Cadence Design Systems (CDNS) 8-K Regulation FD Disclosure

EXHIBIT 99.1

For more information, please contact:
Alan Lindstrom
Investors and Shareholders
Cadence Design Systems, Inc.
direct: 408-944-7100
investor_relations@cadence.com

Giovanni Rodriguez
Media and Analysts
Eastwick Communications
for Cadence Design Systems, Inc.
650-480-4021
www.eastwick.com

Cadence Reports Fourth Quarter and 2003 Results
and Intention to Restate Accounting for Certain Minority Equity Investments and other Financial Information

     SAN JOSE, Calif., Jan. 28, 2004 — Cadence Design Systems, Inc. (NYSE: CDN) today announced its fourth quarter and fiscal 2003 results. Cadence® announced total fourth quarter revenue of $308 million, compared to $274 million in the same period last year. Ratable licenses accounted for approximately 75 percent of product bookings. Pro forma diluted earnings per share for the fourth quarter were $0.24 compared to $0.02 in the same period last year.

     Total revenue for 2003 was $1.11 billion compared to $1.29 billion in 2002, and pro forma diluted earnings per share for the year were $0.51 compared to $0.61 in 2002. For comparison purposes, except where noted, the results discussed in this release reflect earnings before amortization of acquired intangibles and special items.

     Including amortization of acquired intangibles and special items, in accordance with generally accepted accounting principles (GAAP), the company reported net income of $24 million and diluted earnings per share of $0.09 for the fourth quarter of 2003, compared to $87 million and $0.32 per share in the same period last year. On a GAAP basis, the company reported a net loss of $17 million and diluted net loss per share of $(0.06) for the year, compared to $67 million net income and net income per share of $0.25 in the same period last year. Schedules showing the impact of pro forma adjustments on net income on a quarterly and annual basis are included with this release.

     “The fourth quarter was a turning point for Cadence in digital design. Our Encounter™ platform earned 25 new logos and displaced competitors at several global IC companies,” said Ray Bingham, president and chief executive officer of Cadence Design Systems. “We also saw good momentum in our Incisive™ functional verification platform and in our new Virtuoso custom design platform on OpenAccess.”

     Cadence also announced that it will restate certain information in its financial statements for its fiscal year 2002, and the first, second and third quarters of fiscal 2003. These restatements will correct the accounting treatment for certain minority equity investments made by Cadence and its affiliated venture capital partnerships in prior periods. In addition, these restatements will include certain other adjustments that are immaterial both individually and in the aggregate. The adjustments are expected to affect primarily “other income” in Cadence’s Consolidated Statements of Operations, and “other assets” and “retained earnings” in its Consolidated Balance Sheets for the periods affected. For the nine months ended September 27, 2003, GAAP net loss is expected to be decreased by approximately $1.8 million, or $0.01 per share. For the year ended December 28, 2002, Cadence’s GAAP net income is expected to be reduced by approximately $4.9 million, or $0.02 per share.

Business Highlights of Q4 2003

     Cadence delivered — ahead of schedule — the fourth major release of the Encounter digital IC design platform in 13 months. It included the integration of NanoRoute, which surpassed 150 tapeouts, and RTL Compiler, the leading new generation synthesis technology. The customer benefits of this integration are ease of use, higher performance and productivity.

     Verification continues to be a key area of customer investment. Cadence enjoyed a record quarter for the Incisive functional verification platform, which was launched less than a year ago. Thirty-six new customers adopted the Incisive platform in the fourth quarter. Cadence also enjoyed a record quarter for Incisive XLD. Incisive XLD provides the industry’s only “acceleration-on-demand” capability, which allows customers to choose either simulation or hardware-based acceleration at runtime.

     Cadence is investing to sustain its leadership position in the custom design market. In the fourth quarter, Cadence launched the Virtuoso® custom design platform, integrated on the industry standard OpenAccess database. The acquisition of Q Design Automation added process migration and layout optimization technologies to the Virtuoso platform.

     “The decisive actions we took to strengthen our technology are beginning to bear fruit as our customers’ operations improve and they gain greater visibility on their product development plans,” said Bingham. “We are poised to strengthen our position in digital at the leading edge; to exploit the market sweet spot for fast, complicated SoCs; and to develop indispensable business partnerships with our customers through platforms, services and open collaboration. This in turn will enable enterprises to create nanometer electronics profitably.”

Restatement of Financial Information

     During the fourth quarter of 2003, Cadence commenced a review of equity investments made directly by it or through its affiliated Telos venture capital investment partnerships. Most of these investments are treated by Cadence as “passive” investments and have been accounted for using the cost method. However, with respect to certain investments, it was determined that Cadence had the “ability to exercise” significant influence over the investee companies because Cadence held more than 20% of an entity’s voting shares. In cases in which Cadence held less than 20% of the shares, Cadence was also deemed to have the “ability to exercise” significant influence because of its board representation, or commercial or technology relationships material to the investee company. Based on these facts, the equity method of accounting should have been applied to the investments. If Cadence had used the equity method rather than the cost method of accounting during the affected periods, Cadence would have recorded its pro rata share of the income or losses from the investment in the “other income” line item of its consolidated statement of operations. Cadence is working with its independent auditors to finalize the necessary adjustments and complete the restatements as promptly as possible. In addition, Cadence will reflect in its restated 2002 and 2003 financial statements other adjustments that are immaterial both individually and in the aggregate.

     The changes noted above will have no effect on Cadence’s cash flow. Summary financial information relating to these adjustments is provided in attachments to this press release. Detailed schedules relating to the adjustments are available at www.cadence.com/company/investor_relations.

     The Securities and Exchange Commission (SEC) has been notified of these issues and is evaluating them in connection with its current review of Cadence’s Registration Statement on Form S-3. Pending completion of this review, Cadence can give no assurances that the SEC will agree with Cadence’s proposed restatements, that the SEC will not require additional items to be restated, or that such additional restatements will not require a reaudit of certain prior periods affected by those adjustments. Cadence is working to resolve these matters with the SEC as soon as possible.

     Cadence’s application for quotation of its common stock on NASDAQ as a dual listing with the New York Stock Exchange will be postponed pending filing of the restated financial statements for the relevant periods.

Business Outlook

     The following statements are based on current expectations. These statements are forward looking, and actual results may differ materially. These statements do not include the potential impact of any mergers, acquisitions or other business combinations that may be completed after January 3, 2004.

     In the first quarter of 2004, total revenue is expected to be in the range of $260 million to $270 million. Ratable licenses are expected to make up 75 percent to 85 percent of total software bookings, and about 70 percent of product revenue is expected to come from backlog. Pro forma earnings per share for the first quarter of 2004 are expected to be in the range of $0.08 to $0.10. On a GAAP basis, including amortization of acquired intangibles, restructuring and other charges that are required to be included, first quarter earnings are expected to be in the range of $(0.01) to $0.01 per share.

     For 2004, total bookings growth is expected to be in the range of 7 percent to 10 percent. Because of the timing of contract renewals and normal seasonality, bookings and revenue will be weighted toward the second half of 2004. Total revenue is expected to be in the range of $1.175 to $1.225 billion. Pro forma earnings per share for the year are expected to be in the range of $0.70 to $0.77. On a GAAP basis the earnings per share for 2004 are expected to be in the range of $0.43 to $0.50. A schedule showing the impact of pro forma adjustments on forward-looking diluted net income per share is included with this release.

Audio Webcast Scheduled

     Cadence Design Systems, Inc.’s Ray Bingham, chief executive officer, and Bill Porter, chief financial officer, will host a fourth-quarter and full-year 2003 Financial Results Audio Webcast today, January 28, 2004, at 2:00 p.m. (Pacific) / 5:00 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 28 at 5:00 p.m. Pacific time and ending at 5:00 p.m. on February 4. Webcast access is available at www.cadence.com/company/investor_relations.

About Cadence

     Cadence is the largest supplier of electronic design technologies, methodology services, and design services. Cadence solutions are used to accelerate and manage the design of semiconductors, computer systems, networking and telecommunications equipment, consumer electronics, and a variety of other electronics-based products. With approximately 4,800 employees and 2003 revenues of approximately $1.1 billion, Cadence has sales offices, design centers, and research facilities around the world. The company is headquartered in San Jose, Calif., and traded on the New York Stock Exchange under the symbol CDN. More information about the company, its products and services is available at www.cadence.com.

     Cadence, the Cadence logo and Virtuoso are registered trademarks, and Encounter, Incisive and NanoRoute are trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.

     The statements contained above regarding the company’s fourth quarter and full year 2003 results, the discussion relating to the restatement of certain financial information in Cadence’s prior financial statements, those contained in the Business Outlook section above and all statements by Ray Bingham are forward looking statements based on current expectations or beliefs, as well as a number of preliminary assumptions about future events that are subject to factors and uncertainties that could cause actual results to differ materially from those described in the forward looking statements. Readers are cautioned not to put undue reliance on these forward looking statements, which are not a guarantee of future performance or outcomes and are subject to a number of uncertainties and other factors, many of which are outside Cadence’s control, including, among others:

     Cadence’s ability to compete successfully in the design automation product and the commercial electronic design and methodology services industries; the mix of products and services sold and the timing of significant orders for its products; recent economic uncertainty; fluctuations in rates of exchange between the U.S. dollar and the currencies of other countries; its ability to acquire other companies or technology or the failure to successfully integrate those that are acquired; and its independent auditors’ and the SEC’s review of certain financial information in prior period financial statements.

     For a detailed discussion of these and other cautionary statements, please refer to the company’s filings with the Securities and Exchange Commission. These include the company’s Annual Report on Form 10-K for the year ended December 28, 2002 and Quarterly Report on Form 10-Q for the period ended September 27, 2003.

     Cadence expects that its corporate representatives will meet privately during the quarter with investors, the media, investment analysts and others. At these meetings Cadence may reiterate the Business Outlook published in this press release. At the same time, Cadence will keep this press release, including the Business Outlook, publicly available on its Web site (www.cadence.com/company/investor_relations/index.aspx). Prior to the start of the Quiet Period (described below), the public can continue to rely on the Business Outlook herein as still being Cadence’s current expectations on matters covered, unless Cadence issues a press release stating otherwise.

     Beginning March 20, 2004, Cadence will observe a “Quiet Period” during which the Business Outlook as provided in this press release and the company’s most recent 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 update by the company. During the Quiet Period, Cadence representatives will not comment concerning the outlook or Cadence’s financial results or expectations. The Quiet Period will extend until the day when Cadence’s next quarterly Earnings Release is published, currently scheduled for April 21, 2004.

###

Cadence Design Systems, Inc.
Consolidated Balance Sheets
January 3, 2004 and December 28, 2002
(In $000’s)

					Restated
			January 3,		December 28,
			2004		2002
Current Assets:
	Cash and cash equivalents		$	384,525	$	371,327
	Short-term investments			33,898		24,286
	Receivables, net			348,680		313,968
	Inventories			16,926		9,614
	Prepaid expenses and other			53,139		39,448
		Total current assets		837,168		758,643
Property, plant and equipment, net				403,847		431,846
Goodwill, net				916,227		663,197
Acquired intangibles, net				270,273		220,142
Installment contract receivables, net				121,627		113,185
Other assets				254,917		228,732
Total Assets			$	2,804,059	$	2,415,745
Current Liabilities:
	Current portion of capital lease obligations		$	388	$	1,609
	Accounts payable and accrued liabilities			246,862		294,973
	Deferred revenue			254,765		218,945
		Total current liabilities		502,015		515,527
Long-term Liabilities:
	Long-term portion of capital lease obligations			61		659
	Long-term debt			420,000		52,000
	Other long-term liabilities			318,666		214,407
		Total long-term liabilities		738,727		267,066
Stockholders’ equity				1,563,317		1,633,152
Total Liabilities and Stockholders’ Equity			$	2,804,059	$	2,415,745

Cadence Design Systems, Inc.

Consolidated Statements of Operations
For the Quarters and Years Ended January 3, 2004 and December 28, 2002
(In $000’s, except per share amounts)

				Quarters Ended						Years Ended
							Restated			Restated			Restated
				January 3,			December 28,			January 3,			December 28,
				2004			2002			2004			2002
Revenue:
	Product			$	198,836		$	153,905		$	658,490		$	806,786
	Services				30,187			35,526			131,149			149,810
	Maintenance				78,585			84,260			324,822			331,347
		Total revenue			307,608			273,691			1,114,461			1,287,943
Costs and Expenses:
	Cost of product				17,373			17,764			67,036			98,291
	Cost of services				21,624			23,844			93,153			114,688
	Cost of maintenance				13,061			14,816			56,460			65,089
	Marketing and sales				79,586			104,068			326,579			402,148
	Research and development				82,444			85,322			340,121			326,414
	General and administrative				16,968			26,418			82,566			115,767
	Amortization of acquired intangibles				16,310			13,710			62,573			53,752
	Amortization of deferred stock compensation				18,229			10,868			51,183			35,904
	Avant! restitution and settlement				—			(261,090	)		—			(261,090	)
	Mentor settlement				—			—			(14,500	)		—
	Restructuring and other charges				2,610			61,065			66,836			134,296
	Write-off of acquired in-process technology				—			—			7,500			34,000
		Total costs and expenses			268,205			96,785			1,139,507			1,119,259
			Income (loss) from operations		39,403			176,906			(25,046	)		168,684
	Interest expense				(1,296	)		(1,240	)		(5,002	)		(2,803	)
	Other loss, net				(1,917	)		(11,028	)		(10,576	)		(13,756	)
			Income (loss) before provision (benefit) for income taxes		36,190			164,638			(40,624	)		152,125
	Provision (benefit) for income taxes				12,667			77,350			(23,953	)		85,111
			Net income (loss)	$	23,523		$	87,288		$	(16,671	)	$	67,014
Basic net income (loss) per share				$	0.09		$	0.32		$	(0.06	)	$	0.26
Diluted net income (loss) per share				$	0.09		$	0.32		$	(0.06	)	$	0.25
Weighted average common shares outstanding					264,178			268,702			266,794			259,870
Weighted average common and potential common shares outstanding - assuming dilution					274,366			272,475			266,794			267,500
Supplemental diluted earnings per share before amortization of acquired intangibles, amortization of deferred stock compensation, Mentor settlement, net of related costs, restructuring and other charges, Avant! civil settlement, net of related costs, write-off of acquired in-process technology, write-down of long-term investment securities, reserve against inventory, imputed interest related to an acquisition, non-recurring legal costs, and income tax effect of pro forma adjustments				$	0.24		$	0.02		$	0.51		$	0.61

Cadence Design Systems, Inc.
Pro Forma Consolidated Income Statements
Impact of Pro Forma Adjustments on Reported and Restated Net Income
For the Quarters Ended January 3, 2004 and December 28, 2002
(In $000’s, except per share amounts)

					Quarter Ended											Quarter Ended
					January 3, 2004											December 28, 2002
					As Reported			Adjustments					Pro Forma			As Restated			Adjustments					Pro Forma
Revenue:
	Product				$	198,836		$	—				$	198,836		$	153,905		$	—				$	153,905
	Services					30,187			—					30,187			35,526			—					35,526
	Maintenance					78,585			—					78,585			84,260			—					84,260
		Total revenue				307,608			—					307,608			273,691			—					273,691
Costs and Expenses:
	Cost of product					17,373			(9,641	)	(A	)		7,732			17,764			(7,179	)	(A	)		10,585
	Cost of services					21,624			(474	)	(A	)		21,150			23,844			(785	)	(A	)		23,059
	Cost of maintenance					13,061			(604	)	(A	)		12,457			14,816			(370	)	(A	)		14,446
	Marketing and sales					79,586			—					79,586			104,068			—					104,068
	Research and development					82,444			—					82,444			85,322			—					85,322
	General and administrative					16,968			—					16,968			26,418			—					26,418
	Amortization of acquired intangibles					16,310			(16,310	)	(A	)		—			13,710			(13,710	)	(A	)		—
	Amortization of deferred stock compensation					18,229			(18,229	)	(B	)		—			10,868			(10,868	)	(B	)		—
	Avant! restitution and settlement					—			—					—			(261,090	)		261,090		(D	)		—
	Restructuring and other charges					2,610			(2,610	)	(C	)		—			61,065			(61,065	)	(C	)		—
		Total costs and expenses				268,205			(47,868	)				220,337			96,785			167,113					263,898
			Income from operations			39,403			47,868					87,271			176,906			(167,113	)				9,793
	Interest expense					(1,296	)		825		(E	)		(471	)		(1,240	)		—					(1,240	)
	Other income (loss), net					(1,917	)		3,299		(F	)		1,382			(11,028	)		9,350		(F	)		(1,678	)
			Income before provision for income taxes			36,190			51,992					88,182			164,638			(157,763	)				6,875
	Provision for income taxes					12,667			10,260		(G	)		22,927			77,350			(75,562	)	(G	)		1,788
				Net Income	$	23,523		$	41,732				$	65,255		$	87,288		$	(82,201	)			$	5,087
																			��
Basic net income per share					$	0.09							$	0.25		$	0.32							$	0.02
Diluted net income per share					$	0.09							$	0.24		$	0.32							$	0.02
Weighted average common shares outstanding						264,178								264,178			268,702								268,702
Weighted average common and potential common shares outstanding - assuming dilution						274,366								274,366			272,475								272,475

Notes:

(A) Non-cash amortization of acquired intangibles

(B) Non-cash amortization of deferred stock compensation

(C) Restructuring and other charges

(D) Avant! civil settlement, net of related costs

(E) Imputed interest related to an acquisition

(F) Write-down of long-term investment securities

(G) Income tax effect of pro forma adjustments

Cadence Design Systems, Inc.
Pro Forma Consolidated Statements of Operations
Impact of Pro Forma Adjustments on Restated Net Income (Loss)
For the Years Ended January 3, 2004 and December 28, 2002
(In $000’s, except per share amounts)

				Year Ended											Year Ended
				January 3, 2004											December 28,2002
				As Restated			Adjustments					Pro Forma			As Restated			Adjustments					Pro Forma
Revenue:
	Product			$	658,490		$	—				$	658,490		$	806,786		$	—				$	806,786
	Services				131,149			—					131,149			149,810			—					149,810
	Maintenance				324,822			—					324,822			331,347			—					331,347
		Total revenue			1,114,461			—					1,114,461			1,287,943			—					1,287,943
Costs and Expenses:
	Cost of product				67,036			(38,999	)	(A	)		28,037			98,291			(38,959	)	(A	)(F)		59,332
	Cost of services				93,153			(2,213	)	(A	)		90,940			114,688			(2,001	)	(A	)		112,687
	Cost of maintenance				56,460			(2,337	)	(A	)		54,123			65,089			(868	)	(A	)		64,221
	Marketing and sales				326,579			—					326,579			402,148			—					402,148
	Research and development				340,121			—					340,121			326,414			—					326,414
	General and administrative				82,566			—					82,566			115,767			(11,100	)	(G	)		104,667
	Amortization of acquired intangibles				62,573			(62,573	)	(A	)		—			53,752			(53,752	)	(A	)		—
	Amortization of deferred stock compensation				51,183			(51,183	)	(B	)		—			35,904			(35,904	)	(B	)		—
	Avant! restitution and settlement				—			—					—			(261,090	)		261,090		(H	)		—
	Mentor settlement				(14,500	)		14,500		(C	)		—			—			—					—
	Restructuring and other charges				66,836			(66,836	)	(D	)		—			134,296			(134,296	)	(D	)		—
	Write-off of acquired in-process technology				7,500			(7,500	)	(E	)		—			34,000			(34,000	)	(E	)		—
		Total costs and expenses			1,139,507			(217,141	)				922,366			1,119,259			(49,790	)				1,069,469
			Income (loss) from operations		(25,046	)		217,141					192,095			168,684			49,790					218,474
	Interest expense				(5,002	)		825		(I	)		(4,177	)		(2,803	)		—					(2,803	)
	Other income (loss), net				(10,576	)		11,595		(J	)		1,019			(13,756	)		19,350		(J	)		5,594
			Income (loss) before provision (benefit) for income taxes		(40,624	)		229,561					188,937			152,125			69,140					221,265
	Provision (benefit) for income taxes				(23,953	)		73,076		(K	)		49,123			85,111			(27,581	)	(K	)		57,530
			Net Income (loss)	$	(16,671	)	$	156,485				$	139,814		$	67,014		$	96,721				$	163,735
Basic net income (loss) per share				$	(0.06	)						$	0.52		$	0.26							$	0.63
Diluted net income (loss) per share				$	(0.06	)						$	0.51		$	0.25							$	0.61
Weighted average common shares outstanding					266,794								266,794			259,870								259,870
Weighted average common and potential common shares outstanding - assuming dilution					266,794								272,639			267,500								267,500

Notes:

(A) Non-cash amortization of acquired intangibles

(B) Non-cash amortization of deferred stock compensation

(C) Mentor settlement, net of related costs

(D) Restructuring and other charges

(E) Write-off of acquired in-process technology

(F) Reserve against inventory

(G) Non-recurring legal costs

(H) Avant! civil settlement, net of related costs

(I) Imputed interest related to an acquisition

(J) Write-down of long-term investment securities

(K) Income tax effect of pro forma adjustments

Cadence Design Systems, Inc.
As of January 28, 2004
Impact of Pro Forma Adjustments on Forward Looking Diluted Net Income per Share
(Unaudited)

			Quarter Ended		Year Ended
			April 3, 2004		January 1, 2005
GAAP net income (loss) per share		$	(0.01) to $0.01	$	0.43 to $0.50
	Amortization of acquired intangibles		0.08		0.31
	Amortization of deferred stock compensation		0.03		0.09
	Restructuring and other charges		0.01		0.01
	Income tax effect of reconciling items		(0.03)		(0.14)
Pro Forma diluted net income per share		$	0.08 to $0.10	$	0.70 to $0.77

Cadence Design Systems, Inc.

2001-2003 Revenue Detail by Product Group ($ Millions)

		2001										2002
		Q1		Q2		Q3		Q4		Year		Q1		Q2		Q3		Q4		Year
Product Revenue:
	IC Implementation		96.2		96.3		135.6		117.3		445.4		124.6		142.5		123.9		91.7		482.7
	IP Creation		64.9		71.0		63.7		93.3		292.9		71.3		65.5		65.3		45.1		247.2
	PSD		20.1		22.9		18.1		31.1		92.2		22.7		17.2		19.9		17.1		76.9
Total Product Revenue			181.2		190.2		217.4		241.7		830.5		218.6		225.2		209.1		153.9		806.8
Services			80.0		73.8		58.0		51.5		263.3		43.3		37.0		34.0		35.5		149.8
Maintenance			83.4		83.6		84.6		85.0		336.6		82.4		81.7		82.9		84.3		331.3
TOTAL REVENUE			344.6		347.6		360.0		378.2		1,430.4		344.3		343.9		326.0		273.7		1,287.9

[Additional columns below]

[Continued from above table, first column(s) repeated]

		2003
		Q1		Q2		Q3		Q4		Year
Product Revenue:
	IC Implementation		77.3		94.1		89.3		106.7		367.4
	IP Creation		59.2		53.5		52.2		73.5		238.4
	PSD		10.9		13.0		10.2		18.6		52.7
Total Product Revenue			147.4		160.6		151.7		198.8		658.5
Services			32.4		34.8		33.8		30.2		131.2
Maintenance			82.2		81.0		83.0		78.6		324.8
TOTAL REVENUE			262.0		276.4		268.5		307.6		1,114.5

2001-2003 Revenue Detail by Geography ($ Millions)

	2001										2002
	Q1		Q2		Q3		Q4		Year		Q1		Q2		Q3		Q4		Year
North America		217.0		201.1		178.7		224.1		820.9		204.1		184.8		192.7		158.1		739.7
Europe		59.6		85.6		118.3		70.1		333.6		56.6		95.9		61.1		44.3		257.9
Japan		48.9		43.5		30.1		58.8		181.3		61.6		36.5		46.7		43.5		188.3
Asia		19.1		17.4		32.9		25.2		94.6		22.0		26.7		25.5		27.8		102.0
TOTAL REVENUE		344.6		347.6		360.0		378.2		1,430.4		344.3		343.9		326.0		273.7		1,287.9

[Additional columns below]

[Continued from above table, first column(s) repeated]

	2003
	Q1		Q2		Q3		Q4		Year
North America		141.7		151.1		155.9		196.6		645.3
Europe		44.7		41.6		52.1		49.4		187.8
Japan		53.4		59.6		35.3		39.5		187.8
Asia		22.2		24.1		25.2		22.1		93.6
TOTAL REVENUE		262.0		276.4		268.5		307.6		1,114.5

Cadence Design Systems, Inc.
Impact of Restatement Adjustments on Previously Reported Consolidated Balance Sheets
as of December 28, 2002
(In $000’s)

				December 28, 2002
				As Previously			Restatement			Reclassification			As Restated and
				Reported			Adjustments			Adjustments			Reclassified
Current Assets:
	Cash and cash equivalents			$	371,327		$	—		$	—		$	371,327
	Short-term investments				24,286			—			—			24,286
	Receivables, net				313,968			—			—			313,968
	Inventories				9,614			—			—			9,614
	Prepaid expenses and other				39,448			—			—			39,448
		Total current assets			758,643			—			—			758,643
	Property, plant, and equipment, net				434,491			(2,645	) (A)		—			431,846
	Goodwill, net				—			—			663,197	(G)		663,197
	Acquired intangibles, net				883,339			—			(663,197	) (G)		220,142
	Installment contract receivables				113,185			—			—			113,185
	Other assets				248,603			(19,871	) (B)		—			228,732
		Total assets		$	2,438,261		$	(22,516	)	$	—		$	2,415,745
Current Liabilities:
	Current portion of capital lease obligations			$	1,609		$	—		$	—		$	1,609
	Accounts payable and accrued liabilities				297,399			(2,426	) (C)		—			294,973
	Deferred revenue				212,882			6,063	(D)		—			218,945
		Total current liabilities			511,890			3,637			—			515,527
Long-term Liabilities:
	Long-term portion of capital lease obligations				659			—			—			659
	Long-term debt				52,000			—			—			52,000
	Other long-term liabilities				214,407			—			—			214,407
		Total long-term liabilities			267,066			—			—			267,066
Stockholders’ Equity:
	Preferred stock				—			—						—
	Common stock and capital in excess of par value				1,100,380			—			—			1,100,380
	Deferred stock compensation				(44,426	)		(159	) (E)		—			(44,585	)
	Retained earnings				607,460			(25,994	) (F)		—			581,466
	Accumulated other comprehensive loss				(4,109	)		—			—			(4,109	)
		Total stockholders’ equity			1,659,305			(26,153	)		—			1,633,152
			Total liabilities and stockholders’ equity	$	2,438,261		$	(22,516	)	$	—		$	2,415,745

Notes:

(A) Capitalized software adjustment

(B) Effect of investment entries

(C) Tax effect of restatement adjustments

(D) Effect of revenue entries

(E) Net effect of earnout and deferred compensation adjustments

(F) Net effect of restatement adjustments on retained earnings

(G) Separate goodwill from intangible assets

Cadence Design Systems, Inc.
Impact of Restatement Adjustments on Previously Reported Consolidated Statements of Operations
For the Nine Months Ended September 27, 2003 and the Year Ended December 28, 2002
(In $000’s, except per share amounts)

	Nine months ended			Year ended
	September 27, 2003			December 28, 2002
Total revenue, as previously reported	$	800,789		$	1,293,067
Restatement adjustments (A)		6,064			(5,124	)
Total revenue, as restated	$	806,853		$	1,287,943
Total costs and expenses, as previously reported	$	872,678		$	1,118,312
Restatement adjustments (B)		(1,376	)		947
Total costs and expenses, as restated	$	871,302		$	1,119,259
Other loss as previously reported	$	(2,989	)	$	(13,986	)
Restatement adjustments (C)		(5,670	)		230
Other loss as restated	$	(8,659	)	$	(13,756	)
Provision (benefit) for income taxes as previously reported	$	(36,620	)	$	86,017
Restatement adjustments (D)		—			(906	)
Provision (benefit) for income taxes as restated	$	(36,620	)	$	85,111
Net income (loss) as previously reported	$	(41,964	)	$	71,949
Restatement adjustments		1,770			(4,935	)
Net income (loss) as restated	$	(40,194	)	$	67,014
Basic net income (loss) per share as previously reported	$	(0.16	)	$	0.28
Restatement adjustments		0.01			(0.02	)
Basic net income (loss) per share as restated	$	(0.15	)	$	0.26
Diluted net income (loss) per share as previously reported	$	(0.16	)	$	0.27
Restatement adjustments		0.01			(0.02	)
Diluted net income (loss) per share as restated	$	(0.15	)	$	0.25

(A) - Revenue adjustments

(B) - Capitalized software and deferred compensation adjustments

(C) - Investment and foreign currency adjustments

(D) - Tax effect of restatement adjustments

Cadence Design Systems, Inc.
Impact of Restatement Adjustments on Previously Reported Consolidated Statements of Operations
For the Nine Months Ended September 27, 2003 and the Year Ended December 28, 2002
(In $000’s, except per share amounts)

	Nine months ended												Year ended
	September 27, 2003			Q3 2003			Q2 2003			Q1 2003			December 28, 2002			Q4 2002			Q3 2002			Q2 2002			Q1 2002
Total revenue, as previously reported	$	800,789		$	268,476		$	276,437		$	255,876		$	1,293,067		$	276,297		$	327,236		$	344,820		$	344,714
Restatement adjustments		6,064			—			—			6,064			(5,124	)		(2,606	)		(1,211	)		(869	)		(438	)
Total revenue, as restated	$	806,853		$	268,476		$	276,437		$	261,940		$	1,287,943		$	273,691		$	326,025		$	343,951		$	344,276
Total costs and expenses, as previously reported	$	872,678		$	314,392		$	279,353		$	278,933		$	1,118,312		$	101,375		$	311,944		$	385,348		$	319,645
Restatement adjustments		(1,376	)		(181	)		(2,596	)		1,401			947			(4,590	)		319			2,500			2,718
Total costs and expenses, as restated	$	871,302		$	314,211		$	276,757		$	280,334		$	1,119,259		$	96,785		$	312,263		$	387,848		$	322,363
Other income (loss) as previously reported	$	(2,989	)	$	2,295		$	(6,192	)	$	908		$	(13,986	)	$	(10,238	)	$	171		$	(9,401	)	$	5,482
Restatement adjustments		(5,670	)		(803	)		(1,562	)		(3,305	)		230			(790	)		1,579			(2,434	)		1,875
Other income (loss) as restated	$	(8,659	)	$	1,492		$	(7,754	)	$	(2,397	)	$	(13,756	)	$	(11,028	)	$	1,750		$	(11,835	)	$	7,357
Provision (benefit) for income taxes as previously reported	$	(36,620	)	$	(31,018	)	$	(1,895	)	$	(3,707	)	$	86,017		$	74,750		$	6,569		$	(4,029	)	$	8,727
Restatement adjustments		—			(420	)		200			220			(906	)		2,600			(1,458	)		(1,317	)		(731	)
Provision (benefit) for income taxes as restated	$	(36,620	)	$	(31,438	)	$	(1,695	)	$	(3,487	)	$	85,111		$	77,350		$	5,111		$	(5,346	)	$	7,996
Net income (loss) as previously reported	$	(41,964	)	$	(14,995	)	$	(7,853	)	$	(19,116	)	$	71,949		$	88,694		$	8,231		$	(46,321	)	$	21,345
Restatement adjustments		1,770			(202	)		834			1,138			(4,935	)		(1,406	)		1,507			(4,486	)		(550	)
Net income (loss) as restated	$	(40,194	)	$	(15,197	)	$	(7,019	)	$	(17,978	)	$	67,014		$	87,288		$	9,738		$	(50,807	)	$	20,795
Basic net income (loss) per share as previously reported	$	(0.16	)	$	(0.06	)	$	(0.03	)	$	(0.07	)	$	0.28		$	0.33		$	0.03		$	(0.18	)	$	0.09
Restatement adjustments		0.01			0.00			0.00			0.00			(0.02	)		(0.01	)		0.01			(0.02	)		(0.01	)
Basic net income (loss) per share as restated	$	(0.15	)	$	(0.06	)	$	(0.03	)	$	(0.07	)	$	0.26		$	0.32		$	0.04		$	(0.20	)	$	0.08
Diluted net income (loss) per share as previously reported	$	(0.16	)	$	(0.06	)	$	(0.03	)	$	(0.07	)	$	0.27		$	0.33		$	0.03		$	(0.18	)	$	0.08
Restatement adjustments		0.01			0.00			0.00			0.00	��		(0.02	)		(0.01	)		0.01			(0.02	)		0.00
Diluted net income (loss) per share as restated	$	(0.15	)	$	(0.06	)	$	(0.03	)	$	(0.07	)	$	0.25		$	0.32		$	0.04		$	(0.20	)	$	0.08