1
EXHIBIT 99.03
Unaudited pro forma condensed combined balance sheet of the Registrant and
Redwood as of June 30, 1994 and the unaudited pro forma condensed combined
statements of operations of the Registrant and Redwood for the year ended
December 31, 1993 and for the six months ended June 30, 1994.
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PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
reflect the acquisition by Cadence Design Systems, Inc. ("the Company") of
Redwood Design Automation, Inc. ("Redwood") in exchange for approximately
419,000 shares of the Company's common stock. The acquisition was accounted
for using the purchase method of accounting. The pro forma condensed combined
balance sheet assumes the merger took place on June 30, 1994 and combines the
June 30, 1994 balance sheet of the Company with the July 31, 1994 balance sheet
of Redwood. The pro forma combined statements of operations assume that the
merger took place as of the beginning of each company's most recently completed
fiscal year and combines the Company's statements of operations for the year
ended December 31, 1993 and the six months ended June 30, 1994 with Redwood's
statements of operations for the year ended January 31, 1994 and the six months
ended July 31, 1994, respectively. The pro forma statements of operations do
not include the effect of any nonrecurring charges directly attributable to the
acquisition.
The pro forma combined statements of operations are not necessarily indicative
of operating results which would have been achieved had the merger been
consummated as of the beginning of such periods and should not be construed as
representative of future operations.
The pro forma combined condensed financial statements should be read in
conjunction with the historical consolidated financial statements and the
related notes thereto of the Company for the year ended December 31, 1993,
previously filed on Form 10-K and for the six months ended June 30, 1994,
previously filed on Form 10-Q and the financial statements of Redwood which are
included elsewhere herein.
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CADENCE DESIGN SYSTEMS, INC. AND REDWOOD DESIGN AUTOMATION, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1994
(IN THOUSANDS)
(UNAUDITED)
ADJUSTMENTS FOR PURCHASE PRO FORMA
CADENCE REDWOOD DEBIT CREDIT BALANCES
------- -------- ------- ------- --------
ASSETS:
CURRENT ASSETS:
CASH AND CASH INVESTMENTS $ 68,387 $ 1,751 $ 0 $ 0 $ 70,138
SHORT-TERM INVESTMENTS 28,412 0 0 0 28,412
ACCOUNTS RECEIVABLE, NET 74,156 392 0 0 74,548
INVENTORIES 5,204 0 0 0 5,204
OTHER CURRENT ASSETS 15,185 103 0 0 15,288
-------- -------- ------- ------- --------
TOTAL CURRENT ASSETS 191,344 2,246 0 0 193,590
NET PROPERTY & EQUIPMENT 93,421 531 0 0 93,952
OTHER ASSETS 11,227 50 0 2,500 (2) 8,777
PURCHASED SOFTWARE & INTANGIBLES 10,189 0 6,755 (1,3,4) 4,653 (5) 12,291
CAPITALIZED SOFTWARE 30,484 0 0 0 30,484
-------- -------- ------- ------- --------
TOTAL ASSETS $336,665 $ 2,827 $ 6,755 $ 7,153 $339,094
======== ======== ======= ======= ========
LIABILITIES:
ACCOUNTS PAYABLE $13,598 $ 207 $ 0 $ 0 $ 13,805
LOANS & LEASES - CURRENT 2,792 329 0 0 3,121
ACCRUED LIABILITIES 52,317 134 0 1,214 (4) 53,665
DEFERRED REVENUE 52,731 331 0 0 53,062
INCOME TAXES PAYABLE 5,548 0 0 0 5,548
-------- -------- ------- ------- --------
TOTAL CURRENT LIABILITIES 126,986 1,001 0 1,214 129,201
-------- -------- ------- ------- --------
LOANS & LEASES - LONG TERM 2,292 2,817 2,500 (2) 0 2,609
DEFERRED INCOME TAXES 2,202 0 0 0 2,202
LEASE LIABILITIES 9,819 0 0 0 9,819
OTHER LONG TERM LIABILITIES 2,558 0 0 0 2,558
-------- -------- ------- ------- --------
TOTAL LONG TERM LIABILITIES 16,871 2,817 2,500 0 17,188
-------- -------- ------- ------- --------
PUT WARRANTS 44,270 0 0 0 44,270
-------- -------- ------- ------- --------
STOCKHOLDERS' EQUITY (DEFICIT):
PREFERRED STOCK 0 10,900 10,900 (3) 0 0
COMMON STOCK 465 80 80 (3) 4 (1) 469
STOCK NOTES RECEIVABLE (3) (20) 0 20 (3) (3)
PAID-IN CAPITAL 209,602 0 0 4,546 (1) 214,148
TREASURY STOCK (76,750) 0 0 0 (76,750)
RETAINED EARNINGS (DEFICIT) 14,292 (11,951) 4,653 (5) 11,951 (3) 9,639
ACCUMULATED TRANSLATION ADJUSTMENT 932 0 0 0 932
-------- -------- ------- ------- --------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 148,538 (991) 15,633 16,521 148,435
-------- -------- ------- ------- --------
TOTAL LIABILITIES & EQUITY $336,665 $ 2,827 $18,133 $17,735 $339,094
======== ======== ======= ======= ========
(1) ENTRY TO RECORD THE ACQUISITION OF REDWOOD BY THE ISSUANCE OF APPROXIMATELY 419,000 SHARES OF THE COMPANY'S COMMON STOCK
(2) ENTRY TO ELIMINATE NOTE RECEIVABLE AND LOAN
(3) ENTRY TO ELIMINATE THE STOCKHOLDERS' DEFICIT OF REDWOOD
(4) ENTRY TO RECORD OBLIGATIONS OF REDWOOD TO STOCKHOLDERS AND OTHERS PAYABLE PRIOR TO THE CLOSING OF THE ACQUISITION AND
FACILITY RELOCATION COSTS
(5) ENTRY TO WRITE-OFF IN-PROCESS RESEARCH AND DEVELOPMENT AS IT HAD NOT
REACHED TECHNOLOGICAL FEASIBILITY
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CADENCE DESIGN SYSTEMS, INC. AND REDWOOD DESIGN AUTOMATION, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS)
(UNAUDITED)
PRO FORMA ADJUSTMENTS
PRO FORMA
CADENCE REDWOOD DEBIT CREDIT RESULTS
------- ------- ----- ------ ---------
REVENUE:
PRODUCT $241,011 $ 312 $ 0 $ 0 $241,323
MAINTENANCE 127,612 0 0 0 127,612
-------- ------- ------- ----- --------
TOTAL REVENUE 368,623 312 0 0 368,935
-------- ------- ------- ----- --------
COST OF REVENUE:
PRODUCT 73,594 287 1,051 (1) 0 74,932
MAINTENANCE 15,757 0 0 0 15,757
-------- ------- ------- ----- --------
TOTAL COST OF REVENUE 89,351 287 1,051 0 90,689
-------- ------- ------- ----- --------
GROSS MARGIN 279,272 25 (1,051) 0 278,246
-------- ------- ------- ----- --------
OPERATING EXPENSES:
ENGINEERING EXPENSES 69,088 2,380 0 0 71,468
SALES & MARKETING EXPENSES 160,212 2,273 0 0 162,485
GENERAL & ADMINISTRATIVE EXPENSES 38,737 558 0 0 39,295
RESTRUCTURE EXPENSES 13,450 0 0 0 13,450
-------- ------- ------- ----- --------
TOTAL OPERATING EXPENSES 281,487 5,211 0 0 286,698
-------- ------- ------- ----- --------
LOSS FROM CONTINUING OPERATIONS (2,215) (5,186) (1,051) 0 (8,452)
OTHER INCOME (EXPENSE) 1,608 (35) 0 0 1,573
-------- ------- ------- ----- --------
NET LOSS FROM CONTINUING OPERATIONS (607) (5,221) (1,051) 0 (6,879)
-------- ------- ------- ----- --------
DISCONTINUED OPERATIONS:
LOSS FROM OPERATIONS (6,200) 0 0 0 (6,200)
LOSS ON DISPOSAL (5,972) 0 0 0 (5,972)
-------- ------- ------- ----- --------
LOSS FROM DISCONTINUED OPERATIONS (12,172) 0 0 0 (12,172)
-------- ------- ------- ----- --------
NET LOSS $(12,779) $(5,221) $(1,051) $ 0 $(19,051)
======== ======= ======= ===== ========
NET LOSS PER SHARE
FROM CONTINUING OPERATIONS $ (0.02) $ (0.16)
FROM DISCONTINUED OPERATIONS (0.28) (0.28)
-------- --------
NET LOSS PER SHARE $ (0.30) $ (0.44)
======== ========
WEIGHTED AVERAGE SHARES 43,060 419 43,479
======== ======= ========
(1) ENTRY TO RECORD ONE YEAR'S AMORTIZATION OF CAPITALIZED PURCHASED INTANGIBLES BASED ON AN ESTIMATED LIFE OF TWO YEARS.
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CADENCE DESIGN SYSTEMS, INC. AND REDWOOD DESIGN AUTOMATION, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1994
(IN THOUSANDS)
(UNAUDITED)
PRO FORMA ADJUSTMENTS
PRO FORMA
CADENCE REDWOOD DEBIT CREDIT RESULTS
-------- ------- ----- ------ ---------
REVENUE:
PRODUCT $123,832 $ 419 $ 0 $ 0 $124,251
MAINTENANCE 73,989 15 0 0 74,004
-------- ------- ----- ---- --------
TOTAL REVENUE 197,821 434 0 0 198,255
-------- ------- ----- ---- --------
COST OF REVENUE:
PRODUCT 38,976 208 525 (1) 0 39,709
MAINTENANCE 7,134 0 0 0 7,134
-------- ------- ----- ---- --------
TOTAL COST OF REVENUE 46,110 208 525 0 46,843
-------- ------- ----- ---- --------
GROSS MARGIN 151,711 226 (525) 0 151,412
-------- ------- ----- ---- --------
OPERATING EXPENSES:
ENGINEERING EXPENSES 35,288 1,225 0 0 36,513
SALES & MARKETING 78,442 1,181 0 0 79,623
GENERAL & ADMINISTRATIVE EXPENSES 20,406 325 0 0 20,731
PROVISION FOR SETTLEMENT OF LITIGATION 10,054 0 0 0 10,054
-------- ------- ----- ---- --------
TOTAL OPERATING EXPENSES 144,190 2,731 0 0 146,921
-------- ------- ----- ---- --------
INCOME (LOSS) FROM OPERATIONS 7,521 (2,505) (525) 0 4,491
OTHER INCOME (EXPENSE) 790 (49) 0 0 742
-------- ------- ----- ---- --------
NET INCOME (LOSS) BEFORE INCOME TAXES 8,311 (2,554) (525) 0 5,233
PROVISION FOR INCOME TAXES (2,078) 0 0 769 (2) (1,309)
-------- ------- ----- ---- --------
NET INCOME (LOSS) $ 6,233 $(2,554) $(525) $769 $ 3,924
======== ======= ===== ==== ========
NET INCOME PER SHARE $ 0.14 $ 0.09
======== ========
WEIGHTED AVERAGE SHARES 44,973 419 45,392
======== ===== ========
(1) ENTRY TO RECORD SIX MONTHS AMORTIZATION OF CAPITALIZED PURCHASED INTANGIBLES BASED ON AN ESTIMATED LIFE OF TWO YEARS.
(2) ENTRY TO ADJUST CONSOLIDATED TAX PROVISION TO THE COMPANY'S ANNUAL EFFECTIVE RATE.
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NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1. In August 1994 the Company acquired all of the outstanding stock of Redwood
Design Automation, Inc. ("Redwood") for approximately 419,000 shares of the
Company's common stock. The purchase price also includes $2.5 million of
advances made to Redwood, prior to the acquisition, of which $.7 million was
offset against the cash of Redwood as of the closing date and the remaining
amount of $1.8 million was not repaid. Redwood was a development stage company
formed to design, develop and market software for use in electronic system
design. The acquisition was accounted for as a purchase. In connection with
the acquisition, net intangibles of $6.8 million were acquired of which $4.7
million was allocated to research and development in process and will be
charged to operations as the technology had not achieved technological
feasibility and had no alternative future use. The remaining $2.1 million will
be amortized over a useful life of two years. The pro forma combined condensed
financial statements reflect the combined operations of the two companies.
The pro forma combined condensed statements of operations for the year ended
December 31, 1993 and six months ended June 30, 1994 exclude the impact of the
one-time charge associated with expensing in-process research and development
as it had not reached technological feasibility. The charge is included in the
Company's results of operations for the quarter in which the transaction closed
which was the third quarter of 1994.
2. The pro forma combined condensed financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. However, the Company believes
that the disclosures are adequate to make the information presented not
misleading. These pro forma combined condensed financial statements should be
read in conjunction with the financial statements and the notes thereto
included in the Company's annual report on Form 10-K for the year ended
December 31, 1993 and the financial statements of Redwood included in this
filing.
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3. Net income per share for each period is calculated by dividing net
income by the weighted average number of common stock and common stock
equivalents out standing during the period plus approximately 419,000 shares
of the Company's common stock which was exchanged for all outstanding shares
of Redwood common and preferred stock. Common stock equivalents consist of
dilutive shares issuable upon the exercise of outstanding common stock options
and warrants. Net loss per share is calculated by dividing net loss by the
weighted average number of shares of common stock. Fully diluted net income
(loss) per share is substantially the same as primary net income (loss) per
share.