Exhibit 99.4
UNAUDITED PRO FORMA FINANCIAL INFORMATION
CADENCE AND AMBIT UNAUDITED PRO FORMA FINANCIAL INFORMATION
On September 30, 1998, Cadence Design Systems, Inc. ("Cadence")
acquired Ambit Design Systems, Inc. ("Ambit"), a privately held California
corporation that specializes in developing, manufacturing and marketing
specialized Electronic Design Automation (EDA) application software products.
The acquisition was accounted for as a purchase. The following unaudited pro
forma combined financial statements give effect to the acquisition and should
be read in conjunction with the historical financial statements and related
notes thereto for both Cadence and Ambit.
The unaudited pro forma condensed combined statements of operations
for the fiscal year ended January 3, 1998 and the nine-month period ended
October 3, 1998 give effect to the acquisition as if the acquisition was
completed at the beginning of each period, and combines Cadence's and Ambit's
statements of operations for each company's respective period. The required
pro forma balance sheet with respect to the acquired business is incorporated
by reference to Cadence's Quarterly Report on Form 10-Q for the period ended
October 3, 1998 filed with the Commission on November 16, 1998. The pro forma
combined results for the nine-month period ended October 3, 1998 excludes
acquisition-related charges of $214.4 million for purchased in-process
technology related to Ambit.
This method of combining historical financial statements for the
preparation of the pro forma condensed combined financial statements is for
presentation only. Actual statements of operations of the companies will be
combined from the acquisition date with no retroactive restatements. The
unaudited pro forma condensed combined financial statements are presented for
illustrative purposes only and are not necessarily indicative of the combined
financial position or combined results of operations of future periods or the
results that actually would have resulted had the acquisition occurred on the
dates indicated.
CADENCE DESIGN SYSTEMS, INC. AND AMBIT DESIGN SYSTEMS, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR NINE MONTHS ENDED OCTOBER 3, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
PRO FORMA
CADENCE AMBIT ADJUSTMENTS BALANCES
------- ----- ----------- --------
Revenue:
Product $ 489,865 $ 8,562 $ -- $ 498,427
Service 184,733 381 -- 185,114
Maintenance 196,020 1,873 -- 197,893
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Total revenue 870,618 10,816 -- 881,434
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Costs and Expenses:
Cost of product 40,325 189 3,912 (a) 44,426
Cost of service 138,066 1,363 -- 139,429
Cost of maintenance 32,869 -- -- 32,869
Marketing and sales 216,663 8,432 -- 225,095
Research and development 129,522 4,519 -- 134,041
General and administrative 49,484 2,578 -- 52,062
Unusual items 149,890 -- -- 149,890
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Total costs and expenses 756,819 17,081 3,912 777,812
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Income (loss) from operations 113,799 (6,265) (3,912) 103,622
Other income, net 6,523 435 -- 6,958
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Income (loss) before provision for
income taxes 120,322 (5,830) (3,912) 110,580
Provision (benefit) for income taxes 57,776 25 (1,565) (c) 56,236
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Net income (loss) $ 62,546 $ (5,855) $ (2,347) $ 54,344
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Basic net income per share $ 0.30 $ 0.26
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Diluted net income per share $ 0.27 $ 0.23
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Weighted average common shares
outstanding 211,505 211,505
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Weighted average common and potential
common shares outstanding-assuming
dilution 234,385 234,385
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The accompanying notes are an integral part of these condensed
combined financial statements.
CADENCE DESIGN SYSTEMS, INC. AND AMBIT DESIGN SYSTEMS, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR FISCAL YEAR ENDED JANUARY 3, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
PRO FORMA
CADENCE AMBIT ADJUSTMENTS BALANCES
------- ----- ----------- --------
Revenue:
Product $ 530,513 $ 2,361 $ -- $ 532,874
Service 160,890 14 -- 160,904
Maintenance 224,490 538 -- 225,028
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Total revenue 915,893 2,913 -- 918,806
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Costs and Expenses:
Cost of product 41,509 119 5,216 (b) 46,844
Cost of service 114,747 439 -- 115,186
Cost of maintenance 26,840 -- -- 26,840
Marketing and sales 257,867 4,207 -- 262,074
Research and development 140,375 2,811 -- 143,186
General and administrative 56,495 2,814 -- 59,309
Unusual items 44,053 -- -- 44,053
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Total costs and expenses 681,886 10,390 5,216 697,492
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Income (loss) from operations 234,007 (7,477) (5,216) 221,314
Other income, net 25,624 294 -- 25,918
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Income (loss) before provision for income
taxes 259,631 (7,183) (5,216) 247,232
Provision (benefit) for income taxes 77,889 -- (2,086)(c) 75,803
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Net income (loss) before cumulative
effect of change in accounting method $ 181,742 $ (7,183) $ (3,130) $ 171,429
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Basic net income per share, before
cumulative effect of change in
accounting method $ 0.93 $ 0.88
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Diluted net income per share, before
cumulative effect of change in
accounting method $ 0.83 $ 0.78
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Weighted average common shares
outstanding 194,900 194,900
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Weighted average common and
potential common shares
outstanding-assuming dilution 219,552 219,552
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The accompanying notes are an integral part of these condensed combined
financial statements.
CADENCE DESIGN SYSTEMS, INC. AND AMBIT DESIGN SYSTEMS, INC.
NOTES TO THE PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
BASIS OF PRESENTATION
The pro forma condensed combined 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 consolidated
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
condensed combined financial statements should be read in conjunction with
the consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended January 3,
1998 and the Quarterly Report on Form 10-Q for the quarter ended October 3,
1998.
The preparation of pro forma condensed combined financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the pro forma condensed combined financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
PRO FORMA ADJUSTMENTS
Certain pro forma adjustments have been made to the accompanying pro
forma condensed combined Statements of Operations as described below:
a) Reflects amortization of goodwill and identified intangible assets
for nine month period ended October 3, 1998 ($5.2 million per year
for 7 years).
b) Reflects amortization of goodwill and identified intangible assets
for twelve month period ended January 3, 1998 ($5.2 million per
year for 7 years).
c) Reflects tax benefit at the statutory rate of 40% relating to the
pro forma adjustments.
PURCHASE PRICE
The purchase price for the acquisition of Ambit is computed as follows
(in thousands):
Cash payment to Ambit Shareholders $ 252,990
Cadence ownership prior to acquisition 2,000
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Total purchase price $ 254,990
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IN-PROCESS TECHNOLOGY
The acquisition of Ambit was accounted for as a purchase, allocating
the purchase price based upon the estimated fair value of the assets acquired
and the liabilities assumed. In connection with the acquisition, net
intangibles of $250.9 million were acquired. Management estimates that $214.4
million of the purchased intangibles was purchased in-process technology that
had not yet reached technological feasibility and has no alternative future
use. This amount was expensed in the period ended October 3, 1998 but is
excluded from the pro forma condensed combined statement of operations for
that period included herein. The value assigned to purchased in-process
technology, based on a valuation prepared by a third-party appraisal company,
was determined by identifying research projects in areas for which
technological feasibility has not been established. The remaining intangible
assets of $36.5 million were assigned to goodwill and identified intangible
assets and will be amortized on a straight-line basis over their estimated
useful lives of seven years. Management believes that the unamortized balance
is recoverable through future operating results. If these projects are not
successfully developed, business, operating results, and financial condition
of the Company may be adversely affected. Additionally, the value of the
other intangible assets acquired may become impaired.