income per share is included with this release.

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Audio Webcast Scheduled
     Lip-Bu Tan, Cadence’s president and chief executive officer, and Kevin S. Palatnik, Cadence’s senior vice president and chief financial officer, will host a third quarter of fiscal year 2010 financial results audio webcast today, October 27, 2010, at 2 p.m. (Pacific) / 5 p.m. (Eastern). Attendees are asked to register at the Web site at least 10 minutes prior to the scheduled webcast. An archive of the webcast will be available starting October 27, 2010 at 5 p.m. (Pacific) and ending November 10, 2010 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/company/investor_relations.
About Cadence
     Cadence enables global electronic-design innovation and plays an essential role in the creation of today’s integrated circuits and electronics. Customers use Cadence® software and hardware, methodologies, and services to design and verify advanced semiconductors, consumer electronics, networking and telecommunications equipment, and computer systems. Cadence is headquartered in San Jose, Calif., with sales offices, design centers, and research facilities around the world to serve the global electronics industry. More information about Cadence and its products and services is available at www.cadence.com.
Cadence and the Cadence logo are registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.
     The statements contained above regarding Cadence’s third quarter 2010 results, as well as the information in the Business Outlook section and the statements by Lip-Bu Tan, include forward-looking statements based on current expectations or beliefs, as well as a number of preliminary assumptions about future events that are subject to factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Readers are cautioned not to put undue reliance on these forward-looking statements, which are not a guarantee of future performance and are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence’s control, including, among others: (i) Cadence’s ability to compete successfully in the electronic design automation product and the commercial electronic design and methodology services industries; (ii) Cadence’s ability to successfully complete and realize the expected benefits of the previously disclosed restructurings without significant unexpected costs or delays, and the success of Cadence’s other efforts to improve operational efficiency and growth; (iii) the mix of products and services sold and the timing of significant orders for Cadence’s products, and its shift to a ratable license structure, which may result in changes in the mix of license types; (iv) change in customer

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demands, including the possibility that the previously disclosed restructurings and other efforts to improve operational efficiency could result in delays in customers’ purchases of products and services; (v) economic and industry conditions in regions in which Cadence does business; (vi) fluctuations in rates of exchange between the U.S. dollar and the currencies of other countries in which Cadence does business; (vii) capital expenditure requirements, legislative or regulatory requirements, interest rates and Cadence’s ability to access capital and debt markets; (viii) the acquisition of other companies or technologies or the failure to successfully integrate and operate these companies or technologies Cadence acquires; (ix) the effects of the previously disclosed restructurings and other efforts to improve operational efficiency on Cadence’s business, including its strategic and customer relationships, ability to retain key employees and stock prices; (x) events that affect the reserves or settlement assumptions Cadence may take from time to time with respect to accounts receivable, taxes, litigation or other matters; and (xi) the effects of any litigation or other proceedings to which Cadence is or may become a party.
     For a detailed discussion of these and other cautionary statements related to our business, please refer to Cadence’s filings with the Securities and Exchange Commission. These include Cadence’s Annual Report on Form 10-K for the year ended January 2, 2010, Cadence’s Quarterly Report on Form 10-Q for the period ended July 3, 2010 and Cadence’s future filings.

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GAAP to non-GAAP Reconciliation
     Cadence management evaluates and makes operating decisions using various operating measures. These measures are generally based on the revenues of its product, maintenance and services business operations and certain costs of those operations, such as cost of revenues, research and development, sales and marketing and general and administrative expenses. One such measure is non-GAAP net income or net loss, which is a non-GAAP financial measure under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended, and is GAAP net income or net loss excluding, as applicable, amortization of intangible assets, stock-based compensation expense, integration and acquisition-related costs, acquisition-related income tax benefits, shareholder litigation costs, gains or losses and expenses or credits related to non-qualified deferred compensation plan assets, executive severance costs, restructuring charges and credits, amortization of discount on convertible notes, losses on extinguishment of debt, equity in losses or income from investments, write-down of investments and gains or losses on the sale of investments. Intangible assets consist primarily of purchased or licensed technology, backlog, patents, trademarks, distribution rights, customer contracts and related relationships and non-compete agreements. Non-GAAP net income or net loss is adjusted by the amount of additional taxes or tax benefit that the company would accrue if it used non-GAAP results instead of GAAP results to calculate the company’s tax liability.
     Cadence’s management believes it is useful in measuring Cadence’s operations to exclude amortization of intangible assets and integration and acquisition-related costs because these costs are primarily fixed at the time of an acquisition and generally cannot be changed by Cadence’s management in the short term. In addition, Cadence’s management believes it is useful to exclude stock-based compensation expense because such exclusion enhances investors’ ability to review Cadence’s business from the same perspective as Cadence’s management, which believes that stock-based compensation expense is based on many subjective inputs at a point in time and many of these inputs are not necessarily directly attributable to the underlying performance of Cadence’s business operations. Cadence’s management also believes it is useful to exclude costs related to shareholder litigation because these costs are not related to Cadence’s core business operations. Cadence’s management also believes that it is useful to exclude restructuring charges and credits. During fiscal 2009, Cadence commenced a restructuring program that it expects to complete during the first fiscal quarter of 2011. Cadence’s management believes that in measuring the company’s operations, it is useful to exclude any such restructuring charges and credits because exclusion of such charges and credits permits consistent evaluations of Cadence’s performance before and after such actions are taken. Cadence’s management believes it is useful to exclude gains or losses and expenses or credits related to the non-qualified deferred compensation plan assets because these gains or losses and expenses or credits are not part of Cadence’s direct costs of operations, but reflect changes in the value of assets held in the non-qualified deferred compensation plan. Cadence’s management also believes it is useful to exclude executive severance costs as these costs do not occur frequently. Cadence’s management also believes it is useful to exclude the amortization of the discount on convertible notes because this incremental cost recorded as interest expense does not represent a cash obligation of the company and is not part of Cadence’s direct cost of operations. Finally, Cadence’s management believes it is useful to exclude the equity in losses or income from investments, write-down of investments and gains or losses on the sale of investments because these items are not part of Cadence’s direct cost of operations. Rather, these are non-operating items that are included in other income or expense and are part of the company’s investment activities.

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     During the third quarter of fiscal 2010, Cadence’s non-GAAP net income also excluded the impact of an income tax benefit associated with Cadence’s effective settlement of an Internal Revenue Service, or IRS, examination of Cadence’s federal income tax returns for the tax years 2000 through 2002. Cadence’s management believes it is useful to exclude the income tax benefit associated with this settlement because Cadence does not expect settlements resulting in income tax provisions or benefits of the magnitude recorded during the third quarter of 2010 to occur frequently.
     During the second quarter of fiscal 2010, Cadence’s non-GAAP net income also excluded losses associated with its repurchase of a portion of its 1.375% Convertible Senior Notes Due December 15, 2011 and a portion of its 1.500% Convertible Senior Notes Due December 15, 2013. Cadence’s management believes it is useful to exclude the losses on the extinguishment of debt as the losses are not directly related to Cadence’s core business operations and similar transactions are not expected to occur frequently.
     During the second quarter of fiscal 2010, Cadence’s non-GAAP net income also excluded the impact of an income tax benefit associated with Cadence’s acquisition of Denali Software, Inc. Cadence’s management believes it is useful to exclude the tax benefit associated with this acquisition because Cadence does not expect an acquisition-related income tax benefit of the magnitude recorded in the second quarter of 2010 to be recorded frequently.
     During the fourth quarter of fiscal 2009, Cadence’s non-GAAP net loss also excluded the impact of an income tax benefit associated with the temporary increase in the net operating loss carryback period for operating losses Cadence incurred in the United States. Cadence’s management believes it is useful to exclude the tax benefit associated with this change in the United States tax law because the extended net operating loss carryback period is only applicable for operating losses incurred during either fiscal 2008 or fiscal 2009.
     Cadence’s management believes that non-GAAP net income or net loss provides useful supplemental information to Cadence’s management and investors regarding the performance of the company’s business operations and facilitates comparisons to the company’s historical operating results. Cadence’s management also uses this information internally for forecasting and budgeting. Non-GAAP financial measures should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with their most directly comparable GAAP financial results.
     The following tables reconcile the specific items excluded from GAAP net income or net loss and GAAP net income or net loss per diluted share in the calculation of non-GAAP net income and non-GAAP net income per diluted share for the periods shown below:

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    Three Months Ended  
Net Income (Loss) Reconciliation   October 2, 2010     October 3, 2009  
(in thousands)   (unaudited)  
Net income (loss) on a GAAP basis
   $ 126,753     $ (14,047 )
Amortization of acquired intangibles
     6,655       4,391  
Stock-based compensation expense
     12,010       14,455  
Non-qualified deferred compensation expenses (credits)
     (1,873 )     3,752  
Restructuring and other charges (credits)
     (1,682 )     (175 )
Shareholder litigation costs
     1,452       —  
Executive severance costs
     1,627       —  
Integration and acquisition-related costs
     5,322       155  
Amortization of debt discount
     6,291       4,837  
Other income or expense related to investments and non-qualified deferred compensation plan assets*
     1,834       (2,913 )
Income tax benefit of IRS settlement
     (148,302 )     —  
Income tax effect of non-GAAP adjustments
     1,139       (3,055 )
     
Net income on a non-GAAP basis
   $ 11,226     $ 7,400  
     
 
*   Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on sale of investments and gains or losses on non-qualified deferred compensation plan assets recorded in Other income (expense), net.

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Diluted Net Income (Loss) per Share   Three Months Ended  
Reconciliation   October 2, 2010     October 3, 2009  
(in thousands, except per share data)   (unaudited)  
Diluted net income (loss) per share on a GAAP basis
   $ 0.48     $ (0.05 )
Amortization of acquired intangibles
     0.03       0.02  
Stock-based compensation expense
     0.04       0.05  
Non-qualified deferred compensation expenses (credits)
     (0.01 )     0.01  
Restructuring and other charges (credits)
     (0.01 )     —  
Shareholder litigation costs
     0.01       —  
Executive severance costs
     0.01       —  
Integration and acquisition-related costs
     0.02       —  
Amortization of debt discount
     0.02       0.02  
Other income or expense related to investments and non-qualified deferred compensation plan assets*
     0.01       (0.01 )
Income tax benefit of IRS settlement
     (0.56 )     —  
Income tax effect of non-GAAP adjustments
     —       (0.01 )
     
Diluted net income per share on a non-GAAP basis
   $ 0.04     $ 0.03  
     
Shares used in calculation of diluted net income (loss) per share —GAAP**
     263,302       259,193  
Shares used in calculation of diluted net income per share —non-GAAP**
     263,302       262,553  
 
*   Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on sale of investments and gains or losses on non-qualified deferred compensation plan assets recorded in Other income (expense), net.
 
**   Shares used in the calculation of GAAP net income (loss) per share are expected to be the same as shares used in the calculation of non-GAAP net income (loss) per share, except when the company reports a GAAP net loss and non-GAAP net income, or GAAP net income and a non-GAAP net loss.

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Investors are encouraged to look at the GAAP results as the best measure of financial performance. For example, amortization of intangibles is important to consider because it may represent an initial expenditure that under GAAP is reported across future fiscal periods. Likewise, stock-based compensation expense is an obligation of the company that should be considered. Restructuring charges can be triggered by acquisitions or product adjustments, as well as overall company performance within a given business environment. All of these metrics are important to financial performance generally.
Although Cadence’s management finds the non-GAAP measures useful in evaluating the performance of Cadence’s business, reliance on these measures is limited because items excluded from such measures often have a material effect on Cadence’s earnings and earnings per share calculated in accordance with GAAP. Therefore, Cadence’s management typically uses the non-GAAP earnings and earnings per share measures, in conjunction with the GAAP earnings and earnings per share measures, to address these limitations.
Cadence expects that its corporate representatives will meet privately during the quarter with investors, the media, investment analysts and others. At these meetings, Cadence may reiterate the business outlook published in this press release. At the same time, Cadence will keep this press release, including the business outlook, publicly available on its Web site.
Prior to the start of the Quiet Period (described below), the public may continue to rely on the business outlook contained herein as still being Cadence’s current expectations on matters covered unless Cadence publishes a notice stating otherwise.
Beginning December 17, 2010, Cadence will observe a Quiet Period during which the business outlook as provided in this press release and the company’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q no longer constitute the company’s current expectations. During the Quiet Period, the business outlook in these documents should be considered to be historical, speaking as of prior to the Quiet Period only and not subject to any update by the company. During the Quiet Period, Cadence’s representatives will not comment on Cadence’s business outlook, financial results or expectations. The Quiet Period will extend until the day when Cadence’s Fourth Quarter and Fiscal Year 2010 Earnings Release is published, which is currently scheduled for February 2, 2011.

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Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
October 2, 2010 and January 2, 2010
(In thousands)
(Unaudited)
                 
    October 2, 2010     January 2, 2010  
Current Assets:
                
Cash and cash equivalents
   $ 509,035     $ 569,115  
Short-term investments
     2,641       2,184  
Receivables, net of allowances of $10,833 and $14,020, respectively
     202,237       200,628  
Inventories
     28,486       24,165  
Prepaid expenses and other
     79,910       54,655  
 
            
Total current assets
     822,309       850,747  
 
                
Property, plant and equipment, net of accumulated depreciation of $641,805 and $637,107, respectively
     290,103       311,502  
Goodwill
     158,893       —  
Acquired intangibles, net of accumulated amortization of $98,173 and $124,507, respectively
     185,866       28,841  
Installment contract receivables, net of allowances of $0 and $9,724, respectively
     28,231       58,448  
Other assets
     220,546       161,049  
 
            
Total Assets
   $ 1,705,948     $ 1,410,587  
 
            
 
                
Current Liabilities:
                
Accounts payable and accrued liabilities
   $ 152,436     $ 150,207  
Current portion of deferred revenue
     308,591       247,691  
 
            
Total current liabilities
     461,027       397,898  
 
            
 
                
Long-Term Liabilities:
                
Long-term portion of deferred revenue
     96,439       92,298  
Convertible notes
     548,093       436,012  
Other long-term liabilities
     304,402       376,006  
 
            
Total long-term liabilities
     948,934       904,316  
 
            
 
                
Stockholders’ Equity
     295,987       108,373  
 
            
Total Liabilities and Stockholders’ Equity
   $ 1,705,948     $ 1,410,587  
 
            

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Cadence Design Systems, Inc.
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended October 2, 2010 and October 3, 2009
(In thousands, except per share amounts)
(Unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    October 2,     October 3,     October 2,     October 3,  
    2010     2009     2010     2009  
Revenue:
                                
Product
   $ 118,221     $ 96,932     $ 338,053     $ 286,295  
Services
     23,945       26,669       75,123       83,684  
Maintenance
     95,768       92,521       273,760       262,374  
 
                        
 
                                
Total revenue
     237,934       216,122       686,936       632,353  
 
                        
 
                                
Costs and Expenses:
                                
Cost of product
     10,757       6,405       23,172       23,828  
Cost of services
     19,102       21,139       62,583       69,602  
Cost of maintenance
     9,960       11,105       31,839       35,423  
Marketing and sales
     76,065       68,282       222,340       214,603  
Research and development
     97,275       88,049       278,585       273,394  
General and administrative
     25,081       28,732       64,973       101,311  
Amortization of acquired intangibles
     4,459       2,726       9,701       8,694  
Restructuring and other charges (credits)
     (1,682 )     (175 )     (3,073 )     17,833  
 
                        
 
                                
Total costs and expenses
     241,017       226,263       690,120       744,688  
 
                        
 
                                
Loss from operations
     (3,083 )     (10,141 )     (3,184 )     (112,335 )
 
                                
Interest expense
     (10,476 )     (7,278 )     (25,879 )     (21,592 )
Other income (expense), net
     (2,907 )     2,917       (33 )     (5,765 )
 
                        
 
                                
Loss before provision (benefit) for income taxes
     (16,466 )     (14,502 )     (29,096 )     (139,692 )
 
                                
Provision (benefit) for income taxes
     (143,219 )     (455 )     (192,671 )     11,969  
 
                        
 
                                
Net income (loss)
   $ 126,753     $ (14,047 )   $ 163,575     $ (151,661 )
 
                        
 
                                
Basic net income (loss) per share
   $ 0.49     $ (0.05 )   $ 0.63     $ (0.59 )
 
                        
 
                                
Diluted net income (loss) per share
   $ 0.48     $ (0.05 )   $ 0.62     $ (0.59 )
 
                        
 
Weighted average common shares outstanding — basic
     258,606       259,193       261,122       256,792  
 
                        
 
                                
Weighted average common shares outstanding — diluted
     263,302       259,193       265,383       256,792  
 
                        

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Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended October 2, 2010 and October 3, 2009
(In thousands)
(Unaudited)
                 
    Nine Months Ended  
    October 2,     October 3,  
    2010     2009  
Cash and Cash Equivalents at Beginning of Period
   $ 569,115     $ 568,255  
 
            
Cash Flows from Operating Activities:
                
Net income (loss)
     163,575       (151,661 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
                
Depreciation and amortization
     64,795       71,334  
Amortization of debt discounts and fees
     18,331       15,557  
Loss on extinguishment of debt
     5,321       —  
Stock-based compensation
     32,817       43,690  
Loss from equity method investments
     105       369  
(Gain) loss on investments, net
     (5,133 )     4,307  
Gain on sale of property, plant and equipment
     (799 )     —  
Write-down of investment securities
     1,500       5,207  
Impairment of property, plant and equipment
     491       6,603  
Deferred income taxes
     (70,617 )     (6,520 )
Proceeds from the sale of receivables, net
     —       5,827  
Provisions (recoveries) for losses (gains) on trade and installment contract receivables
     (13,339 )     18,668  
Other non-cash items
     2,259       (4,084 )
Changes in operating assets and liabilities, net of effect of acquired businesses:
                
Receivables
     (44,422 )     56,444  
Installment contract receivables
     97,818       122,302  
Inventories
     (16,005 )     2,846  
Prepaid expenses and other
     (23,828 )     (4,041 )
Other assets
     (32,223 )     11,809  
Accounts payable and accrued liabilities
     3,308       (79,395 )
Deferred revenue
     45,229       (83,760 )
Other long-term liabilities
     (87,054 )     (10,773 )
 
            
Net cash provided by operating activities
     142,129       24,729  
 
            
 
                
Cash Flows from Investing Activities:
                
Proceeds from the sale of available-for-sale securities
     —       139  
Proceeds from the sale of long-term investments
     10,276       —  
Proceeds from the sale of property, plant and equipment
     900       —  
Purchases of property, plant and equipment
     (28,940 )     (30,504 )
Purchases of software licenses
     (2,706 )     (774 )
Investment in venture capital partnerships and equity investments
     (3,000 )     (2,300 )
Cash paid in business combinations and asset acquisitions, net of cash acquired
     (256,117 )     (14,126 )
 
            
Net cash used for investing activities
     (279,587 )     (47,565 )
 
            
 
                
Cash Flows from Financing Activities:
                
Principal payments on receivable sale financing
     (3,540 )     (2,467 )
Proceeds from issuance of 2015 Notes
     350,000       —  
Payment of Convertible Senior Notes
     (187,150 )     —  
Payment of 2015 Notes issuance costs
     (10,419 )     —  
Purchase of 2015 Notes Hedges
     (76,635 )     —  
Proceeds from termination of Convertible Senior Notes Hedges
     280       —  
Proceeds from sale of 2015 Warrants
     37,450       —  
Tax effect related to employee stock transactions allocated to equity
     (9,624 )     —  
Proceeds from issuance of common stock
     13,269       27,862  
Stock received for payment of employee taxes on vesting of restricted stock
     (5,875 )     (4,055 )
 
            
Purchases of treasury stock
     (39,997 )     —  
 
            
Net cash provided by financing activities
     67,759       21,340  
 
            
 
                
Effect of exchange rate changes on cash and cash equivalents
     9,619       3,858  
 
            
 
                
Increase (decrease) in cash and cash equivalents
     (60,080 )     2,362  
 
            
 
                
Cash and Cash Equivalents at End of Period
   $ 509,035     $ 570,617  
 
            

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Cadence Design Systems, Inc.
As of October 27, 2010
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income (Loss) Per Share
(Unaudited)
                 
    Three Months Ending     Year Ending  
    January 1, 2011     January 1, 2011  
    Forecast     Forecast  
Diluted net income (loss) per share on a GAAP basis
   $(0.06) to $(0.04)   $0.55 to $0.57  
 
                
Amortization of acquired intangibles
     0.03       0.08  
Stock-based compensation expense
     0.04       0.16  
Non-qualified deferred compensation expenses
     —       —  
Restructuring and other charges (credits)
     —       (0.01)
Shareholder litigation costs
     —       0.02  
Executive severance costs
     —       0.01  
Integration and acquisition-related costs
     0.02       0.05  
Amortization of debt discount
     0.02       0.08  
Other income or expense related to investments and non-qualified deferred compensation plan assets*
     —       (0.01)
Loss on extinguishment of debt
     —       0.02  
Acquisition-related income tax benefit
     —       (0.25)
Income tax benefit of IRS settlement
     —       (0.56)
Income tax effect of non-GAAP adjustments
     (0.02)     0.02  
 
            
 
                
Diluted net income per share on a non-GAAP basis
   $0.03 to $0.05     $0.16 to $0.18  
 
            
 
*   Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on sale of investments and gains or losses on non-qualified deferred compensation plan assets recorded in Other income (expense), net.
Cadence Design Systems, Inc.
As of October 27, 2010
Impact of Non-GAAP Adjustments on Forward Looking Net Income (Loss)
(Unaudited)
                 
    Three Months Ending     Year Ending  
    January 1, 2011     January 1, 2011  
($ in Millions)   Forecast     Forecast  
Net income (loss) on a GAAP basis
   $(15) to $(10)   $148 to $153  
 
                
Amortization of acquired intangibles
     7       21  
Stock-based compensation expense
     11       44  
Non-qualified deferred compensation expenses
     —       1  
Restructuring and other charges (credits)
     —       (3)
Shareholder litigation costs
     —       4  
Executive severance costs
     —       2  
Integration and acquisition-related costs
     4       12  
Amortization of debt discount
     6       23  
Other income or expense related to investments and non-qualified deferred compensation plan assets*
     —       (4)
Loss on extinguishment of debt
     —       5  
Acquisition-related income tax benefit
     —       (67)
Income tax benefit of IRS settlement
     —       (148)
Income tax effect of non-GAAP adjustments
     (5)     5  
 
            
 
                
Net income on a non-GAAP basis
   $8 to $13     $43 to $48  
 
            
 
*   Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on sale of investments and gains or losses on non-qualified deferred compensation plan assets recorded in Other income (expense), net.

13

 

Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by Geography (% of Total Revenue)
                                                                 
    2009   2010
GEOGRAPHY   Q1   Q2   Q3   Q4   Year   Q1   Q2   Q3
Americas
     42 %     48 %     43 %     51 %     46 %     40 %     46 %     43 %
Europe
     24 %     21 %     20 %     24 %     22 %     22 %     23 %     20 %
Japan
     19 %     17 %     23 %     12 %     18 %     23 %     14 %     20 %
Asia
     15 %     14 %     14 %     13 %     14 %     15 %     17 %     17 %
Total
     100 %     100 %     100 %     100 %     100 %     100 %     100 %     100 %
Revenue Mix by Product Group (% of Total Revenue)
                                                                 
    2009   2010
PRODUCT GROUP   Q1   Q2   Q3   Q4   Year   Q1   Q2   Q3
Functional Verification
     20 %     23 %     21 %     22 %     22 %     22 %     26 %     25 %
Digital IC Design
     19 %     24 %     19 %     22 %     21 %     21 %     21 %     23 %
Custom IC Design
     26 %     25 %     28 %     28 %     27 %     27 %     26 %     24 %
Design for Manufacturing
     9 %     5 %     9 %     7 %     7 %     9 %     6 %     8 %
System Interconnect
     12 %     10 %     11 %     11 %     11 %     9 %     10 %     10 %
Services & Other
     14 %     13 %     12 %     10 %     12 %     12 %     11 %     10 %
Total
     100 %     100 %     100 %     100 %     100 %     100 %     100 %     100 %
Note: Product Group total revenue includes Product + Maintenance
For more information, please contact:
Investors and Shareholders
Jennifer Jordan
Cadence Design Systems, Inc.
408-944-7100
investor_relations@cadence.com
Media and Industry Analysts
Lynne Cox
Cadence Design Systems, Inc.
408-914-6016
publicrelations@cadence.com
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