EX-99.01 2 cdns242015ex9901.htm PRESS RELEASE CDNS 2.4.2015 EX 99.01


Exhibit 99.01
Cadence Reports Fourth Quarter and Fiscal Year 2014 Financial Results
SAN JOSE, Calif. — February 4, 2015 — Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the fourth quarter and fiscal year 2014.
Cadence reported fourth quarter 2014 revenue of $423 million, compared to revenue of $377 million reported for the same period in 2013. On a GAAP basis, Cadence recognized net income of $65 million, or $0.21 per share on a diluted basis, in the fourth quarter of 2014, compared to net income of $38 million, or $0.13 per share on a diluted basis, for the same period in 2013. Revenue for 2014 totaled $1.581 billion, compared to revenue of $1.460 billion for 2013. Net income for 2014 was $159 million, or $0.52 per share on a diluted basis, compared to net income of $164 million, or $0.56 per share on a diluted basis, for 2013.
Using the non-GAAP measure defined below, net income in the fourth quarter of 2014 was $84 million, or $0.27 per share on a diluted basis, as compared to net income of $67 million, or $0.23 per share on a diluted basis, for the same period in 2013. For 2014, non-GAAP net income was $287 million, or $0.94 per share on a diluted basis, compared to non-GAAP net income of $252 million, or $0.86 per share on a diluted basis, in 2013.

“Fiscal 2014 was a year of excellent progress for our system design enablement strategy for end-product design, as we delivered a growing set of innovative solutions to our expanding systems and SoC customer base,” said Lip-Bu Tan, president and chief executive officer.  “Our digital and signoff solutions gained momentum with market-shaping customers, and our IP business had a breakout year with revenue growth of nearly 40 percent.  As we look ahead, we are confident that our strategy and commitment to innovation will continue to drive meaningful customer wins.”

“Our focus on execution drove solid financial results in Q4 and throughout 2014,” added Geoff Ribar, senior vice president and chief financial officer.  “We are committed to driving efficiency, productivity and sustainable profitability over the long-term as we work to meet the needs of our ongoing business, invest in future growth opportunities and return cash to shareholders under our recently expanded stock repurchase program.”
Business Outlook
For the first quarter of 2015, the company expects total revenue in the range of $405 million to $415 million. First quarter GAAP net income per diluted share is expected to be in the range of $0.08 to $0.10. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.20 to $0.22.
For 2015, the company expects total revenue in the range of $1.680 billion to $1.720 billion. On a GAAP basis, net income per diluted share for 2015 is expected to be in the range of $0.49 to $0.61. Using the non-GAAP measure defined below, net income per diluted share for 2015 is expected to be in the range of $0.94 to $1.06.
For 2015, the company is forecasting a non-GAAP income tax rate of 23 percent, down from 26 percent used in fiscal 2014, based on forecasted increases in foreign earnings that are expected to lower Cadence's long-term non-GAAP effective income tax rate.

A schedule showing a reconciliation of the business outlook from GAAP net income and diluted net income per share to non-GAAP net income and diluted net income per share is included in this release.
Audio Webcast Scheduled
Lip-Bu Tan, president and chief executive officer, and Geoff Ribar, senior vice president and chief financial officer, will host a fourth quarter and fiscal year 2014 financial results audio webcast today, February 4, 2015, at 2 p.m. (Pacific) / 5 p.m. (Eastern). Attendees are asked to register at the website at least 10 minutes prior to the scheduled webcast. An archive of the webcast will be available starting February 4, 2015 at 5 p.m. (Pacific) and ending March 20, 2015 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, hardware, IP, and services to design and verify advanced semiconductors, consumer electronics, networking and telecommunications equipment, and computer systems. The company is headquartered in San Jose, California, with sales offices, design centers, and research facilities around the world to serve the global electronics industry. More information about the company 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 fourth quarter and fiscal year 2014 financial results, as well as the information in the Business Outlook section and the statements by Lip-Bu Tan and Geoff Ribar, are or include forward-looking statements based on current expectations or beliefs and 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. These forward-looking statements 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) the success of Cadence’s 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; (iv) change in customer demands, including those resulting from consolidation among Cadence’s customers and the possibility that the restructurings and other efforts to improve operational efficiency of Cadence's customers could result in delays in purchases of Cadence’s 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, including the potential inability to retain customers, key employees or vendors; (ix) the effects of Cadence’s efforts to improve operational efficiency in its business, including strategic, customer and supplier relationships, and its ability to retain key employees; (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 Cadence’s business, please refer to Cadence’s filings with the Securities and Exchange Commission. These include Cadence’s most recent reports on Form 10-K and Form 10-Q, including Cadence’s future filings.





GAAP to Non-GAAP Reconciliation

To supplement Cadence’s financial results presented on a generally accepted accounting principles, or GAAP, basis, Cadence management uses non-GAAP measures that it believes are helpful in understanding Cadence’s performance. One such measure is non-GAAP net income, which is a financial measure not calculated under GAAP, and is calculated by taking GAAP net income and excluding, as applicable, amortization and sale of intangible assets and debt discount related to our convertible notes, stock-based compensation expense, acquisition and integration-related costs including changes in fair value of contingent consideration and retention expenses for employees added from our 2013 and 2014 acquisitions, special charges (comprised of costs related to a voluntary retirement program and executive severance costs), investment gains or losses, income or expenses related to Cadence’s non-qualified deferred compensation plan, restructuring and other significant items not directly related to Cadence’s core business operations, and the income tax effect of non-GAAP pre-tax adjustments.

Cadence’s management uses non-GAAP net income because it excludes items that are generally not directly related to the performance of the company’s core business operations and therefore provides useful supplemental information to Cadence’s management and investors regarding the performance of the company’s business operations, facilitates comparisons to the company’s historical operating results and enhances investors' ability to review Cadence's business from the same perspective as Cadence's management. Cadence’s management also uses non-GAAP net income 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. Investors are encouraged to look at the GAAP results as the best measure of financial performance.
The following tables reconcile the specific items excluded from GAAP net income and GAAP net income per diluted share in the calculation of non-GAAP net income and non-GAAP net income per diluted share for the periods shown below:
 
Net Income Reconciliation
 
Three Months Ended
 
 
January 3, 2015
 
December 28, 2013
 
 
(unaudited)
(in thousands)
 
 
 
 
Net income on a GAAP basis
 
$
65,030

 
$
37,705

Amortization of acquired intangibles
 
17,559

 
12,422

Stock-based compensation expense
 
22,974

 
18,798

Non-qualified deferred compensation expenses
 
409

 
1,256

Restructuring and other charges (credits)
 
(1,145
)
 
15,405

Acquisition and integration-related costs
 
4,280

 
8,903

Special charges*
 
—

 
216

Amortization of debt discount
 
4,782

 
5,515

Other income or expense related to investments and non-qualified deferred compensation plan assets**
 
(1,484
)
 
(1,553
)
Income tax effect of non-GAAP adjustments
 
(27,987
)
 
(31,775
)
Net income on a non-GAAP basis
 
$
84,418

 
$
66,892

 
*
Comprised of costs related to executive severance costs
**
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 or expense.






Net Income Reconciliation
 
Years Ended
 
 
January 3, 2015
 
December 28, 2013
 
 
(unaudited)
(in thousands)
 
 
 
 
Net income on a GAAP basis
 
$
158,898

 
$
164,243

Amortization and sale of acquired intangibles
 
60,924

 
44,134

Stock-based compensation expense
 
83,792

 
66,285

Non-qualified deferred compensation expenses
 
3,415

 
3,293

Restructuring and other charges
 
10,252

 
17,999

Acquisition and integration-related costs
 
24,620

 
31,972

Special charges*
 
10,816

 
961

Amortization of debt discount
 
17,602

 
22,315

Other income or expense related to investments and non-qualified deferred compensation plan assets**
 
(4,629
)
 
(5,280
)
Income tax benefit due to a release of an uncertain tax position
 
—

 
(33,719
)
Income tax effect of non-GAAP adjustments
 
(78,723
)
 
(60,104
)
Net income on a non-GAAP basis
 
$
286,967

 
$
252,099

 
*
Comprised of costs related to a voluntary retirement program and executive severance costs
**
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 or expense.






Diluted Net Income per Share Reconciliation
 
Three Months Ended
 
 
January 3, 2015
 
December 28, 2013
 
 
(unaudited)
(in thousands, except per share data)
 
 
 
 
Diluted net income per share on a GAAP basis
 
$
0.21

 
$
0.13

Amortization of acquired intangibles
 
0.06

 
0.04

Stock-based compensation expense
 
0.07

 
0.06

Non-qualified deferred compensation expenses
 
—

 
0.01

Restructuring and other charges (credits)
 
—

 
0.05

Acquisition and integration-related costs
 
0.01

 
0.03

Special charges*
 
—

 
—

Amortization of debt discount
 
0.01

 
0.02

Other income or expense related to investments and non-qualified deferred compensation plan assets**
 
—

 
—

Income tax effect of non-GAAP adjustments
 
(0.09
)
 
(0.11
)
Diluted net income per share on a non-GAAP basis
 
$
0.27

 
$
0.23

Shares used in calculation of diluted net income per share — GAAP***
 
310,273

 
294,663

Shares used in calculation of diluted net income per share — non-GAAP***
 
310,273

 
294,663

 
*
Comprised of costs related to executive severance costs
**
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 or expense.
***
Shares used in the calculation of GAAP net income per share are expected to be the same as shares used in the calculation of non-GAAP net income 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.






Diluted Net Income per Share Reconciliation
 
Years Ended
 
 
January 3, 2015
 
December 28, 2013
 
 
(unaudited)
(in thousands, except per share data)
 
 
 
 
Diluted net income per share on a GAAP basis
 
$
0.52

 
$
0.56

Amortization and sale of acquired intangibles
 
0.20

 
0.15

Stock-based compensation expense
 
0.27

 
0.23

Non-qualified deferred compensation expenses
 
0.01

 
0.01

Restructuring and other charges
 
0.03

 
0.06

Acquisition and integration-related costs
 
0.08

 
0.11

Special charges*
 
0.04

 
—

Amortization of debt discount
 
0.06

 
0.08

Other income or expense related to investments and non-qualified deferred compensation plan assets**
 
(0.01
)
 
(0.02
)
Income tax benefit due to a release of an uncertain tax position
 
—

 
(0.11
)
Income tax effect of non-GAAP adjustments
 
(0.26
)
 
(0.21
)
Diluted net income per share on a non-GAAP basis
 
$
0.94

 
$
0.86

Shares used in calculation of diluted net income per share — GAAP***
 
306,775

 
294,564

Shares used in calculation of diluted net income per share — non-GAAP***
 
306,775

 
294,564

 
*
Comprised of costs related to a voluntary retirement program and executive severance costs
**
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 or expense.
***
Shares used in the calculation of GAAP net income per share are expected to be the same as shares used in the calculation of non-GAAP net income 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.





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 website.
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 March 20, 2015, 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 first quarter 2015 earnings release is published, which is currently scheduled for April 27, 2015.
For more information, please contact:
Investors and Shareholders
Alan Lindstrom
Cadence Design Systems, Inc.
408-944-7100
investor_relations@cadence.com
Media and Industry Analysts
Mark Plungy
Cadence Design Systems, Inc.
408-944-7039
publicrelations@cadence.com





Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
January 3, 2015 and December 28, 2013
(In thousands)
(Unaudited)
 
 
 
January 3, 2015
 
December 28, 2013
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
932,161

 
$
536,260

Short-term investments
 
90,445

 
96,788

Receivables, net
 
122,492

 
107,624

Inventories
 
56,394

 
50,220

2015 notes hedges
 
523,930

 
306,817

Prepaid expenses and other
 
126,313

 
123,382

Total current assets
 
1,851,735

 
1,221,091

Property, plant and equipment, net of accumulated depreciation of $552,551 and $568,494, respectively
 
230,112

 
238,715

Goodwill
 
553,767

 
456,905

Acquired intangibles, net of accumulated amortization of $154,814 and $139,820, respectively
 
360,932

 
311,693

Long-term receivables
 
3,644

 
3,672

Other assets
 
209,366

 
196,525

Total assets
 
$
3,209,556

 
$
2,428,601

Current liabilities:
 
 
 
 
Convertible notes
 
$
342,499

 
$
324,826

2015 notes embedded conversion derivative
 
523,930

 
306,817

Accounts payable and accrued liabilities
 
225,375

 
216,594

Current portion of deferred revenue
 
301,287

 
299,973

Total current liabilities
 
1,393,091

 
1,148,210

Long-term liabilities:
 
 
 
 
Long-term portion of deferred revenue
 
54,726

 
52,850

Long-term debt
 
348,676

 
—

Other long-term liabilities
 
79,489

 
71,436

Total long-term liabilities
 
482,891

 
124,286

Stockholders’ equity
 
1,333,574

 
1,156,105

Total liabilities and stockholders’ equity
 
$
3,209,556

 
$
2,428,601





Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three Months and Years Ended January 3, 2015 and December 28, 2013
(In thousands, except per share amounts)
(Unaudited)
 
 
 
Three Months Ended
 
Years Ended
 
 
January 3, 2015
 
December 28, 2013
 
January 3, 2015
 
December 28, 2013
Revenue:
 
 
 
 
 
 
 
 
Product and maintenance
 
$
393,223

 
$
350,079

 
$
1,479,151

 
$
1,357,934

Services
 
29,875

 
26,643

 
101,781

 
102,182

Total revenue
 
423,098

 
376,722

 
1,580,932

 
1,460,116

Costs and expenses:
 
 
 
 
 
 
 
 
Cost of product and maintenance
 
39,475

 
41,757

 
156,333

 
132,245

Cost of services
 
18,640

 
17,274

 
67,373

 
67,956

Marketing and sales
 
102,367

 
94,384

 
399,688

 
378,157

Research and development
 
155,124

 
135,465

 
603,006

 
534,022

General and administrative
 
26,939

 
29,481

 
113,619

 
121,314

Amortization of acquired intangibles
 
6,912

 
5,157

 
24,017

 
19,416

Restructuring and other charges (credits)
 
(1,145
)
 
15,405

 
10,252

 
17,999

Total costs and expenses
 
348,312

 
338,923

 
1,374,288

 
1,271,109

Income from operations
 
74,786

 
37,799

 
206,644

 
189,007

Interest expense
 
(11,961
)
 
(9,208
)
 
(34,121
)
 
(37,581
)
Other income, net
 
3,879

 
842

 
8,479

 
7,570

Income before provision (benefit) for income taxes
 
66,704

 
29,433

 
181,002

 
158,996

Provision (benefit) for income taxes
 
1,674

 
(8,272
)
 
22,104

 
(5,247
)
Net income
 
$
65,030

 
$
37,705

 
$
158,898

 
$
164,243

Net income per share - basic
 
$
0.23

 
$
0.13

 
$
0.56

 
$
0.59

Net income per share - diluted
 
$
0.21

 
$
0.13

 
$
0.52

 
$
0.56

Weighted average common shares outstanding - basic
 
283,928

 
280,083

 
283,349

 
277,796

Weighted average common shares outstanding - diluted
 
310,273

 
294,663

 
306,775

 
294,564





Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Years Ended January 3, 2015 and December 28, 2013
(In thousands)
(Unaudited) 
 
Years Ended
 
January 3, 2015
 
December 28, 2013
Cash and cash equivalents at beginning of year
$
536,260

 
$
726,357

Cash flows from operating activities:
 
 
 
Net income
158,898

 
164,243

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
115,634

 
98,308

Amortization of debt discount and fees
20,529

 
25,384

Stock-based compensation
83,792

 
66,285

Gain on investments, net
(4,707
)
 
(5,311
)
Deferred income taxes
12,478

 
(2,366
)
Other non-cash items
6,854

 
3,932

Changes in operating assets and liabilities, net of effect of acquired businesses:
 
 
 
Receivables
(17,925
)
 
(3,609
)
Inventories
(11,708
)
 
(14,594
)
Prepaid expenses and other
(2,501
)
 
30,368

Other assets
(42,181
)
 
(2,530
)
Accounts payable and accrued liabilities
3,856

 
41,727

Deferred revenue
(11,860
)
 
2,506

Other long-term liabilities
5,563

 
(36,738
)
Net cash provided by operating activities
316,722

 
367,605

Cash flows from investing activities:
 
 
 
Purchases of available-for-sale securities
(124,165
)
 
(111,702
)
Proceeds from the sale of available-for-sale securities
85,384

 
77,621

Proceeds from the maturity of available-for-sale securities
46,612

 
38,706

Proceeds from the sale of long-term investments
1,085

 
6,234

Purchases of property, plant and equipment
(39,810
)
 
(44,929
)
Cash paid in business combinations and asset acquisitions, net of cash acquired
(167,121
)
 
(392,825
)
Net cash used for investing activities
(198,015
)
 
(426,895
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of debt
348,649

 
—

Proceeds from revolving credit facility
100,000

 
100,000

Payment on revolving credit facility
(100,000
)
 
(100,000
)
Payment of convertible notes
(1
)
 
(144,639
)
Payment of convertible notes embedded conversion derivative liability
(1
)
 
—

Proceeds from convertible notes hedges
1

 
—

Principal payments on receivable financing
—

 
(2,526
)
Payment of debt issuance costs
(6,500
)
 
—

Payment of acquisition-related contingent consideration
(1,835
)
 
(677
)
Tax effect related to employee stock transactions allocated to equity
7,583

 
9,034

Proceeds from issuance of common stock
65,913

 
42,657

Stock received for payment of employee taxes on vesting of restricted stock
(24,727
)
 
(20,140
)
Payments for repurchases of common stock
(100,117
)
 
—

Net cash provided by (used for) financing activities
288,965

 
(116,291
)
Effect of exchange rate changes on cash and cash equivalents
(11,771
)
 
(14,516
)
Increase (decrease) in cash and cash equivalents
395,901

 
(190,097
)
Cash and cash equivalents at end of year
$
932,161

 
$
536,260






Cadence Design Systems, Inc.
As of February 4, 2015
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
(Unaudited)
 
 
 
Three Months Ending
April 4, 2015
 
Year Ending
January 2, 2016
 
 
Forecast
 
Forecast
Diluted net income per share on a GAAP basis
 
$0.08 to $0.10
 
$0.49 to $0.61
Amortization of acquired intangibles
 
0.05
 
0.21
Stock-based compensation expense
 
0.07
 
0.31
Acquisition and integration-related costs
 
0.01
 
0.03
Amortization of debt discount
 
0.02
 
0.02
Income tax effect of non-GAAP adjustments
 
(0.03)
 
(0.12)
Diluted net income per share on a non-GAAP basis
 
$0.20 to $0.22
 
$0.94 to $1.06


Cadence Design Systems, Inc.
As of February 4, 2015
Impact of Non-GAAP Adjustments on Forward Looking Net Income
(Unaudited)
 
 
 
Three Months Ending
April 4, 2015
 
Year Ending
January 2, 2016
($ in millions)
 
Forecast
 
Forecast
Net income on a GAAP basis
 
$26 to $33
 
$153 to $190
Amortization of acquired intangibles
 
16
 
64
Stock-based compensation expense
 
22
 
95
Acquisition and integration-related costs
 
3
 
8
Amortization of debt discount
 
5
 
7
Income tax effect of non-GAAP adjustments
 
(10)
 
(36)
Net income on a non-GAAP basis
 
$62 to $69
 
$291 to $328






Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by Geography (% of Total Revenue)
 
 
 
2013
 
2014
GEOGRAPHY
 
Q1
 
Q2
 
Q3
 
Q4
 
Year
 
Q1
 
Q2
 
Q3
 
Q4
 
Year
Americas
 
44
%
 
45
%
 
48
%
 
47
%
 
46
%
 
45
%
 
44
%
 
46
%
 
47
%
 
45
%
Asia
 
19
%
 
21
%
 
20
%
 
19
%
 
20
%
 
23
%
 
23
%
 
22
%
 
22
%
 
23
%
Europe, Middle East and Africa
 
22
%
 
21
%
 
20
%
 
20
%
 
21
%
 
20
%
 
22
%
 
21
%
 
21
%
 
21
%
Japan
 
15
%
 
13
%
 
12
%
 
14
%
 
13
%
 
12
%
 
11
%
 
11
%
 
10
%
 
11
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%

Revenue Mix by Product Group (% of Total Revenue)
 
 
 
2013
 
2014
PRODUCT GROUP
 
Q1
 
Q2
 
Q3
 
Q4
 
Year
 
Q1
 
Q2
 
Q3
 
Q4
 
Year
Functional Verification, including Emulation Hardware
 
22
%
 
22
%
 
24
%
 
25
%
 
23
%
 
23
%
 
21
%
 
23
%
 
21
%
 
22
%
Digital IC Design and Signoff
 
33
%
 
31
%
 
29
%
 
29
%
 
30
%
 
30
%
 
30
%
 
29
%
 
28
%
 
29
%
Custom IC Design
 
28
%
 
28
%
 
28
%
 
26
%
 
27
%
 
27
%
 
28
%
 
27
%
 
28
%
 
27
%
System Interconnect and Analysis
 
10
%
 
11
%
 
10
%
 
10
%
 
11
%
 
10
%
 
11
%
 
10
%
 
11
%
 
11
%
IP
 
7
%
 
8
%
 
9
%
 
10
%
 
9
%
 
10
%
 
10
%
 
11
%
 
12
%
 
11
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%




Cadence Design Systems, Inc.
Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures
For the Three Months Ended January 3, 2015
(In thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
 
 
 
January 3, 2015
 
 
 
 
 
 
GAAP
 
Adjustments
 
Non-GAAP
Revenue:
 
 
 
 
 
 
 
 
 
Product and maintenance
 
$
393,223

 
$
—

 
$
393,223

 
Services
 
 
29,875

 
—

 
29,875

 
 
Total revenue
 
 
423,098

 
—

 
423,098

Costs and expenses:
 
 
 
 
 
 
 
 
Cost of product and maintenance
 
39,475

 
(11,297
)
 (A)
28,178

 
Cost of services
 
 
18,640

 
(950
)
 (A)
17,690

 
Marketing and sales
 
 
102,367

 
(5,924
)
 (A)
96,443

 
Research and development
 
155,124

 
(15,795
)
 (A)
139,329

 
General and administrative
 
26,939

 
(4,344
)
 (A)
22,595

 
Amortization of acquired intangibles
 
6,912

 
(6,912
)
 (A)
—

 
Restructuring and other charges (credits)
 
(1,145
)
 
1,145

 
—

 
 
Total costs and expenses
 
348,312

 
(44,077
)
 
304,235

 
 
 
Income from operations
 
74,786

 
44,077

 
118,863

 
Interest expense
 
 
(11,961
)
 
4,782

 (B)
(7,179
)
 
Other income (expense), net
 
3,879

 
(1,484
)
 (C)
2,395

 
 
 
Income before provision for income taxes
66,704

 
47,375

 
114,079

 
Provision for income taxes
 
1,674

 
27,987

(D)
29,661

 
 
 
Net income
 
 
$
65,030

 
$
19,388

 
$
84,418

Notes:
(A) For the three months ended January 3, 2015 adjustments to GAAP are as follows for the line items specified:
 
 
 
 
 
Amortization of acquired intangibles
 
Stock-based compensation expense
 
Non-qualified deferred compensation expenses
 
Acquisition and integration-related costs
 
Total adjustments
Cost of product and maintenance
$
10,647

 
$
644

 
$
6

 
$
—

 
$
11,297

Cost of services
 
—

 
942

 
8

 
—

 
950

Marketing and sales
 
—

 
5,494

 
19

 
411

 
5,924

Research and development
 
—

 
12,225

 
216

 
3,354

 
15,795

General and administrative
 
—

 
3,669

 
160

 
515

 
4,344

Amortization of acquired intangibles
6,912

 
—

 
—

 
—

 
6,912

 
Total
 
 
$
17,559

 
$
22,974

 
$
409

 
$
4,280

 
$
45,222

(B) Amortization of debt discount related to convertible notes
(C) Other income or expense related to investments and non-qualified deferred compensation plan assets
(D) Income tax effect of non-GAAP adjustments





Cadence Design Systems, Inc.
Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures
For the Three Months Ended December 28, 2013
(In thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
 
 
 
December 28, 2013
 
 
 
 
 
 
GAAP
 
Adjustments
 
Non-GAAP
Revenue:
 
 
 
 
 
 
 
 
 
Product and maintenance
 
$
350,079

 
$
—

 
$
350,079

 
Services
 
 
26,643

 
—

 
26,643

 
 
Total revenue
 
 
376,722

 
—

 
376,722

Costs and expenses:
 
 
 
 
 
 
 
 
Cost of product and maintenance
 
41,757

 
(7,743
)
 (E)
34,014

 
Cost of services
 
 
17,274

 
(698
)
 (E)
16,576

 
Marketing and sales
 
 
94,384

 
(5,201
)
 (E)
89,183

 
Research and development
 
135,465

 
(15,666
)
 (E)
119,799

 
General and administrative
 
29,481

 
(7,130
)
 (E)
22,351

 
Amortization of acquired intangibles
 
5,157

 
(5,157
)
 (E)
—

 
Restructuring and other charges
 
15,405

 
(15,405
)
 
—

 
 
Total costs and expenses
 
338,923

 
(57,000
)
 
281,923

 
 
 
Income from operations
 
37,799

 
57,000

 
94,799

 
Interest expense
 
 
(9,208
)
 
5,515

(F)
(3,693
)
 
Other income (expense), net
 
842

 
(1,553
)
(G)
(711
)
 
 
 
Income before provision (benefit) for income taxes
29,433

 
60,962

 
90,395

 
Provision (benefit) for income taxes
 
(8,272
)
 
31,775

(H)
23,503

 
 
 
Net income
 
 
$
37,705

 
$
29,187

 
$
66,892

Notes:
(E) For the three months ended December 28, 2013 adjustments to GAAP are as follows for the line items specified:
 
 
 
 
 
Amortization of acquired intangibles
 
Stock-based compensation expense
 
Non-qualified deferred compensation expenses
 
Acquisition and integration-related costs
 
Special charges (I)
 
Total adjustments
Cost of product and maintenance
$
7,265

 
$
471

 
$
7

 
$
—

 
$
—

 
$
7,743

Cost of services
 
—

 
689

 
9

 
—

 
—

 
698

Marketing and sales
 
—

 
4,703

 
68

 
430

 
—

 
5,201

Research and development
 
—

 
9,605

 
683

 
5,378

 
—

 
15,666

General and administrative
 
—

 
3,330

 
489

 
3,095

 
216

 
7,130

Amortization of acquired intangibles
5,157

 
—

 
—

 
—

 
—

 
5,157

 
Total
 
 
$
12,422

 
$
18,798

 
$
1,256

 
$
8,903

 
$
216

 
$
41,595

(F) Amortization of debt discount related to convertible notes
(G) Other income or expense related to investments and non-qualified deferred compensation plan assets
(H) Income tax effect of non-GAAP adjustments
(I) Comprised of cost related to executive severance costs




Cadence Design Systems, Inc.
Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures
For the Year Ended January 3, 2015
(In thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended
 
 
 
 
 
 
January 3, 2015
 
 
 
 
 
 
GAAP
 
Adjustments
 
Non-GAAP
Revenue:
 
 
 
 
 
 
 
 
 
Product and maintenance
 
$
1,479,151

 
$
—

 
$
1,479,151

 
Services
 
 
101,781

 
—

 
101,781

 
 
Total revenue
 
 
1,580,932

 
—

 
1,580,932

Costs and expenses:
 
 
 
 
 
 
 
 
Cost of product and maintenance
 
156,333

 
(39,586
)
 (J)
116,747

 
Cost of services
 
 
67,373

 
(3,997
)
 (J)
63,376

 
Marketing and sales
 
 
399,688

 
(25,410
)
 (J)
374,278

 
Research and development
 
603,006

 
(68,141
)
 (J)
534,865

 
General and administrative
 
113,619

 
(22,416
)
 (J)
91,203

 
Amortization of acquired intangibles
 
24,017

 
(24,017
)
 (J)
—

 
Restructuring and other charges
 
10,252

 
(10,252
)
 
—

 
 
Total costs and expenses
 
1,374,288

 
(193,819
)
 
1,180,469

 
 
 
Income from operations
 
206,644

 
193,819

 
400,463

 
Interest expense
 
 
(34,121
)
 
17,602

 (K)
(16,519
)
 
Other income, net
 
8,479

 
(4,629
)
 (L)
3,850

 
 
 
Income before provision for income taxes
181,002

 
206,792

 
387,794

 
Provision for income taxes
 
22,104

 
78,723

(M)
100,827

 
 
 
Net income
 
 
$
158,898

 
$
128,069

 
$
286,967

Notes:
(J) For the year ended January 3, 2015 adjustments to GAAP are as follows for the line items specified:
 
 
 
 
 
Amortization of acquired intangibles
 
Stock-based compensation expense
 
Non-qualified deferred compensation expenses
 
Acquisition and integration-related costs
 
Special charges (N)
 
Total adjustments
Cost of product and maintenance
$
36,907

 
$
2,244

 
$
34

 
$
—

 
$
401

 
$
39,586

Cost of services
 
—

 
3,280

 
50

 
—

 
667

 
3,997

Marketing and sales
 
—

 
20,580

 
149

 
2,768

 
1,913

 
25,410

Research and development
 
—

 
43,173

 
1,886

 
17,228

 
5,854

 
68,141

General and administrative
 
—

 
14,515

 
1,296

 
4,624

 
1,981

 
22,416

Amortization of acquired intangibles
24,017

 
—

 
—

 
—

 
—

 
24,017

 
Total
 
 
$
60,924

 
$
83,792

 
$
3,415

 
$
24,620

 
$
10,816

 
$
183,567

(K) Amortization of debt discount related to convertible notes
(L) Other income or expense related to investments and non-qualified deferred compensation plan assets
(M) Income tax effect of non-GAAP adjustments
(N) Comprised of costs related to a voluntary retirement program




Cadence Design Systems, Inc.
Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures
For the Year Ended December 28, 2013
(In thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended
 
 
 
 
 
 
December 28, 2013
 
 
 
 
 
 
GAAP
 
Adjustments
 
Non-GAAP
Revenue:
 
 
 
 
 
 
 
 
 
Product and maintenance
 
$
1,357,934

 
$
—

 
$
1,357,934

 
Services
 
 
102,182

 
—

 
102,182

 
 
Total revenue
 
 
1,460,116

 
—

 
1,460,116

Costs and expenses:
 
 
 
 
 
 
 
 
Cost of product and maintenance
 
132,245

 
(26,352
)
 (O)
105,893

 
Cost of services
 
 
67,956

 
(2,373
)
 (O)
65,583

 
Marketing and sales
 
 
378,157

 
(17,828
)
 (O)
360,329

 
Research and development
 
534,022

 
(53,403
)
 (O)
480,619

 
General and administrative
 
121,314

 
(27,273
)
 (O)
94,041

 
Amortization of acquired intangibles
 
19,416

 
(19,416
)
 (O)
—

 
Restructuring and other charges
 
17,999

 
(17,999
)
 
—

 
 
Total costs and expenses
 
1,271,109

 
(164,644
)
 
1,106,465

 
 
 
Income from operations
 
189,007

 
164,644

 
353,651

 
Interest expense
 
 
(37,581
)
 
22,315

(P)
(15,266
)
 
Other income, net
 
 
7,570

 
(5,280
)
(Q)
2,290

 
 
 
Income before provision (benefit) for income taxes
158,996

 
181,679

 
340,675

 
Provision (benefit) for income taxes
 
(5,247
)
 
93,823

(R)
88,576

 
 
 
Net income
 
 
$
164,243

 
$
87,856

 
$
252,099

Notes:
(O) For the year ended December 28, 2013 adjustments to GAAP are as follows for the line items specified:
 
 
 
 
 
Amortization and sale of acquired intangibles
 
Stock-based compensation expense
 
Non-qualified deferred compensation expenses
 
Acquisition and integration-related costs
 
Special charges (S)
 
Total adjustments
Cost of product and maintenance
$
24,718

 
$
1,596

 
$
38

 
$
—

 
$
—

 
$
26,352

Cost of services
 
—

 
2,321

 
52

 
—

 
—

 
2,373

Marketing and sales
 
—

 
15,642

 
239

 
1,467

 
480

 
17,828

Research and development
 
—

 
32,999

 
1,700

 
18,704

 
—

 
53,403

General and administrative
 
—

 
13,727

 
1,264

 
11,801

 
481

 
27,273

Amortization of acquired intangibles
19,416

 
—

 
—

 
—

 
—

 
19,416

 
Total
 
 
$
44,134

 
$
66,285

 
$
3,293

 
$
31,972

 
$
961

 
$
146,645

(P) Amortization of debt discount related to convertible notes
(Q) Other income or expense related to investments and non-qualified deferred compensation plan assets
(R) Income tax effect of non-GAAP adjustments
(S) Comprised of cost related to executive severance costs