Cadence Reports Fourth Quarter and Fiscal Year 2012 Financial Results

Marketwired

SAN JOSE, CA--(Marketwire - Jan 30, 2013) - Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the fourth quarter and fiscal year 2012.

Cadence reported fourth quarter 2012 revenue of $346 million, compared to revenue of $308 million reported for the same period in 2011. On a GAAP basis, Cadence recognized net income of $314 million, or $1.10 per share on a diluted basis, in the fourth quarter of 2012, compared to net income of $11 million, or $0.04 per share on a diluted basis, in the same period in 2011. Revenue for 2012 totaled $1.326 billion, compared to revenue of $1.150 billion for 2011. Net income for 2012 was $440 million, or $1.57 per share on a diluted basis, compared to net income of $72 million, or $0.27 per share on a diluted basis, for 2011. GAAP net income for the fourth quarter of 2012 included a $220 million income tax benefit from releasing a valuation allowance against Cadence's deferred tax assets and a $37 million income tax benefit related to the settlement of a State of California examination of Cadence's state income tax returns for the tax years 2001 through 2003.

Using Cadence's non-GAAP measure, net income in the fourth quarter of 2012 was $58 million, or $0.20 per share on a diluted basis, as compared to net income of $46 million, or $0.17 per share on a diluted basis, in the same period in 2011. For 2012, non-GAAP net income was $217 million, or $0.77 per share on a diluted basis, compared to non-GAAP net income of $138 million or $0.51 per share on a diluted basis, in 2011.

"In 2012, we executed on multiple aspects of our strategy," said Lip-Bu Tan, president and chief executive officer. "In Silicon Realization, we demonstrated market leading technology for the newest process nodes, multi-core based design, 3DIC, low-power and mixed-signal as well as advanced verification. In SoC Realization, we significantly expanded our IP and VIP portfolios and revenue grew over 30 percent. In System Realization, Palladium XP had record revenue and we strengthened our printed circuit board platform with the acquisition of Sigrity."

"Cadence also produced strong financial results in 2012," added Geoff Ribar, senior vice president and chief financial officer. "Revenue grew 15 percent, operating profitability improved approximately five percentage points, and operating cash flow increased 31 percent. With $827 million of cash and short term investments at year end, our balance sheet is well positioned to support our strategy and meet our debt obligations."

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.

Business Outlook

For the first quarter of 2013, the company expects total revenue in the range of $342 million to $352 million. First quarter GAAP net income per diluted share is expected to be in the range of $0.23 to $0.24. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.19 to $0.20.

For 2013, the company expects total revenue in the range of $1.405 billion to $1.445 billion. On a GAAP basis, net income per diluted share for 2013 is expected to be in the range of $0.58 to $0.68. Using the non-GAAP measure defined below, net income per diluted share for 2013 is expected to be in the range of $0.82 to $0.92.

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 with this release.

Audio Webcast Scheduled

Lip-Bu Tan, Cadence's president and chief executive officer, and Geoff Ribar, Cadence's senior vice president and chief financial officer, will host a fourth quarter 2012 financial results audio webcast today, January 30, 2013, 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 January 30, 2013 at 5 p.m. (Pacific) and ending February 13, 2013 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, the Cadence logo and Palladium 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 2012 results, as well as the information in the Business Outlook section and the statements by Lip-Bu Tan and Geoff Ribar, include forward-looking statements based on current expectations or beliefs and 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) 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, and its shift to a ratable license structure, which may result in changes in the mix of license types; (iv) change in customer demands, including those resulting from consolidation among Cadence's customers and the possibility that Cadence's customers' restructurings and other efforts to improve operational efficiency could result in delays in their 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; (ix) the effects of Cadence's efforts to improve operational efficiency on its business, including its 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 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 of intangible assets, stock-based compensation expense, integration and acquisition-related costs, including changes in contingent consideration related to prior acquisitions and asset purchases, acquisition-related income tax benefits, shareholder litigation costs, gains or losses and expenses or credits related to non-qualified deferred compensation plan assets, executive and other employee severance costs, restructuring charges and credits, amortization of discount on convertible notes, 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 is adjusted by the amount of additional taxes or tax benefit that Cadence 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, including changes in contingent consideration related to prior acquisitions and asset purchases, because these costs are inconsistent in size, are significantly impacted by the timing and valuation of those acquisitions 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 it 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, and such exclusion enhances investors' ability to review Cadence's business from the same perspective as Cadence's management. 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. 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 also 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 and other employee severance costs because exclusion of such costs permits consistent evaluations of Cadence's performance. 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.

During the fourth quarter of 2012, Cadence's non-GAAP net income also excluded the effect of an income tax benefit associated with the release of a valuation allowance against Cadence's deferred tax assets. Cadence's management believes it is useful to exclude the tax benefit associated with the release of this valuation allowance as Cadence does not expect releases in the valuation allowance of the magnitude recorded in the fourth quarter of 2012 to be recorded frequently.

During the fourth quarter of 2012, Cadence's non-GAAP net income also excluded the effect of an income tax benefit associated with Cadence's effective settlement of a State of California examination of Cadence's state income tax returns for the tax years 2001 through 2003. 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 benefits of the magnitude recorded in the fourth quarter of 2012 to occur frequently.

During the third quarter of 2012, Cadence's non-GAAP net income also excluded the effect of an income tax benefit associated with Cadence's acquisition of Sigrity, Inc. During the second quarter of 2011, Cadence's non-GAAP net income also excluded the effect of an income tax benefit associated with an acquisition Cadence completed during the second quarter of 2011. Cadence's management believes it is useful to exclude the tax benefits associated with these acquisitions because exclusion of such tax benefits permits consistent evaluations of Cadence's performance. Cadence does not expect an acquisition-related income tax benefit of the magnitude recorded in the third quarter of 2012 to be recorded frequently.

Cadence's management believes that non-GAAP net income 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 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  
    December 29, 2012     December 31, 2011  
    (unaudited)  
(in thousands)                
Net income on a GAAP basis   $ 313,874     $ 10,892  
  Amortization of acquired intangibles     7,649       6,681  
  Stock-based compensation expense     13,276       11,999  
  Non-qualified deferred compensation expenses (credits)     1,216       (3,560 )
  Restructuring and other charges     64       83  
  Shareholder litigation costs     --       192  
  Executive and other employee severance costs     --       2,931  
  Integration and acquisition-related costs     2,187       353  
  Amortization of debt discount     5,354       6,432  
  Other income or expense related to investments and non-qualified deferred compensation plan assets*     (4,081 )     3,482  
  Income tax benefit of valuation allowance release     (219,601 )     --  
  Income tax benefit of State of California settlement     (36,564 )     --  
  Income tax effect of non-GAAP adjustments     (25,363 )     6,260  
Net income on a non-GAAP basis   $ 58,011     $ 45,745  
     
*   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.
     
Net Income Reconciliation   Years Ended  
    December 29, 2012     December 31, 2011  
    (unaudited)  
(in thousands)                
Net income on a GAAP basis   $ 439,948     $ 72,229  
  Amortization of acquired intangibles     28,618       27,016  
  Stock-based compensation expense     47,561       43,588  
  Non-qualified deferred compensation expenses (credits)     4,453       (383 )
  Restructuring and other charges     113       360  
  Shareholder litigation costs     46       1,545  
  Executive and other employee severance costs     --       6,178  
  Integration and acquisition-related costs     9,278       2,598  
  Amortization of debt discount     20,846       26,214  
  Other income or expense related to investments and non-qualified deferred compensation plan assets*     (6,296 )     (15,682 )
  Income tax benefit of valuation allowance release     (219,601 )     --  
  Income tax benefit of State of California settlement     (36,564 )     --  
  Acquisition-related income tax benefit     (14,806 )     (5,021 )
  Income tax effect of non-GAAP adjustments     (56,857 )     (20,366 )
Net income on a non-GAAP basis   $ 216,739     $ 138,276  
     
*   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.
     
Diluted Net Income per Share Reconciliation   Three Months Ended  
    December 29, 2012     December 31, 2011  
    (unaudited)  
(in thousands, except per share data)                
Diluted net income per share on a GAAP basis   $ 1.10     $ 0.04  
  Amortization of acquired intangibles     0.03       0.03  
  Stock-based compensation expense     0.05       0.05  
  Non-qualified deferred compensation expenses (credits)     --       (0.01 )
  Restructuring and other charges     --       --  
  Shareholder litigation costs     --       --  
  Executive and other employee severance costs     --       0.01  
  Integration and acquisition-related costs     0.01       --  
  Amortization of debt discount     0.02       0.02  
  Other income or expense related to investments and non-qualified deferred compensation plan assets*     (0.02 )     0.01  
  Income tax benefit of valuation allowance release     (0.77 )     --  
  Income tax benefit of State of California settlement     (0.13 )     --  
  Income tax effect of non-GAAP adjustments     (0.09 )     0.02  
Diluted net income per share on a non-GAAP basis   $ 0.20     $ 0.17  
Shares used in calculation of diluted net income per share -- GAAP**     286,289       273,057  
Shares used in calculation of diluted net income per share -- non-GAAP**     286,289       273,057  
     
*   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 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  
    December 29, 2012     December 31, 2011  
    (unaudited)  
(in thousands, except per share data)                
Diluted net income per share on a GAAP basis   $ 1.57     $ 0.27  
  Amortization of acquired intangibles     0.10       0.10  
  Stock-based compensation expense     0.17       0.16  
  Non-qualified deferred compensation expenses (credits)     0.02       --  
  Restructuring and other charges     --       --  
  Shareholder litigation costs     --       0.01  
  Executive and other employee severance costs     --       0.02  
  Integration and acquisition-related costs     0.03       0.01  
  Amortization of debt discount     0.07       0.10  
  Other income or expense related to investments and non-qualified deferred compensation plan assets*     (0.02 )     (0.06 )
  Income tax benefit of valuation allowance release     (0.78 )     --  
  Income tax benefit of State of California settlement     (0.13 )     --  
  Acquisition-related income tax benefit     (0.05 )     (0.02 )
  Income tax effect of non-GAAP adjustments     (0.21 )     (0.08 )
Diluted net income per share on a non-GAAP basis   $ 0.77     $ 0.51  
Shares used in calculation of diluted net income per share -- GAAP**     280,667       270,816  
Shares used in calculation of diluted net income per share -- non-GAAP**     280,667       270,816  
     
*   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 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.
     

Investors are encouraged to look at the GAAP results as the best measure of financial performance.

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 15, 2013, 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 2013 Earnings Release is published, which is currently scheduled for April 24, 2013.

 
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
December 29, 2012 and December 31, 2011
(In thousands)
(Unaudited)
         
    December 29, 2012   December 31, 2011
             
Current assets:            
  Cash and cash equivalents   $ 726,357   $ 601,602
  Short-term investments     100,704     3,037
  Receivables, net of allowances of $85 and $0, respectively     97,821     136,772
  Inventories     36,163     43,243
  2015 notes hedges     303,154     215,113
  Prepaid expenses and other     127,036     64,216
    Total current assets     1,391,235     1,063,983
             
Property, plant and equipment, net of accumulated depreciation of $635,450 and $658,990, respectively     244,439     262,517
Goodwill     233,266     192,125
Acquired intangibles, net of accumulated amortization of $104,351 and $91,542, respectively     184,938     173,234
Long-term receivables     7,559     11,371
Other assets     225,566     58,039
Total assets   $ 2,287,003   $ 1,761,269
             
Current liabilities:            
  Convertible notes   $ 447,011   $ 294,061
  2015 notes embedded conversion derivative     303,154     215,113
  Accounts payable and accrued liabilities     171,318     165,791
  Current portion of deferred revenue     295,787     340,401
    Total current liabilities     1,217,270     1,015,366
             
Long-term liabilities:            
  Long-term portion of deferred revenue     50,529     73,959
  Convertible notes     -     131,920
  Other long-term liabilities     104,033     128,894
    Total long-term liabilities     154,562     334,773
             
Stockholders' equity     915,171     411,130
Total liabilities and stockholders' equity   $ 2,287,003   $ 1,761,269
             
Cadence Design Systems, Inc.  
Condensed Consolidated Income Statements  
For the Three Months and Years Ended December 29, 2012 and December 31, 2011  
(In thousands, except per share amounts)  
(Unaudited)  
                         
    Three Months Ended     Years Ended  
    December 29, 2012     December 31, 2011     December 29, 2012     December 31, 2011  
                                 
Revenue:                                
  Product   $ 224,243     $ 177,113     $ 839,129     $ 640,836  
  Services     27,072       30,308       113,995       116,692  
  Maintenance     94,270       100,585       373,300       392,307  
                                 
    Total revenue     345,585       308,006       1,326,424       1,149,835  
                                 
Costs and expenses:                                
  Cost of product     13,069       17,204       73,392       69,657  
  Cost of services     19,353       20,397       72,607       81,498  
  Cost of maintenance     11,368       11,164       45,124       44,001  
  Marketing and sales     95,604       88,506       342,278       323,798  
  Research and development     118,382       97,024       454,085       400,745  
  General and administrative     27,712       24,143       112,076       92,863  
  Amortization of acquired intangibles     3,772       3,786       15,077       16,536  
  Restructuring and other charges     64       83       113       360  
                                 
    Total costs and expenses     289,324       262,307       1,114,752       1,029,458  
                                 
      Income from operations     56,261       45,699       211,672       120,377  
                                 
  Interest expense     (8,902 )     (10,441 )     (34,742 )     (43,025 )
  Other income (expense), net     5,369       (2,033 )     11,341       18,074  
                                 
      Income before provision (benefit) for income taxes     52,728       33,225       188,271       95,426  
                                 
  Provision (benefit) for income taxes     (261,146 )     22,333       (251,677 )     23,197  
                                 
      Net income   $ 313,874     $ 10,892     $ 439,948     $ 72,229  
                                 
                                 
Net income per share - basic   $ 1.15     $ 0.04     $ 1.63     $ 0.27  
                                 
Net income per share - diluted   $ 1.10     $ 0.04     $ 1.57     $ 0.27  
                                 
Weighted average common shares outstanding - basic     272,884       266,120       270,479       263,892  
                                 
Weighted average common shares outstanding - diluted     286,289       273,057       280,667       270,816  
                                 
Cadence Design Systems, Inc.  
Condensed Consolidated Statements of Cash Flows  
For the Years Ended December 29, 2012 and December 31, 2011  
(In thousands)  
(Unaudited)  
             
    Years Ended  
    December 29,     December 31,  
    2012     2011  
                 
Cash and cash equivalents at beginning of period   $ 601,602     $ 557,409  
Cash flows from operating activities:                
  Net income     439,948       72,229  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation and amortization     89,217       91,648  
    Amortization of debt discount and fees     23,513       29,266  
    Stock-based compensation     47,561       43,588  
    Gain on investments, net     (6,320 )     (15,737 )
    Non-cash restructuring and other charges     252       240  
    Tax impact of convertible notes interest     -       8,486  
    Deferred income taxes     (240,424 )     (7,811 )
    Provisions (recoveries) for losses (gains) on receivables, net     215       (6,596 )
    Other non-cash items     3,063       3,196  
    Changes in operating assets and liabilities, net of effect of acquired businesses:                
      Receivables     45,630       76,785  
      Inventories     5,245       (6,820 )
      Prepaid expenses and other     (12,426 )     20,053  
      Other assets     (4,902 )     (2,220 )
      Accounts payable and accrued liabilities     17,523       (46,950 )
      Deferred revenue     (69,662 )     (13,408 )
      Other long-term liabilities     (22,439 )     (5,607 )
        Net cash provided by operating activities     315,994       240,342  
                 
Cash flows from investing activities:                
  Purchases of available-for-sale securities     (121,154 )     -  
  Proceeds from the sale of available-for-sale securities     18,338       9,793  
  Proceeds from the maturity of available-for-sale securities     4,150       -  
  Proceeds from the sale of long-term investments     74       9,791  
  Purchases of property, plant and equipment     (35,966 )     (31,421 )
  Investment in venture capital partnerships and equity investments     (250 )     (608 )
  Cash paid in business combinations and asset acquisitions, net of cash acquired     (66,432 )     (44,052 )
        Net cash used for investing activities     (201,240 )     (56,497 )
                 
Cash flows from financing activities:                
  Principal payments on receivable sale financing     (5,776 )     (5,842 )
  Payment of 2011 notes     -       (150,000 )
  Payment of debt issuance costs     (1,372 )     -  
  Payment of acquisition-related contingent consideration     (39 )     -  
  Tax effect related to employee stock transactions allocated to equity     6,061       5,549  
  Proceeds from issuance of common stock     32,687       19,714  
  Stock received for payment of employee taxes on vesting of restricted stock     (15,728 )     (14,225 )
        Net cash provided by (used for) financing activities     15,833       (144,804 )
                 
Effect of exchange rate changes on cash and cash equivalents     (5,832 )     5,152  
                 
Increase in cash and cash equivalents     124,755       44,193  
                 
Cash and cash equivalents at end of period   $ 726,357     $ 601,602  
                 
Cadence Design Systems, Inc.
As of January 30, 2013
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
(Unaudited)
         
    Three Months Ending   Year Ending
    March 30, 2013   December 28, 2013
    Forecast   Forecast
         
Diluted net income per share on a GAAP basis   $0.23 to $0.24   $0.58 to $0.68
         
  Amortization of acquired intangibles   0.03   0.09
  Stock-based compensation expense   0.05   0.22
  Integration and acquisition-related costs   0.01   0.03
  Amortization of debt discount   0.02   0.08
  Income tax effect of non-GAAP adjustments   (0.15)   (0.18)
         
Diluted net income per share on a non-GAAP basis   $0.19 to $0.20   $0.82 to $0.92
         
Cadence Design Systems, Inc.
As of January 30, 2013
Impact of Non-GAAP Adjustments on Forward Looking Net Income
(Unaudited)
         
    Three Months Ending   Year Ending
    March 30, 2013   December 28, 2013
($ in millions)   Forecast   Forecast
         
Net income on a GAAP basis   $66 to $71   $168 to $198
         
  Amortization of acquired intangibles   8   28
  Stock-based compensation expense   14   64
  Integration and acquisition-related costs   2   8
  Amortization of debt discount   6   22
  Income tax effect of non-GAAP adjustments   (42)   (51)
         
Net income on a non-GAAP basis   $54 to $59   $239 to $269
         
Cadence Design Systems, Inc.
(Unaudited)
                         
Revenue Mix by Geography (% of Total Revenue)
                         
    2011   2012
GEOGRAPHY   Q1 Q2 Q3 Q4 Year   Q1 Q2 Q3 Q4 Year
                         
  Americas   44% 47% 44% 44% 45%   44% 46% 43% 45% 45%
  EMEA   21% 20% 21% 20% 20%   19% 20% 20% 21% 20%
  Japan   19% 17% 18% 17% 18%   18% 16% 17% 14% 16%
  Asia   16% 16% 17% 19% 17%   19% 18% 20% 20% 19%
Total   100% 100% 100% 100% 100%   100% 100% 100% 100% 100%
                         
Revenue Mix by Product Group (% of Total Revenue)
                         
    2011   2012
PRODUCT GROUP   Q1 Q2 Q3 Q4 Year   Q1 Q2 Q3 Q4 Year
                         
  Functional Verification and Design IP   28% 33% 30% 32% 30%   30% 33% 30% 30% 30%
  Digital IC Design   24% 21% 22% 21% 22%   23% 22% 23% 23% 23%
  Custom IC Design   20% 22% 23% 23% 22%   23% 22% 24% 24% 23%
  Design for Manufacturing   8% 6% 6% 6% 7%   7% 6% 6% 6% 6%
  System Interconnect   10% 8% 9% 8% 9%   8% 8% 9% 9% 9%
  Services & Other   10% 10% 10% 10% 10%   9% 9% 8% 8% 9%
Total   100% 100% 100% 100% 100%   100% 100% 100% 100% 100%
                         
                         
Note: Product Group total revenue includes Product and Maintenance revenue
 
Contact:
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
Nancy Szymanski
Cadence Design Systems, Inc.
408-473-8382
publicrelations@cadence.com
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