EXHIBIT 99.1
FOR MORE INFORMATION, PLEASE CONTACT:
Alan Lindstrom
Investors and Shareholders
Cadence Design Systems, Inc.
408-944-7100
investor_relations@cadence.com
Giovanni Rodriguez
Media and Industry Analysts
Eastwick Communications
Cadence Design Systems, Inc.
650-480-4021
www.eastwick.com
CADENCE REPORTS FIRST QUARTER RESULTS
SAN JOSE, Calif., April 21, 2004 -- Cadence Design Systems, Inc. (NYSE:
CDN) today announced total revenue for the first quarter of 2004 of $266 million
compared to $263 million in the same period last year. On a GAAP basis,
Cadence(R) recognized a net loss of $9 million, or $0.03 per share in the first
quarter of 2004, compared to a net loss of $13 million, or $0.05 per share in
the same period last year.
In addition to using GAAP results in evaluating Cadence's business,
management also believes it useful to measure results using a non-GAAP measure
of net income (loss), which excludes as applicable amortization of intangible
assets and deferred stock compensation, in-process research and development
charges, integration and other acquisition-related expenses, restructuring
charges and equity in losses from investments. Non-GAAP net income (loss) is
reduced by the amount of additional taxes or tax benefit that the company would
accrue if it used non-GAAP results instead of GAAP results to calculate the
company's tax liability. Using this non-GAAP measure, earnings in the first
quarter were $28 million, or $0.10 per share, on a fully diluted basis as
compared to $12 million, or $0.05 per share, on a fully diluted basis, in the
same period last year.
"In the first quarter we executed to our financial and technology
goals, and introduced our fourth technology platform, Allegro(R)," said Ray
Bingham, Cadence president and chief executive officer. "Customer adoption
continued to validate our platform strategy, particularly in digital design,
where our Encounter(TM) platform is rapidly gaining momentum for the design of
big, complex SoCs."
BUSINESS HIGHLIGHTS OF Q1 2004
The number of tapeouts with the full SoC Encounter flow grew to over
150, more than 30 of which were 90 nanometer designs, including a 35 million
gate processor chip. Leaders such as ARM, Artisan, IBM and TSMC validated
Encounter RTL Compiler global synthesis for support in their reference flows.
The Incisive(TM) platform, introduced just one year ago, further
demonstrated the strength of our platform approach. In the first quarter, 70
percent of Cadence's software-based verification business was generated by sales
of the full platform - up from 50 percent for the prior quarter. The Incisive
platform provides the fastest, most complete verification solution for big,
complex SoCs.
Cadence continued to focus on its custom/analog platform integration,
which enhances tool interoperability and makes designers more productive. In
September 2003 Cadence introduced the Virtuoso(R) custom design platform on the
OpenAccess database, and introduced the new chip integration flow, which reduces
time for full-scale physical integration by half. In April, Cadence completed
its acquisition of Neolinear, Inc. This will enhance the analog/mixed-signal and
radio frequency capability in the Virtuoso platform, and deliver
higher-performance designs, with improved yield, in less time for customers.
"We are gaining widespread customer support for our best-of-breed
technologies, integrating them into platforms, and validating them through open
collaboration" said Bingham. "Our focus is to deliver design automation
solutions that generate more profit for our customers."
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 impact of any mergers, acquisitions or other business
combinations that may be completed after April 21, 2004.
BUSINESS OUTLOOK
For the second quarter of 2004, the company expects total revenue in
the range of $285 million to $295 million. Second quarter GAAP earnings per
fully diluted share are expected to be in the range of $0.03 to $0.05. Diluted
earnings per share using our non-GAAP measure defined below are expected to be
in the range of $0.14 to $0.16.
For the full year 2004, the company expects total revenue in the range
of $1.175 billion to $1.225 billion. On a GAAP basis, we expect net income per
fully diluted share for fiscal 2004 in the range of $0.31 to $0.38. Using our
non-GAAP measure defined below, we expect fully diluted earnings per share for
fiscal 2004 to be in the range of $0.70 to $0.77.
A schedule showing a reconciliation of the business outlook from GAAP
net income (loss) and diluted net income (loss) per share to our non-GAAP net
income (loss) and diluted net income (loss) 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 first quarter Financial
Results audio webcast today, April 21, 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 April 21 at 5:00 p.m. Pacific time and ending at 5:00 p.m. Pacific time
on April 28. 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 4800 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, Allegro and Virtuoso are registered trademarks, and
Encounter and Incisive 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 first quarter 2004
results, those contained in the Business Outlook section above and the
statements by Ray Bingham include 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 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; economic
uncertainty; fluctuations in rates of exchange between the U.S. dollar and the
currencies of other countries in which Cadence does business; and the
acquisition of other companies or the failure to successfully integrate those it
acquires.
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 January 3,
2004.
GAAP TO NON-GAAP RECONCILIATION
The company's management evaluates and makes operating decisions using
various operating measures. These measures are generally based on the revenues
of its product, maintenance and services business operations and certain costs
of those operations, such as cost of revenues, research and development, sales
and marketing and general and administrative expenses. One such measure is
non-GAAP net income (loss), which is a non-GAAP financial measure under Section
101 of Regulation G under the Securities Exchange Act of 1934, as amended. This
measure consists of GAAP net income (loss) excluding, as applicable,
amortization of intangible assets and deferred stock compensation, in-process
research and development charges, integration and other acquisition-related
expenses, restructuring charges (severance and benefits, excess facilities and
asset-related restructuring charges) and equity in losses (income) from
investments. Intangible assets consist primarily of purchased technology,
backlog, patents, trademarks, distribution rights, customer contracts and
related relationships and non-compete agreements. Non-GAAP net income (loss) is
reduced by the amount of additional taxes or tax benefit that the company would
accrue if it used non-GAAP results instead of GAAP results to calculate the
company's tax liability.
Management believes it is useful in measuring Cadence's operations to
exclude amortization of intangibles, deferred stock compensation, in-process
research and development and acquisition-related expenses because these costs
are primarily fixed at the time of an acquisition and generally cannot be
changed by management in the short term. Management believes that it also is
useful to exclude restructuring costs. Cadence has dramatically reduced the size
of its design services business and portions of its product and maintenance
businesses over the past three years. As a result, in 2001, 2002 and 2003,
Cadence's GAAP statements of operations have included significant charges
relating to such restructurings. Cadence believes that in measuring its
operations it is useful to exclude such restructuring costs because the
company's level of restructuring activities is expected to significantly
decrease in the foreseeable future. Management also believes it is useful to
exclude the equity in losses (income) from investments and investment
write-downs, as these costs are not part of the company's direct cost of
operations. Rather, these are non-operating costs that are included in other
income (expense) and are part of the company's investment activities.
Management believes that non-GAAP net income (loss) provides useful
supplemental information to management and investors regarding the performance
of the company's business operations and facilitates comparisons to our
historical operating results. Management also uses this information internally
for forecasting and budgeting. Non-GAAP financial measures should not be
considered as a substitute for 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 table reconciles the specific items excluded from GAAP in
the calculation of non-GAAP net income for the periods shown below:
QUARTER ENDED
------------------------------------
RESTATED
STATEMENT OF OPERATIONS RECONCILIATION APRIL 3, 2004 MARCH 29, 2003
- ------------------------------------------------------- ---------------- -----------------
(in thousands)
Net loss on a GAAP basis $ (8,755) $ (13,038)
Amortization of intangible assets 26,158 25,286
Amortization of deferred stock compensation 7,958 6,081
Restructuring charges 5,435 -
In-process research and development charges - 1,700
Integration and other acquisition-related expenses 825 -
Equity in losses from investments 8,384 -
Tax effect (12,229) (7,788)
Net income on a non-GAAP basis $ 27,776 $ 12,241
QUARTER ENDED
------------------------------------
RESTATED
STATEMENT OF OPERATIONS RECONCILIATION PER SHARE APRIL 3, 2004 MARCH 29, 2003
- ------------------------------------------------------- ---------------- -----------------
(in thousands, except per share data)
Diluted net loss per share on a GAAP basis $ (0.03) $ (0.05)
Amortization of intangible assets 0.09 0.09
Amortization of deferred stock compensation 0.03 0.02
Restructuring charges 0.02 -
In-process research and development charges - 0.01
Integration and other acquisition-related expenses - -
Equity in losses from investments 0.03 -
Tax effect (0.04) (0.02)
Diluted net income per share on a non-GAAP basis $ 0.10 $ 0.05
Shares used in calculation of net (loss) -- GAAP 271,477 268,358
Shares used in calculation of net income -- non-
GAAP* 280,586 271,910
* Shares used in the calculation of GAAP earnings per share are expected to be
the same as shares used in the calculation of non-GAAP earnings per share
except when the company reports a GAAP loss and non-GAAP income, or GAAP
income and a non-GAAP loss.
Investors are encouraged to look at GAAP results as the best measure of
financial performance. For example, amortization of intangibles or amortization
of deferred stock compensation or in-process technology are important to
consider because they may represent initial expenditures that under GAAP are
reported across future fiscal periods. Likewise, deferred stock compensation
expense is an obligation of the company that should be considered. Restructuring
charges can be triggered by acquisitions or product adjustments as well as
overall company performance within a given business environment. All of these
metrics are important to financial performance generally.
Though Cadence management finds its non-GAAP measure useful to evaluate the
performance of Cadence's business, its reliance on this measure is limited
because items excluded from such measures often have a material effect on
Cadence's earnings and earnings per share calculated in accordance with GAAP.
Therefore, Cadence management typically uses its non-GAAP earnings and earnings
per share measures in conjunction with GAAP earnings and earnings per share
measures, to address these limitations.
Cadence believes that presenting its non-GAAP measure of earnings and earnings
per share provides investors with an additional tool for evaluating the
performance of the company's business, which management uses in its own
evaluation of performance, and an additional base line for assessing the future
earnings potential of the company. While the GAAP results are more complete, the
company prefers to allow investors to have this supplemental measure since, with
a reconciliation to GAAP, it may provide additional insight into our financial
results.
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
outlook, publicly available on its Web site
(www.cadence.com/company/investor_relations/index.html).
Prior to the start of the Quiet Period (described below), the public may
continue to rely on the Business Outlook herein as still being Cadence's current
expectations on matters covered unless Cadence publishes a notice stating
otherwise.
Beginning June 18, 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 Second Quarter 2004 Earnings Release is published, currently scheduled
for July 21, 2004.
# # #
CADENCE DESIGN SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
APRIL 3, 2004 AND JANUARY 3, 2004
(IN THOUSANDS)
APRIL 3, 2004 JANUARY 3, 2004
------------- ---------------
(UNAUDITED)
Current Assets:
Cash and cash equivalents $ 466,900 $ 384,525
Short-term investments 27,233 33,898
Receivables, net 354,878 348,680
Inventories 26,040 16,926
Prepaid expenses and other 64,356 58,212
----------- ------------
Total current assets 939,407 842,241
Property, plant and equipment, net 403,478 403,847
Goodwill 928,623 922,797
Acquired intangibles, net 212,585 237,508
Installment contract receivables, net 80,770 121,627
Other assets 280,639 289,882
----------- ------------
Total Assets $ 2,845,502 $ 2,817,902
=========== ============
Current Liabilities:
Current portion of capital lease obligations $ 183 $ 388
Accounts payable and accrued liabilities 251,415 243,062
Current portion of deferred revenue 240,908 238,478
----------- ------------
Total current liabilities 492,506 481,928
----------- ------------
Long-term Liabilities:
Long-term portion of capital lease obligations 54 61
Long-term portion of deferred revenue 14,857 16,287
Convertible notes 420,000 420,000
Other long-term liabilities 297,720 327,345
----------- ------------
Total long-term liabilities 732,631 763,693
----------- ------------
Stockholders' Equity 1,620,365 1,572,281
----------- ------------
Total Liabilities and Stockholders' Equity $ 2,845,502 $ 2,817,902
=========== ============
CADENCE DESIGN SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED APRIL 3, 2004 AND MARCH 29, 2003
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
QUARTERS ENDED
RESTATED
---------------------------------
APRIL 3, 2004 MARCH 29, 2003
------------- --------------
Revenue:
Product $ 154,737 $ 148,458
Services 32,364 32,388
Maintenance 78,623 82,206
------------- --------------
Total revenue 265,724 263,052
------------- --------------
Costs and Expenses:
Cost of product 18,514 17,364
Cost of services 23,099 24,395
Cost of maintenance 13,705 15,600
Marketing and sales 81,223 83,615
Research and development 87,151 85,122
General and administrative 19,768 26,677
Amortization of acquired intangibles 15,910 14,840
Amortization of deferred stock compensation 7,958 6,081
Restructuring and other charges 5,435 -
Write-off of acquired in-process technology - 1,700
------------- --------------
Total costs and expenses 272,763 275,394
------------- --------------
Loss from operations (7,039) (12,342)
Interest expense (1,557) (674)
Other loss, net (2,629) (3,509)
------------- --------------
Loss before benefit for income taxes (11,225) (16,525)
Benefit for income taxes (2,470) (3,487)
------------- --------------
Net loss $ (8,755) $ (13,038)
============= ==============
Basic net loss per share $ (0.03) $ (0.05)
============= ==============
Diluted net loss per share $ (0.03) $ (0.05)
============= ==============
Weighted average common shares outstanding 271,477 268,358
============= ==============
Weighted average common and potential common shares
outstanding - assuming dilution 271,477 268,358
============= ==============
CADENCE DESIGN SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED APRIL 3, 2004 AND MARCH 29, 2003
(IN THOUSANDS)
(UNAUDITED)
QUARTER ENDED
-----------------------
RESTATED
APRIL 3, MARCH 29,
2004 2003
----------- ---------
Cash and Cash Equivalents at Beginning of Period $ 384,525 $ 371,327
----------- ---------
Cash Flows from Operating Activities:
Net loss (8,755) (13,038)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 45,359 47,437
Amortization of deferred stock compensation 7,958 6,081
Equity in loss from investments, net 6,263 1,834
Gain on sale of investments (4,608) -
Write-off of investment securities 1,924 1,476
Write-off of acquired in-process technology - 1,700
Provisions for losses on trade accounts receivable and sales returns 1,000 289
Other non-cash items 1,111 -
Changes in operating assets and liabilities, net of effect of acquired and disposed
businesses:
Receivables 8,316 (5,397)
Proceeds from the sale of receivables 5,149 20,053
Inventories (9,114) 854
Prepaid expenses and other (2,024) 943
Installment contract receivables 20,194 14,796
Other assets 5,309 17,356
Accounts payable and accrued liabilities (14,554) (95,849)
Deferred revenue 1,000 (13,967)
Other long-term liabilities (4,868) 16,467
----------- ---------
Net cash provided by operating activities 59,660 1,035
----------- ---------
Cash Flows from Investing Activities:
Proceeds from sale and maturities of short-term investments - available-for-sale 3,557 -
Proceeds from the sale of long-term investments 3,328 -
Purchases of property, plant and equipment (17,829) (17,180)
Purchases of software licenses (650) (1,750)
Investment in venture capital partnerships and equity investments (5,653) (5,569)
Net cash paid in business combinations - (24,682)
----------- ---------
Net cash used for investing activities (17,247) (49,181)
----------- ---------
Cash Flows from Financing Activities:
Proceeds from credit facility - 10,000
Principal payments on credit facility and capital leases (212) (52,594)
Payment of convertible notes issuance costs (2,081) -
Proceeds from issuance of common stock 40,361 21,890
Purchases of treasury stock - (61,964)
----------- ---------
Net cash provided by (used for) financing activities 38,068 (82,668)
----------- ---------
Effect of exchange rate changes on cash 1,894 (1,118)
----------- ---------
Net increase (decrease) in cash and cash equivalents 82,375 (131,932)
----------- ---------
Cash and Cash Equivalents at End of Period $ 466,900 $ 239,395
=========== =========
CADENCE DESIGN SYSTEMS, INC.
AS OF APRIL 21, 2004
IMPACT OF NON-GAAP ADJUSTMENTS ON FORWARD LOOKING DILUTED NET INCOME PER SHARE
(UNAUDITED)
QUARTER ENDED YEAR ENDED
JULY 3, 2004 JANUARY 1, 2005
-------------- ---------------
FORECAST FORECAST
-------------- ---------------
Diluted net income per share on a GAAP basis $0.03 to $0.05 $0.31 to $0.38
Amortization of intangible assets 0.09 0.34
Amortization of deferred stock compensation 0.02 0.09
Restructuring charges 0.01 0.03
In-process research and development charges 0.01 0.01
Integration and other acquisition-related expenses - 0.01
Equity in losses from investments 0.02 0.07
Tax effect (0.04) (0.16)
-------------- ---------------
Diluted net income per share on a non-GAAP basis $0.14 to $0.16 $0.70 to $0.77
============== ===============
CADENCE DESIGN SYSTEMS, INC.
AS OF APRIL 21, 2004
IMPACT OF NON-GAAP ADJUSTMENTS ON FORWARD LOOKING NET INCOME
(UNAUDITED)
QUARTER ENDED YEAR ENDED
JULY 3, 2004 JANUARY 1, 2005
-------------- ---------------
($ IN MILLIONS) FORECAST FORECAST
-------------- ---------------
Net income on a GAAP basis $8 to $13 $87 to $107
Amortization of intangible assets 26 96
Amortization of deferred stock compensation 6 25
Restructuring charges 2 9
In-process research and development charges 3 3
Integration and other acquisition-related expenses 1 3
Equity in losses from investments 6 20
Tax effect (12) (45)
-------------- ---------------
Net income on a non-GAAP basis $40 to $45 $198 to $218
============== ===============
CADENCE DESIGN SYSTEMS, INC.
(UNAUDITED)
REVENUE MIX BY GEOGRAPHY (% OF TOTAL REVENUE)
2003 2004
--------------------------------------------------- -------
GEOGRAPHY Q1 Q2 Q3 Q4 YEAR Q1
- -------------- ------- ------- ------- ------- ------- -------
North America 55% 54% 59% 64% 58% 53%
Europe 17% 15% 19% 16% 17% 16%
Japan 20% 22% 13% 13% 17% 22%
Asia 8% 9% 9% 7% 8% 9%
TOTAL 100% 100% 100% 100% 100% 100%
REVENUE MIX BY PRODUCT GROUP (% OF TOTAL REVENUE)
2003 2004
--------------------------------------------------- -------
PRODUCT GROUP Q1 Q2 Q3 Q4 YEAR Q1
- ------------------------- ------- ------- ------- ------- ------- -------
Functional Verification 20% 18% 18% 20% 19% 20%
Digital IC Design 24% 22% 27% 20% 23% 25%
Custom IC Design 27% 28% 27% 27% 27% 27%
Design for Manufacturing 9% 10% 7% 13% 10% 6%
System Interconnect 8% 9% 8% 10% 9% 10%
Services 12% 13% 13% 10% 12% 12%
TOTAL 100% 100% 100% 100% 100% 100%
Note: Product Group total revenue includes Product + Maintenance