SOURCE: CADENCE DESIGN SYSTEMS, INC.

Cadence Design Systems, Inc.

April 24, 2013 16:05 ET

Cadence Reports First Quarter 2013 Financial Results and Completes Acquisition of Tensilica

SAN JOSE, CA--(Marketwired - Apr 24, 2013) - Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the first quarter of fiscal year 2013.

Cadence reported first quarter 2013 revenue of $354 million, compared to revenue of $316 million reported for the same period in 2012. On a GAAP basis, Cadence recognized net income of $79 million, or $0.27 per share on a diluted basis, in the first quarter of 2013, compared to net income of $31 million, or $0.11 per share on a diluted basis, in the same period in 2012. GAAP net income for the first quarter of 2013 included a $34 million income tax benefit due to a reversal of an uncertain tax position.

Using Cadence's non-GAAP measure, net income in the first quarter of 2013 was $61 million, or $0.21 per share on a diluted basis, as compared to net income of $47 million, or $0.17 per share on a diluted basis, in the same period in 2012.

"In Q1 we accelerated our IP strategy through key acquisitions that will expand the scope of our IP business and demonstrate our capabilities and readiness for FinFET-based high performance design, and we also saw significant strength in repeat orders for Palladium XP," said Lip-Bu Tan, president and chief executive officer. "Looking ahead, I expect to see our focus and discipline in scaling our IP business start to show meaningful growth."

"Strong execution by the Cadence team continued in Q1 as results for all key operating metrics exceeded expectations," added Geoff Ribar, senior vice president and chief financial officer. "The Tensilica acquisition not only significantly expands the scope of our IP business, but also brings a growing royalty component to our revenue mix."

IP Acquisitions

Cadence this week completed its previously announced acquisition of Tensilica, Inc., a leader in dataplane processing IP. The cash outlay at closing, after taking into account adjustments for certain costs and an estimated $25 million of cash held by Tensilica at closing, was approximately $326 million. In addition, Cadence assumed certain unvested Tensilica options.  Tensilica's configurable dataplane processing units complement industry-standard processor architectures and are optimized for embedded data and signal processing. Tensilica's target markets include mobile wireless, network infrastructure, auto infotainment and home applications. The Tensilica team, led by Jack Guedj, will report to Martin Lund, Cadence's senior vice president of research and development, SOC Realization Group.  

During the first quarter 2013, Cadence also announced its intent to acquire Cosmic Circuits Private Limited, a developer of low-power connectivity and analog/mixed-signal IP. This transaction is expected to close soon. These acquisitions accelerate Cadence's strategy of growing its IP business by providing high quality differentiated IP for leading protocols at advanced process nodes. Cadence is pursuing this strategy through both targeted acquisitions and increased investment in internal IP development. In addition to expanding Cadence's IP portfolio focused on growing markets, these acquisitions, as they are integrated into Cadence, will enable optimization with Cadence's design tools and accelerate IP subsystem development and integration.

It is estimated that 2013 revenue on a standalone basis for Tensilica would be about $57 million prior to merger accounting, of which $13 million would be royalties, representing growth of about 30 percent over Tensilica's revenue in 2012. Cadence is assuming that Tensilica will contribute approximately $27 million of revenue in the remainder of 2013, after a deferred revenue adjustment of approximately $16 million due to merger accounting. The transaction is expected to be approximately eight cents dilutive to GAAP EPS and one cent dilutive to non-GAAP EPS for 2013.

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.

Business Outlook
For the second quarter of 2013, the company expects total revenue in the range of $355 million to $365 million. Second quarter GAAP net income per diluted share is expected to be in the range of $0.10 to $0.12. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.19 to $0.21.

For 2013, the company expects total revenue in the range of $1.440 billion to $1.470 billion. On a GAAP basis, net income per diluted share for 2013 is expected to be in the range of $0.59 to $0.69. Using the non-GAAP measure defined below, net income per diluted share for 2013 is expected to be in the range of $0.81 to $0.91.

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, Cadence's president and chief executive officer, and Geoff Ribar, Cadence's senior vice president and chief financial officer, will host a first quarter 2013 financial results audio webcast today, April 24, 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 April 24, 2013 at 5 p.m. (Pacific) and ending May 8, 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 and Palladium are registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.

The statements contained above regarding Cadence's first quarter 2013 results, as well as the information in the IP Acquisitions and Business Outlook sections 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, and its shift to a ratable license structure, which may result in changes in the mix of license types; (iv) change in customer demands, including those resulting from consolidation among Cadence's customers and the possibility that Cadence's customers' restructurings and other efforts to improve operational efficiency could result in delays in customers' 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 failure or inability to consummate the previously announced acquisition, the effect of regulatory approval requirements and the effects of the acquisitions on Cadence's financial results; (x) 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; (xi) 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 (xii) 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 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, 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  
    March 30, 2013     March 31, 2012  
    (unaudited)  
(in thousands)                
Net income on a GAAP basis   $ 78,609     $ 31,104  
  Amortization of acquired intangibles     7,598       6,685  
  Stock-based compensation expense     13,810       11,525  
  Non-qualified deferred compensation expenses     152       1,798  
  Restructuring and other charges (credits)     (148 )     (51 )
  Shareholder litigation costs     --       46  
  Integration and acquisition-related costs     4,935       448  
  Amortization of debt discount     5,536       5,089  
  Other income or expense related to investments and non-qualified deferred compensation plan assets*     (990 )     (1,949 )
  Income tax benefit due to a reversal of an uncertain tax position     (33,719 )     --  
  Income tax effect of non-GAAP adjustments     (15,146 )     (8,195 )
Net income on a non-GAAP basis   $ 60,637     $ 46,500  
   
* 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  
    March 30, 2013     March 31, 2012  
    (unaudited)  
(in thousands, except per share data)                
Diluted net income per share on a GAAP basis   $ 0.27     $ 0.11  
  Amortization of acquired intangibles     0.03       0.03  
  Stock-based compensation expense     0.05       0.04  
  Non-qualified deferred compensation expenses     --       0.01  
  Restructuring and other charges (credits)     --       --  
  Shareholder litigation costs     --       --  
  Integration and acquisition-related costs     0.02       --  
  Amortization of debt discount     0.02       0.02  
  Other income or expense related to investments and non-qualified deferred compensation plan assets*     (0.01 )     (0.01 )
  Income tax benefit due to a reversal of an uncertain tax position     (0.12 )     --  
  Income tax effect of non-GAAP adjustments     (0.05 )     (0.03 )
Diluted net income per share on a non-GAAP basis   $ 0.21     $ 0.17  
Shares used in calculation of diluted net income per share -- GAAP**     292,151       277,733  
Shares used in calculation of diluted net income per share -- non-GAAP**     292,151       277,733  
   
* 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 June 14, 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 Second Quarter 2013 Earnings Release is published, which is currently scheduled for July 24, 2013.

 
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
March 30, 2013 and December 29, 2012
(In thousands)
(Unaudited)
         
    March 30, 2013   December 29, 2012
             
Current assets:            
  Cash and cash equivalents   $ 810,152   $ 726,357
  Short-term investments     100,992     100,704
  Receivables, net of allowances of $0 and $85, respectively     75,253     97,821
  Inventories     37,016     36,163
  2015 notes hedges     315,895     303,154
  Prepaid expenses and other     122,604     127,036
    Total current assets     1,461,912     1,391,235
             
Property, plant and equipment, net of accumulated depreciation of $626,732 and $635,450, respectively     237,455     244,439
Goodwill     232,608     233,266
Acquired intangibles, net of accumulated amortization of $104,822 and $104,351, respectively     177,891     184,938
Long-term receivables     3,734     7,559
Other assets     209,663     225,566
Total assets   $ 2,323,263   $ 2,287,003
             
Current liabilities:            
  Convertible notes   $ 452,571   $ 447,011
  2015 notes embedded conversion derivative     315,895     303,154
  Accounts payable and accrued liabilities     156,606     171,318
  Current portion of deferred revenue     285,553     295,787
    Total current liabilities     1,210,625     1,217,270
             
Long-term liabilities:            
  Long-term portion of deferred revenue     41,432     50,529
  Other long-term liabilities     51,533     104,033
    Total long-term liabilities     92,965     154,562
             
Stockholders' equity     1,019,673     915,171
Total liabilities and stockholders' equity   $ 2,323,263   $ 2,287,003
             
Cadence Design Systems, Inc.  
Condensed Consolidated Income Statements  
For the Three Months Ended March 30, 2013 and March 31, 2012  
(In thousands, except per share amounts)  
(Unaudited)  
             
    Three Months Ended  
    March 30, 2013     March 31, 2012  
                 
Revenue:                
  Product and maintenance   $ 328,271     $ 286,288  
  Services     25,995       29,542  
                   
    Total revenue     354,266       315,830  
                 
Costs and expenses:                
  Cost of product and maintenance     29,847       27,212  
  Cost of services     18,344       19,374  
  Marketing and sales     90,402       83,795  
  Research and development     124,084       108,594  
  General and administrative     29,810       27,770  
  Amortization of acquired intangibles     3,791       3,786  
  Restructuring and other charges (credits)     (148 )     (51 )
                 
    Total costs and expenses     296,130       270,480  
                 
      Income from operations     58,136       45,350  
                 
  Interest expense     (9,262 )     (8,537 )
  Other income, net     2,175       2,434  
                 
      Income before provision (benefit) for income taxes     51,049       39,247  
                 
  Provision (benefit) for income taxes     (27,560 )     8,143  
                 
      Net income   $ 78,609     $ 31,104  
                 
                 
Net income per share - basic   $ 0.29     $ 0.12  
                 
Net income per share - diluted   $ 0.27     $ 0.11  
                 
Weighted average common shares outstanding - basic     274,936       267,940  
                 
Weighted average common shares outstanding - diluted     292,151       277,733  
                 
Cadence Design Systems, Inc.  
Condensed Consolidated Statements of Cash Flows  
For the Three Months Ended March 30, 2013 and March 31, 2012  
(In thousands)  
(Unaudited)  
   
    Three Months Ended  
    March 30,     March 31,  
    2013     2012  
                 
Cash and cash equivalents at beginning of period   $ 726,357     $ 601,602  
Cash flows from operating activities:                
  Net income     78,609       31,104  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation and amortization     21,682       21,939  
    Amortization of debt discount and fees     6,281       5,734  
    Stock-based compensation     13,810       11,525  
    Gain on investments, net     (1,006 )     (1,949 )
    Deferred income taxes     8,695       223  
    Provisions (recoveries) for losses (gains) on receivables, net     (85 )     -  
    Other non-cash items     (922 )     746  
    Changes in operating assets and liabilities, net of effect of acquired businesses:                
      Receivables     23,652       60,172  
      Inventories     (979 )     (154 )
      Prepaid expenses and other     (1,099 )     (5,545 )
      Other assets     4,148       (577 )
      Accounts payable and accrued liabilities     (11,003 )     (19,582 )
      Deferred revenue     (16,648 )     (39,315 )
      Other long-term liabilities     (49,799 )     (3,612 )
        Net cash provided by operating activities     75,336       60,709  
                 
Cash flows from investing activities:                
  Purchases of available-for-sale securities     (24,282 )     -  
  Proceeds from the sale of available-for-sale securities     14,985       -  
  Proceeds from the maturity of available-for-sale securities     8,700       -  
  Proceeds from the sale of long-term investments     6,102       44  
  Purchases of property, plant and equipment     (6,569 )     (8,201 )
  Investment in venture capital partnerships and equity investments     -       (250 )
  Cash paid in business combinations and asset acquisitions, net of cash acquired     (757 )     (1,041 )
        Net cash used for investing activities     (1,821 )     (9,448 )
                 
Cash flows from financing activities:                
  Principal payments on receivable financing     (2,526 )     -  
  Payment of acquisition-related contingent consideration     (582 )     (39 )
  Tax effect related to employee stock transactions allocated to equity     5,276       2,842  
  Proceeds from issuance of common stock     21,801       12,761  
  Stock received for payment of employee taxes on vesting of restricted stock     (8,775 )     (6,173 )
        Net cash provided by financing activities     15,194       9,391  
                 
Effect of exchange rate changes on cash and cash equivalents     (4,914 )     (2,567 )
                 
Increase in cash and cash equivalents     83,795       58,085  
                 
Cash and cash equivalents at end of period   $ 810,152     $ 659,687  
                 
Cadence Design Systems, Inc.
As of April 24, 2013
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
(Unaudited)
         
    Three Months Ending   Year Ending
    June 29, 2013   December 28, 2013
    Forecast   Forecast
         
Diluted net income per share on a GAAP basis   $0.10 to $0.12   $0.59 to $0.69
         
  Amortization of acquired intangibles   0.04   0.15
  Stock-based compensation expense   0.05   0.21
  Integration and acquisition-related costs   0.03   0.09
  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 reversal of an uncertain tax position   -   (0.11)
  Income tax effect of non-GAAP adjustments   (0.05)   (0.19)
         
Diluted net income per share on a non-GAAP basis   $0.19 to $0.21   $0.81 to $0.91
   
* 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 April 24, 2013
Impact of Non-GAAP Adjustments on Forward Looking Net Income
(Unaudited)
         
    Three Months Ending   Year Ending
    June 29, 2013   December 28, 2013
($ in millions)   Forecast   Forecast
         
Net income on a GAAP basis   $29 to $35   $172 to $202
         
  Amortization of acquired intangibles   12   46
  Stock-based compensation expense   13   63
  Integration and acquisition-related costs   8   26
  Amortization of debt discount   6   22
  Other income or expense related to investments and non-qualified deferred compensation plan assets*   -   (1)
  Income tax benefit due to a reversal of an uncertain tax position   -   (34)
  Income tax effect of non-GAAP adjustments   (13)   (56)
         
Net income on a non-GAAP basis   $55 to $61   $238 to $268
   
* 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
                                     
  Americas   44 %   46 %   43 %   45 %   45 %   44 %
  EMEA   19 %   20 %   20 %   21 %   20 %   22 %
  Japan   18 %   16 %   17 %   14 %   16 %   15 %
  Asia   19 %   18 %   20 %   20 %   19 %   19 %
Total   100 %   100 %   100 %   100 %   100 %   100 %
                                     
Revenue Mix by Product Group (% of Total Revenue)  
                                     
    2012   2013
PRODUCT GROUP   Q1   Q2   Q3   Q4   Year   Q1
                                     
  Functional Verification, Hardware and IP   30 %   33 %   30 %   30 %   30 %   26 %
  Digital IC Design   23 %   22 %   23 %   23 %   23 %   25 %
  Custom IC Design   23 %   22 %   24 %   24 %   23 %   25 %
  Design for Manufacturing   7 %   6 %   6 %   6 %   6 %   7 %
  System Interconnect   8 %   8 %   9 %   9 %   9 %   10 %
  Services and other   9 %   9 %   8 %   8 %   9 %   7 %
Total   100 %   100 %   100 %   100 %   100 %   100 %
                                     
Note: Product Group total revenue includes product and maintenance revenue
 
Cadence Design Systems, Inc.  
Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures  
For the Three Months Ended March 30, 2013  
(In thousands, except per share amounts)  
(Unaudited)  
       
       Three Months Ended        
       March 30, 2013        
    GAAP     Adjustments           Non-GAAP  
                               
Revenue:                              
  Product and maintenance   $ 328,271     $ -           $ 328,271  
  Services     25,995       -             25,995  
                               
    Total revenue     354,266       -             354,266  
                               
Costs and expenses:                              
  Cost of product and maintenance     29,847       (4,175 )   (A )     25,672  
  Cost of services     18,344       (530 )   (A )     17,814  
  Marketing and sales     90,402       (3,104 )   (A )     87,298  
  Research and development     124,084       (7,928 )   (A )     116,156  
  General and administrative     29,810       (6,967 )   (A )     22,843  
  Amortization of acquired intangibles     3,791       (3,791 )   (A )     -  
  Restructuring and other charges (credits)     (148 )     148             -  
                               
    Total costs and expenses     296,130       (26,347 )           269,783  
                               
      Income from operations     58,136       26,347             84,483  
                               
  Interest expense     (9,262 )     5,536     (B )     (3,726 )
  Other income, net     2,175       (990 )   (C )     1,185  
                               
      Income before provision (benefit) for income taxes     51,049       30,893             81,942  
                               
  Provision (benefit) for income taxes     (27,560 )     48,865     (D )     21,305  
                               
      Net income   $ 78,609     $ (17,972 )         $ 60,637  
                               
Notes:  
(A) For the three months ended March 30, 2013 adjustments to GAAP are as follows for the line items specified:  
                     
    Amortization of acquired intangibles   Stock-based compensation expense   Non-qualified deferred compensation expenses   Integration and acquisition-related costs   Total adjustments
Cost of product and maintenance   $ 3,807   $ 364   $ 4   $ -   $ 4,175
Cost of services     -     525     5     -     530
Marketing and sales     -     3,018     22     64     3,104
Research and development     -     6,553     78     1,297     7,928
General and administrative     -     3,350     43     3,574     6,967
Amortization of acquired intangibles     3,791     -     -     -     3,791
  Total   $ 7,598   $ 13,810   $ 152   $ 4,935   $ 26,495
                                 
(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 benefit due to reversal of an uncertain tax position $33,719 and income tax effect of non-GAAP adjustments $15,146
   
Cadence Design Systems, Inc.  
Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures  
For the Three Months Ended March 31, 2012  
(In thousands, except per share amounts)  
(Unaudited)  
       
       Three Months Ended        
       March 31, 2012        
    GAAP     Adjustments           Non-GAAP  
                               
Revenue:                              
  Product and maintenance   $ 286,288     $ -           $ 286,288  
  Services     29,542       -             29,542  
                               
    Total revenue     315,830       -             315,830  
                               
Costs and expenses:                              
  Cost of product and maintenance     27,212       (3,250 )   (E )     23,962  
  Cost of services     19,374       (503 )   (E )     18,871  
  Marketing and sales     83,795       (2,877 )   (E )     80,918  
  Research and development     108,594       (6,045 )   (E )     102,549  
  General and administrative     27,770       (4,041 )   (E )     23,729  
  Amortization of acquired intangibles     3,786       (3,786 )   (E )     -  
  Restructuring and other charges (credits)     (51 )     51             -  
                               
    Total costs and expenses     270,480       (20,451 )           250,029  
                               
      Income from operations     45,350       20,451             65,801  
                               
  Interest expense     (8,537 )     5,089     (F )     (3,448 )
  Other income, net     2,434       (1,949 )   (G )     485  
                               
      Income before provision for income taxes     39,247       23,591             62,838  
                               
  Provision for income taxes     8,143       8,195     (H )     16,338  
                               
      Net income   $ 31,104     $ 15,396           $ 46,500  
   
(E) For the three months ended March 31, 2012 adjustments to GAAP are as follows for the line items specified:
   
    Amortization of acquired intangibles   Stock-based compensation expense   Non-qualified deferred compensation expenses   Integration and acquisition-related costs   Shareholder litigation costs   Total adjustments
Cost of product and maintenance   $ 2,899   $ 331   $ 20   $ -   $ -   $ 3,250
Cost of services     -     474     29     -     -     503
Marketing and sales     -     2,511     257     109     -     2,877
Research and development     -     5,008     807     230     -     6,045
General and administrative     -     3,201     685     109     46     4,041
Amortization of acquired intangibles     3,786     -     -     -     -     3,786
  Total   $ 6,685   $ 11,525   $ 1,798   $ 448   $ 46   $ 20,502
   
(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       
   

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