Cadence Reports Third Quarter 2013 Financial Results

Marketwired

SAN JOSE, CA--(Marketwired - Oct 23, 2013) - Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the third quarter of fiscal year 2013.

Cadence reported third quarter 2013 revenue of $367 million, compared to revenue of $339 million reported for the same period in 2012. On a GAAP basis, Cadence recognized net income of $39 million, or $0.13 per share on a diluted basis, in the third quarter of 2013, compared to net income of $59 million, or $0.21 per share on a diluted basis, in the same period in 2012.

Using the non-GAAP measure defined below, net income in the third quarter of 2013 was $63 million, or $0.21 per share on a diluted basis, as compared to net income of $59 million, or $0.21 per share on a diluted basis, in the same period in 2012.

"In Q3, Cadence posted solid results and continued to announce new products. Palladium XP II, the latest emulator in our market leading product family, offers a significant performance improvement and contributed to strong Q3 hardware sales," said Lip-Bu Tan, president and chief executive officer. "Our talented development teams also delivered Spectre XPS, a new FastSPICE simulator which can deliver up to 10-times faster throughput than competing solutions."

"I am pleased with our financial performance in Q3 with profitability and cash flow both at the high end of our expectations," added Geoff Ribar, senior vice president and chief financial officer. 

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 2013, the company expects total revenue in the range of $370 million to $380 million. Fourth quarter GAAP net income per diluted share is expected to be in the range of $0.11 to $0.13. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.22 to $0.24.

For 2013, the company expects total revenue in the range of $1.453 billion to $1.463 billion. On a GAAP basis, net income per diluted share for 2013 is expected to be in the range of $0.55 to $0.56. Using the non-GAAP measure defined below, net income per diluted share for 2013 is expected to be in the range of $0.85 to $0.86.

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, president and chief executive officer, and Geoff Ribar, senior vice president and chief financial officer, will host a third quarter 2013 financial results audio webcast today, October 23, 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 October 23, 2013 at 5 p.m. (Pacific) and ending November 6, 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, Palladium and Spectre are trademarks or 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 2013 financial 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. 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 on Cadence's 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 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 acquisitions, 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  
    September 28, 2013     September 29, 2012  
    (unaudited)  
(in thousands)                
Net income on a GAAP basis   $ 38,500     $ 58,584  
  Amortization and sale of acquired intangibles     13,027       7,750  
  Stock-based compensation expense     18,566       12,399  
  Non-qualified deferred compensation expenses (credits)     186       (839 )
  Restructuring and other charges     86       57  
  Integration and acquisition-related costs     8,041       3,016  
  Executive severance costs     745       --  
  Amortization of debt discount     5,693       5,279  
  Other income or expense related to investments and non-qualified deferred compensation plan assets*     (1,544 )     1,954  
  Acquisition-related income tax benefit     --       (14,806 )
  Income tax effect of non-GAAP adjustments     (19,895 )     (14,054 )
Net income on a non-GAAP basis   $ 63,405     $ 59,340  
                 
* 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  
    September 28, 2013     September 29, 2012  
    (unaudited)  
(in thousands, except per share data)                
Diluted net income per share on a GAAP basis   $ 0.13     $ 0.21  
  Amortization and sale of acquired intangibles     0.04       0.03  
  Stock-based compensation expense     0.06       0.04  
  Non-qualified deferred compensation expenses (credits)     --       --  
  Restructuring and other charges     --       --  
  Integration and acquisition-related costs     0.03       0.01  
  Executive severance costs     --       --  
  Amortization of debt discount     0.02       0.02  
  Other income or expense related to investments and non-qualified deferred compensation plan assets*     --       --  
  Acquisition-related income tax benefit     --       (0.05 )
  Income tax effect of non-GAAP adjustments     (0.07 )     (0.05 )
Diluted net income per share on a non-GAAP basis   $ 0.21     $ 0.21  
Shares used in calculation of diluted net income per share -- GAAP**     296,958       283,328  
Shares used in calculation of diluted net income per share -- non-GAAP**     296,958       283,328  
                 
* 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 December 13, 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 fourth quarter and fiscal year 2013 earnings release is published, which is currently scheduled for January 29, 2014.

 
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
September 28, 2013 and December 29, 2012
(In thousands)
(Unaudited)
         
    September 28, 2013   December 29, 2012
             
Current assets:            
  Cash and cash equivalents   $ 620,403   $ 726,357
  Short-term investments     96,019     100,704
  Receivables, net of allowances of $144 and $85, respectively     101,896     97,821
  Inventories     45,877     36,163
  2015 notes hedges     292,511     303,154
  Prepaid expenses and other     117,457     127,036
    Total current assets     1,274,163     1,391,235
             
Property, plant and equipment, net of accumulated depreciation of $564,416 and $635,450, respectively    
241,965
   
244,439
Goodwill     456,267     233,266
Acquired intangibles, net of accumulated amortization of $128,004 and $104,351, respectively     323,807     184,938
Long-term receivables     3,994     7,559
Other assets     257,191     225,566
Total assets   $ 2,557,387   $ 2,287,003
             
Current liabilities:            
  Revolving credit facility   $ 50,000   $ -
  Convertible notes     463,837     447,011
  2015 notes embedded conversion derivative     292,511     303,154
  Accounts payable and accrued liabilities     193,445     171,318
  Current portion of deferred revenue     297,897     295,787
    Total current liabilities     1,297,690     1,217,270
             
Long-term liabilities:            
  Long-term portion of deferred revenue     48,229     50,529
  Other long-term liabilities     115,262     104,033
    Total long-term liabilities     163,491     154,562
             
Stockholders' equity     1,096,206     915,171
Total liabilities and stockholders' equity   $ 2,557,387   $ 2,287,003
             
             
                   
Cadence Design Systems, Inc.  
Condensed Consolidated Income Statements  
For the Three and Nine Months Ended September 28, 2013 and September 29, 2012  
(In thousands, except per share amounts)  
(Unaudited)  
                   
    Three Months Ended   Nine Months Ended  
    September 28, 2013   September 29, 2012   September 28, 2013   September 29, 2012  
                           
Revenue:                          
  Product and maintenance   $ 341,601   $ 310,118   $ 1,007,855   $ 893,916  
  Services     25,046     28,415     75,539     86,923  
                           
    Total revenue     366,647     338,533     1,083,394     980,839  
                           
Costs and expenses:                          
  Cost of product and maintenance     32,546     34,461     90,488     94,079  
  Cost of services     17,190     16,809     50,682     53,254  
  Marketing and sales     98,094     82,461     283,773     246,674  
  Research and development     138,078     115,078     398,557     335,703  
  General and administrative     27,582     26,350     91,833     84,364  
  Amortization of acquired intangibles     5,141     3,876     14,259     11,305  
  Restructuring and other charges     86     57     2,594     49  
                           
    Total costs and expenses     318,717     279,092     932,186     825,428  
                           
      Income from operations     47,930     59,441     151,208     155,411  
                           
  Interest expense     (9,583 )   (8,737 )   (28,373 )   (25,840 )
  Other income (expense), net     2,535     (131 )   6,728     5,972  
                           
      Income before provision (benefit) for income taxes     40,882     50,573     129,563     135,543  
                           
  Provision (benefit) for income taxes     2,382     (8,011 )   3,025     9,469  
                           
      Net income   $ 38,500   $ 58,584   $ 126,538   $ 126,074  
                           
                           
Net income per share - basic   $ 0.14   $ 0.22   $ 0.46   $ 0.47  
                           
Net income per share - diluted   $ 0.13   $ 0.21   $ 0.43   $ 0.45  
                           
Weighted average common shares outstanding - basic     278,977     271,350     277,034     269,643  
                           
Weighted average common shares outstanding - diluted     296,958     283,328     294,531     278,760  
                           
                           
   
Cadence Design Systems, Inc.  
Condensed Consolidated Statements of Cash Flows  
For the Nine Months Ended September 28, 2013 and September 29, 2012  
(In thousands)  
(Unaudited)  
   
    Nine Months Ended  
    September 28,     September 29,  
    2013     2012  
                 
Cash and cash equivalents at beginning of period   $ 726,357     $ 601,602  
Cash flows from operating activities:                
  Net income     126,538       126,074  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation and amortization     72,681       67,171  
    Amortization of debt discount and fees     19,102       17,480  
    Stock-based compensation     47,487       34,285  
    Gain on investments, net     (4,035 )     (2,222 )
    Deferred income taxes     (6,425 )     (14,107 )
    Other non-cash items     2,183       3,578  
    Changes in operating assets and liabilities, net of effect of acquired businesses:                
      Receivables     2,192       24,276  
      Inventories     (10,005 )     6,936  
      Prepaid expenses and other     26,927       1,547  
      Other assets     (46,651 )     (3,101 )
      Accounts payable and accrued liabilities     18,277       (1,714 )
      Deferred revenue     (5,474 )     (38,230 )
      Other long-term liabilities     5,644       (1,855 )
        Net cash provided by operating activities     248,441       220,118  
                 
Cash flows from investing activities:                
  Purchases of available-for-sale securities     (84,000 )     (101,248 )
  Proceeds from the sale of available-for-sale securities     59,014       5,936  
  Proceeds from the maturity of available-for-sale securities     30,506       1,500  
  Proceeds from the sale of long-term investments     6,200       44  
  Purchases of property, plant and equipment     (35,950 )     (25,932 )
  Investment in venture capital partnerships and equity investments     -       (250 )
  Cash paid in business combinations and asset acquisitions, net of cash acquired     (392,825 )     (66,432 )
        Net cash used for investing activities     (417,055 )     (186,382 )
                 
Cash flows from financing activities:                
  Proceeds from revolving credit facility     100,000       -  
  Payment on revolving credit facility     (50,000 )     -  
  Payment of convertible notes     (78 )     -  
  Principal payments on receivable financing     (2,526 )     (2,907 )
  Payment of acquisition-related contingent consideration     (677 )     (39 )
  Tax effect related to employee stock transactions allocated to equity     9,494       5,790  
  Proceeds from issuance of common stock     40,691       28,755  
  Stock received for payment of employee taxes on vesting of restricted stock     (19,461 )     (13,457 )
        Net cash provided by financing activities     77,443       18,142  
                 
Effect of exchange rate changes on cash and cash equivalents     (14,783 )     (4,381 )
                 
Increase (decrease) in cash and cash equivalents     (105,954 )     47,497  
                 
Cash and cash equivalents at end of period   $ 620,403     $ 649,099  
                 
                 
 
Cadence Design Systems, Inc.
As of October 23, 2013
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
(Unaudited)
         
    Three Months Ending   Year Ending
    December 28, 2013   December 28, 2013
    Forecast   Forecast
         
Diluted net income per share on a GAAP basis   $0.11 to $0.13   $0.55 to $0.56
         
  Amortization and sale of acquired intangibles   0.04   0.15
  Stock-based compensation expense   0.07   0.22
  Non-qualified deferred compensation expenses   -   0.01
  Restructuring and other charges   -   0.01
  Integration and acquisition-related costs   0.02   0.10
  Executive severance costs   -   -
  Amortization of debt discount   0.02   0.08
  Other income or expense related to investments and non-qualified deferred compensation plan assets*  
-
 
(0.01)
  Income tax benefit due to a release of an uncertain tax position   -   (0.12)
  Income tax effect of non-GAAP adjustments   (0.04)   (0.14)
         
Diluted net income per share on a non-GAAP basis   $0.22 to $0.24   $0.85 to $0.86
         
* 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.
         
         
         
Cadence Design Systems, Inc.
As of October 23, 2013
Impact of Non-GAAP Adjustments on Forward Looking Net Income
(Unaudited)
         
    Three Months Ending   Year Ending
    December 28, 2013   December 28, 2013
($ in millions)   Forecast   Forecast
         
Net income on a GAAP basis   $33 to $39   $160 to $165
         
  Amortization and sale of acquired intangibles   12   44
  Stock-based compensation expense   19   66
  Non-qualified deferred compensation expenses   -   2
  Restructuring and other charges   -   3
  Integration and acquisition-related costs   6   30
  Executive severance costs   -   1
  Amortization of debt discount   6   22
  Other income or expense related to investments and non-qualified deferred compensation plan assets*   -   (4)
  Income tax benefit due to a release of an uncertain tax position   -   (34)
  Income tax effect of non-GAAP adjustments   (13)   (41)
         
Net income on a non-GAAP basis   $63 to $69   $249 to $254
         
* 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.
 
 
   
Cadence Design Systems, Inc.  
(Unaudited)  
                                                 
Revenue Mix by Geography (% of Total Revenue)  
                                                 
    2012     2013  
GEOGRAPHY   Q1     Q2     Q3     Q4     Year     Q1     Q2     Q3  
                                                 
  Americas   44 %   46 %   43 %   45 %   45 %   44 %   45 %   48 %
  EMEA   19 %   20 %   20 %   21 %   20 %   22 %   21 %   20 %
  Japan   18 %   16 %   17 %   14 %   16 %   15 %   13 %   12 %
  Asia   19 %   18 %   20 %   20 %   19 %   19 %   21 %   20 %
Total   100 %   100 %   100 %   100 %   100 %   100 %   100 %   100 %
                                                 
                                                 
Revenue Mix by Product Group (% of Total Revenue)  
                                                 
    2012     2013  
PRODUCT GROUP   Q1     Q2     Q3     Q4     Year     Q1     Q2     Q3  
                                                 
  Functional Verification, Hardware and IP   30 %   33 %   30 %   30 %   30 %   26 %   28 %   31 %
  Digital IC Design   23 %   22 %   23 %   23 %   23 %   25 %   23 %   21 %
  Custom IC Design   23 %   22 %   24 %   24 %   23 %   25 %   25 %   25 %
  Design for Manufacturing   7 %   6 %   6 %   6 %   6 %   7 %   6 %   6 %
  System Interconnect Design   8 %   8 %   9 %   9 %   9 %   10 %   11 %   10 %
  Services and other   9 %   9 %   8 %   8 %   9 %   7 %   7 %   7 %
Total   100 %   100 %   100 %   100 %   100 %   100 %   100 %   100 %
                                                 
Note: Product Group total revenue includes Product + Maintenance  
   
   
                         
Cadence Design Systems, Inc.  
Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures  
For the Three Months Ended September 28, 2013  
(In thousands, except per share amounts)  
(Unaudited)  
                         
    Three Months Ended  
    September 28, 2013  
    GAAP     Adjustments           Non-GAAP  
                               
Revenue:                              
  Product and maintenance   $ 341,601     $ -           $ 341,601  
  Services     25,046       -             25,046  
                               
  Total revenue     366,647       -             366,647  
                               
Costs and expenses:                              
  Cost of product and maintenance     32,546       (8,339 )   (A )     24,207  
  Cost of services     17,190       (662 )   (A )     16,528  
  Marketing and sales     98,094       (5,655 )   (A )     92,439  
  Research and development     138,078       (16,713 )   (A )     121,365  
  General and administrative     27,582       (4,055 )   (A )     23,527  
  Amortization of acquired intangibles     5,141       (5,141 )   (A )     -  
  Restructuring and other charges     86       (86 )           -  
                               
    Total costs and expenses     318,717       (40,651 )           278,066  
                               
      Income from operations     47,930       40,651             88,581  
                               
  Interest expense     (9,583 )     5,693     (B )     (3,890 )
  Other income, net     2,535       (1,544 )   (C )     991  
                               
      Income before provision for income taxes     40,882       44,800             85,682  
                               
  Provision for income taxes     2,382       19,895     (D )     22,277  
                               
      Net income   $ 38,500     $ 24,905           $ 63,405  
                               
Notes:                              
(A) For the three months ended September 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   Integration and acquisition-related costs   Executive severance costs   Total adjustments
Cost of product and maintenance   $ 7,886   $ 438   $ 15   $ -   $ -   $ 8,339
Cost of services     -     641     21     -     -     662
Marketing and sales     -     4,594     3     578     480     5,655
Research and development     -     9,356     60     7,297     -     16,713
General and administrative     -     3,537     87     166     265     4,055
Amortization of acquired intangibles     5,141     -     -     -     -     5,141
  Total   $ 13,027   $ 18,566   $ 186   $ 8,041   $ 745   $ 40,565
                                     
(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 September 29, 2012  
(In thousands, except per share amounts)  
(Unaudited)  
                         
    Three Months Ended  
    September 29, 2012  
    GAAP     Adjustments           Non-GAAP  
                               
Revenue:                              
  Product and maintenance   $ 310,118     $ -           $ 310,118  
  Services     28,415       -             28,415  
                               
    Total revenue     338,533       -             338,533  
                               
Costs and expenses:                              
  Cost of product and maintenance     34,461       (4,204 )   (E )     30,257  
  Cost of services     16,809       (474 )   (E )     16,335  
  Marketing and sales     82,461       (2,868 )   (E )     79,593  
  Research and development     115,078       (7,225 )   (E )     107,853  
  General and administrative     26,350       (3,679 )   (E )     22,671  
  Amortization of acquired intangibles     3,876       (3,876 )   (E )     -  
  Restructuring and other charges     57       (57 )           -  
                               
    Total costs and expenses     279,092       (22,383 )           256,709  
                               
      Income from operations     59,441       22,383             81,824  
                               
  Interest expense     (8,737 )     5,279     (F )     (3,458 )
  Other income (expense), net     (131 )     1,954     (G )     1,823  
                               
      Income before provision (benefit) for income taxes     50,573       29,616             80,189  
                               
  Provision (benefit) for income taxes     (8,011 )     28,860     (H )     20,849  
                               
      Net income   $ 58,584     $ 756           $ 59,340  
                               
Notes:                              
(E) For the three months ended September 29, 2012 adjustments to GAAP are as follows for the line items specified:  
                       
    Amortization of acquired intangibles   Stock-based compensation expense   Non-qualified deferred compensation credits     Integration and acquisition-related costs   Total adjustments
Cost of product and maintenance   $ 3,874   $ 343   $ (13 )   $ -   $ 4,204
Cost of services     -     493     (19 )     -     474
Marketing and sales     -     2,647     (87 )     308     2,868
Research and development     -     5,774     (369 )     1,820     7,225
General and administrative     -     3,142     (351 )     888     3,679
Amortization of acquired intangibles     3,876     -     -       -     3,876
  Total   $ 7,750   $ 12,399   $ (839 )   $ 3,016   $ 22,326
                                 
(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
 
 
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
Anna del Rosario
Cadence Design Systems, Inc.
408-914-6884
publicrelations@cadence.com

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