SOURCE: CADENCE DESIGN SYSTEMS, INC.

Cadence Design Systems, Inc.

July 28, 2011 16:05 ET

Cadence Reports Q2 2011 Financial Results

SAN JOSE, CA--(Marketwire - Jul 28, 2011) - Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the second quarter of fiscal year 2011.

Cadence reported second quarter 2011 revenue of $283 million, compared to revenue of $227 million reported for the same period in 2010. On a GAAP basis, Cadence recognized net income of $27 million, or $0.10 per share on a diluted basis in the second quarter of 2011, compared to net income of $49 million, or $0.18 per share on a diluted basis in the same period in 2010. GAAP net income for the second quarter of 2010 included $67 million in acquisition-related tax benefits.

Using Cadence's non-GAAP measure, net income in the second quarter of 2011 was $32 million, or $0.12 per share on a diluted basis, as compared to net income of $18 million, or $0.07 per share on a diluted basis in the same period in 2010.

"Demand for our products and services in the second quarter continued to be strong with run rates on renewals increasing," said Lip-Bu Tan, president and chief executive officer. "We saw acceleration in adoption of our end-to-end digital solution at advanced nodes and very positive response to our new Cadence System Development Suite."

"The Cadence team produced excellent operating results in Q2 as we met or exceeded expectations for our key operating metrics," added Geoff Ribar, senior vice president and chief financial officer. "With the ongoing strength in our business we are adjusting upward our outlook for fiscal 2011."

In addition to using GAAP results to evaluate Cadence's business, management believes it is useful to measure results using a non-GAAP measure of net income, which excludes, as applicable, amortization of intangible assets, stock-based compensation expense, integration and acquisition-related costs, acquisition-related income tax benefits, income tax benefits related to the settlement of IRS examinations, shareholder litigation costs and charges, gains or losses and expenses or credits related to non-qualified deferred compensation plan assets, executive and other employee severance costs, restructuring charges and credits, amortization of discount on convertible notes, losses on extinguishment of debt, equity in losses or income from investments, write-down of investments, and gains or losses on the sale of investments. Non-GAAP net income is adjusted 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. See "GAAP to non-GAAP Reconciliation" below for further information on the non-GAAP measure.

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

Business Outlook

For the third quarter of 2011, the company expects total revenue in the range of $280 million to $290 million. Third quarter GAAP net income per diluted share is expected to be in the range of $0.04 to $0.06. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.11 to $0.13.

For the full year 2011, the company expects total revenue in the range of $1,115 million to $1,135 million. On a GAAP basis, net income per diluted share for fiscal year 2011 is expected to be in the range of $0.20 to $0.26. Using the non-GAAP measure defined below, net income per diluted share for fiscal year 2011 is expected to be in the range of $0.41 to $0.47.

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 second quarter of fiscal year 2011 financial results audio webcast today, July 28, 2011, 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 July 28, 2011 at 5 p.m. (Pacific) and ending August 11, 2011 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 and the Cadence logo 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 second quarter 2011 results, as well as the information in the Business Outlook section and the statements by Lip-Bu Tan and Geoff Ribar 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 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) Cadence's ability to successfully complete and realize the expected benefits of its previously announced restructurings without significant unexpected costs or delays, and the success of Cadence's other 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 the possibility that restructurings and other efforts to improve operational efficiency could result in delays in customers' purchases of 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; (ix) the effects of restructurings and other efforts to improve operational efficiency on Cadence's business, including its strategic and customer relationships, ability to retain key employees and stock prices; (x) 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 (xi) 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 Annual Report on Form 10-K for the year ended January 1, 2011, and Cadence's future filings.

GAAP to non-GAAP Reconciliation

Cadence 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, which is a non-GAAP financial measure under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended, and is GAAP net income excluding, as applicable, amortization of intangible assets, stock-based compensation expense, integration and acquisition-related costs, acquisition-related income tax benefits, income tax benefits related to the settlement of IRS examinations, shareholder litigation costs and charges, gains or losses and expenses or credits related to non-qualified deferred compensation plan assets, executive and other employee severance costs, restructuring charges and credits, amortization of discount on convertible notes, losses on extinguishment of debt, equity in losses or income from investments, write-down of investments and gains or losses on the sale of investments. Intangible assets consist primarily of purchased or licensed technology, backlog, patents, trademarks, distribution rights, customer contracts and related relationships and non-compete agreements. Non-GAAP net income is adjusted 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.

Cadence's management believes it is useful in measuring Cadence's operations to exclude amortization of intangible assets and integration and acquisition-related costs because these costs are primarily fixed at the time of an acquisition and generally cannot be changed by Cadence's management in the short term. In addition, Cadence's management believes it is useful to exclude stock-based compensation expense because such exclusion enhances investors' ability to review Cadence's business from the same perspective as Cadence's management, which believes that stock-based compensation expense is based on many subjective inputs at a point in time and many of these inputs are not necessarily directly attributable to the underlying performance of Cadence's business operations. Cadence's management also believes it is useful to exclude costs and charges related to shareholder litigation because these costs and charges are not related to Cadence's core business operations. Cadence's management also believes that it is useful to exclude restructuring charges and credits. During the fourth quarter of fiscal year 2010, Cadence commenced a restructuring program and expects to have paid substantially all termination benefits and costs by the fourth fiscal quarter of 2011. Cadence's management believes that in measuring the company's operations, it is useful to exclude any such restructuring charges and credits because exclusion of such charges and credits permits consistent evaluations of Cadence's performance before and after such actions are taken. Cadence's management also believes it is useful to exclude gains or losses and expenses or credits related to the non-qualified deferred compensation plan assets because these gains or losses and expenses or credits are not part of Cadence's direct costs of operations, but reflect changes in the value of assets held in the non-qualified deferred compensation plan. Cadence's management also believes it is useful to exclude executive and other employee severance costs as these costs do not occur frequently. Cadence's management also believes it is useful to exclude the amortization of the discount on convertible notes because this incremental cost recorded as interest expense does not represent a cash obligation of the company and is not part of Cadence's direct cost of operations. Finally, Cadence's management believes it is useful to exclude the equity in losses or income from investments, write-down of investments and gains or losses on the sale of investments because these items are not part of Cadence's direct cost of operations. Rather, these are non-operating items that are included in other income or expense and are part of the company's investment activities.

During the second quarter of fiscal year 2011, Cadence's non-GAAP net income also excluded the effect of an income tax benefit associated with Cadence's effective settlement of an Internal Revenue Services, or IRS, examination of Cadence's federal income tax returns for the tax years 2003 through 2005. During the third quarter of fiscal year 2010, Cadence's non-GAAP net income also excluded the effect of an income tax benefit associated with Cadence's effective settlement of an IRS examination of Cadence's federal income tax returns for the tax years 2000 through 2002. Cadence's management believes it is useful to exclude the income tax benefits associated with these settlements because exclusion of such tax benefits permits consistent evaluations of Cadence's performance. Cadence does not expect settlements resulting in income tax provisions or benefits of the magnitude recorded during the third quarter of 2010 to occur frequently.

During the second and fourth quarters of fiscal year 2010, Cadence's non-GAAP net income also excluded losses associated with its repurchase of a portion of its 1.375% Convertible Senior Notes Due December 15, 2011 and a portion of its 1.500% Convertible Senior Notes Due December 15, 2013. Cadence's management believes it is useful to exclude the losses on the extinguishment of debt as the losses are not directly related to Cadence's core business operations and similar transactions are not expected to occur frequently.

During the second quarter of fiscal year 2011, Cadence's non-GAAP net income also excluded the effect of an income tax benefit associated with an acquisition Cadence completed during the second quarter of 2011. During the second quarter of fiscal year 2010, Cadence's non-GAAP net income also excluded the effect of an income tax benefit associated with Cadence's acquisition of Denali Software, Inc. Cadence's management believes it is useful to exclude the tax benefits associated with these acquisitions because exclusion of such tax benefits permits consistent evaluation of Cadence's performance. Cadence does not expect an acquisition-related income tax benefit of the magnitude recorded in the second quarter of 2010 to be recorded frequently.

Cadence's management believes that non-GAAP net income provides useful supplemental information to Cadence's management and investors regarding the performance of the company's business operations and facilitates comparisons to the company's historical operating results. Cadence's management also uses this information 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.

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
                                                    ----------------------
                                                      July 2,     July 3,
                                                       2011        2010
                                                    ----------  ----------
                                                         (unaudited)
(in thousands)
Net income on a GAAP basis                          $   26,908  $   48,607
   Amortization of acquired intangibles                  6,988       3,142
   Stock-based compensation expense                     10,341      10,435
   Non-qualified deferred compensation expenses          1,186       1,192
   Restructuring and other charges (credits)               751        (317)
   Shareholder litigation costs                          1,106       2,862
   Executive and other employee severance costs          1,916           -
   Integration and acquisition-related costs             1,005       2,469
   Amortization of debt discount                         6,566       5,248
   Other income or expense related to investments
    and non-qualified deferred compensation plan
    assets*                                             (9,229)        202
   Loss on extinguishment of debt                            -       5,321
   Acquisition-related income tax benefit               (5,021)    (66,707)
   Income tax benefit of IRS settlement                 (5,680)          -
   Income tax effect of non-GAAP adjustments            (4,859)      5,825
                                                    ----------  ----------
Net income on a non-GAAP basis                      $   31,978  $   18,279
                                                    ==========  ==========

* 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 (expense), net.




Diluted Net Income per Share Reconciliation           Three Months Ended
                                                    ----------------------
                                                      July 2,     July 3,
                                                       2011        2010
                                                    ----------  ----------
                                                          (unaudited)
(in thousands, except per share data)
Diluted net income per share on a GAAP basis        $     0.10  $     0.18
   Amortization of acquired intangibles                   0.03        0.01
   Stock-based compensation expense                       0.04        0.04
   Non-qualified deferred compensation expenses           0.01        0.01
   Restructuring and other charges (credits)                 -           -
   Shareholder litigation costs                              -        0.01
   Executive and other employee severance costs           0.01           -
   Integration and acquisition-related costs                 -        0.01
   Amortization of debt discount                          0.02        0.02
   Other income or expense related to investments
    and non-qualified deferred compensation plan
    assets*                                              (0.03)          -
   Loss on extinguishment of debt                            -        0.02
   Acquisition-related income tax benefit                (0.02)      (0.25)
   Income tax benefit of IRS settlement                  (0.02)          -
   Income tax effect of non-GAAP adjustments             (0.02)       0.02
                                                    ----------  ----------
Diluted net income per share on a non-GAAP basis    $     0.12  $     0.07
                                                    ==========  ==========
Shares used in calculation of diluted net income
 per share --GAAP**                                    270,885     266,423
Shares used in calculation of diluted net income
 per share --non-GAAP**                                270,885     266,423

*  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 (expense), net.

** 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.

Investors are encouraged to look at the GAAP results as the best measure of financial performance. For example, amortization of intangibles is important to consider because it may represent an initial expenditure that under GAAP is reported across future fiscal periods. Likewise, stock-based 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.

Although Cadence's management finds the non-GAAP measures useful in evaluating the performance of Cadence's business, reliance on these measures 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's management typically uses the non-GAAP earnings and earnings per share measures, in conjunction with the GAAP earnings and earnings per share measures, to address these limitations.

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 September 16, 2011, 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 Third Quarter 2011 Earnings Release is published, which is currently scheduled for October 26, 2011.

                       Cadence Design Systems, Inc.
                  Condensed Consolidated Balance Sheets
                     July 2, 2011 and January 1, 2011
                              (In thousands)
                                (Unaudited)

                                              July 2, 2011  January 1, 2011
                                              ------------- ---------------
Current Assets:
  Cash and cash equivalents                   $     665,317 $       557,409
  Short-term investments                              3,255          12,715
  Receivables, net of allowances of $747 and
   $7,604, respectively                             150,241         191,893
  Inventories                                        44,391          39,034
  2015 notes hedges                                 222,085               -
  Prepaid expenses and other                         79,966          78,355
                                              ------------- ---------------
    Total current assets                          1,165,255         879,406

Property, plant and equipment, net of
 accumulated depreciation of $640,380 and
 $648,676, respectively                             267,758         285,115
Goodwill                                            173,752         158,893
Acquired intangibles, net of accumulated
 amortization of $77,436 and $105,158,
 respectively                                       178,566         179,198
Installment contract receivables                     10,622          23,380
2015 notes hedges                                         -         130,211
Other assets                                         78,672          75,913
                                              ------------- ---------------
Total Assets                                  $   1,874,625 $     1,732,116
                                              ============= ===============
Current Liabilities:
  Convertible notes                           $     433,857 $       143,258
  2015 notes embedded conversion derivative         222,085               -
  Accounts payable and accrued liabilities          165,698         216,864
  Current portion of deferred revenue               362,762         337,426
                                              ------------- ---------------
    Total current liabilities                     1,184,402         697,548
                                              ------------- ---------------
Long-Term Liabilities:
  Long-term portion of deferred revenue              91,360          85,400
  Convertible notes                                 128,928         406,404
  2015 notes embedded conversion derivative               -         130,211
  Other long-term liabilities                       138,619         135,899
                                              ------------- ---------------
    Total long-term liabilities                     358,907         757,914
                                              ------------- ---------------
Stockholders' Equity                                331,316         276,654
                                              ------------- ---------------
Total Liabilities and Stockholders' Equity    $   1,874,625 $     1,732,116
                                              ============= ===============

                       Cadence Design Systems, Inc.
                 Condensed Consolidated Income Statements
     For the Three and Six Months Ended July 2, 2011 and July 3, 2010
                 (In thousands, except per share amounts)
                                (Unaudited)

                        Three Months Ended           Six Months Ended
                    --------------------------  --------------------------
                    July 2, 2011  July 3, 2010  July 2, 2011  July 3, 2010
                    ------------  ------------  ------------  ------------
Revenue:
  Product           $    157,938  $    117,066  $    299,757  $    219,832
  Services                29,477        25,258        57,282        51,178
  Maintenance             95,855        84,740       192,333       177,992
                    ------------  ------------  ------------  ------------
    Total revenue        283,270       227,064       549,372       449,002
                    ------------  ------------  ------------  ------------
Costs and Expenses:
  Cost of product         20,074         7,123        34,268        12,415
  Cost of services        20,616        21,556        40,691        43,481
  Cost of maintenance     10,716        10,481        21,614        21,879
  Marketing and sales     77,006        71,513       155,378       146,275
  Research and
   development            99,268        91,880       200,567       181,310
  General and
   administrative         25,377        17,058        44,679        39,892
  Amortization of
   acquired
   intangibles             4,505         2,551         8,964         5,242
  Restructuring and
   other charges
   (credits)                 751          (317)          710        (1,391)
                    ------------  ------------  ------------  ------------
    Total costs and
     expenses            258,313       221,845       506,871       449,103
                    ------------  ------------  ------------  ------------
      Income (loss)
       from
       operations         24,957         5,219        42,501          (101)
  Interest expense       (10,768)       (7,972)      (21,754)      (15,403)
  Other income
   (expense), net          8,394        (3,100)       12,863         2,874
                    ------------  ------------  ------------  ------------
      Income (loss)
       before
       provision
       (benefit) for
       income taxes       22,583        (5,853)       33,610       (12,630)
  Provision (benefit)
   for income taxes       (4,325)      (54,460)          379       (49,452)
                    ------------  ------------  ------------  ------------
      Net income    $     26,908  $     48,607  $     33,231  $     36,822
                    ============  ============  ============  ============
Basic net income
 per share          $       0.10  $       0.19  $       0.13  $       0.14
                    ============  ============  ============  ============
Diluted net income
 per share          $       0.10  $       0.18  $       0.12  $       0.14
                    ============  ============  ============  ============
Weighted average
 common shares
 outstanding -
 basic                   263,191       262,163       262,362       262,380
                    ============  ============  ============  ============
Weighted average
 common shares
 outstanding -
 diluted                 270,885       266,423       269,732       266,539
                    ============  ============  ============  ============

                       Cadence Design Systems, Inc.
              Condensed Consolidated Statements of Cash Flows
          For the Six Months Ended July 2, 2011 and July 3, 2010
                              (In thousands)
                                (Unaudited)

                                                     Six Months Ended
                                                --------------------------
                                                July 2, 2011  July 3, 2010
                                                ------------  ------------
Cash and Cash Equivalents at Beginning of
 Period                                         $    557,409  $    569,115
                                                ------------  ------------
Cash Flows from Operating Activities:
   Net income                                         33,231        36,822
   Adjustments to reconcile net income to net
    cash provided by operating activities:
      Depreciation and amortization                   46,283        41,333
      Amortization of debt discount and fees          14,587        11,301
      Loss on extinguishment of debt                       -         5,321
      Stock-based compensation                        19,698        20,807
      Loss from equity method investments                 65            73
      Gain on investments, net                       (13,741)       (6,935)
      Write-down of investment securities                  -         1,500
      Non-cash restructuring and other charges           136           216
      Impairment of property, plant and
       equipment                                           -           427
      Deferred income taxes                           (4,811)      (69,266)
      Provisions (recoveries) for losses
       (gains) on trade and installment
       contract receivables                           (5,885)      (12,978)
      Other non-cash items                             2,518         3,124
      Changes in operating assets and
       liabilities, net of effect of acquired
       businesses:
         Receivables                                   2,455       (25,384)
         Installment contract receivables             62,080        70,479
         Inventories                                  (6,987)      (10,923)
         Prepaid expenses and other                    1,969       (13,778)
         Other assets                                  1,479         1,397
         Accounts payable and accrued
          liabilities                                (48,650)        6,026
         Deferred revenue                             25,979        31,882
         Other long-term liabilities                  (4,628)        4,257
                                                ------------  ------------
            Net cash provided by operating
             activities                              125,778        95,701
                                                ------------  ------------
Cash Flows from Investing Activities:
  Proceeds from the sale of available-for-sale
   securities                                          9,588             -
  Proceeds from the sale of long-term
   investments                                         2,785        10,133
  Purchases of property, plant and equipment         (11,312)      (18,765)
  Purchases of software licenses                           -        (2,517)
  Investment in venture capital partnerships
   and equity investments                               (608)         (500)
  Cash paid in business combinations and asset
   acquisitions, net of cash acquired                (22,865)     (253,951)
                                                ------------  ------------
           Net cash used for investing
            activities                               (22,412)     (265,600)
                                                ------------  ------------
Cash Flows from Financing Activities:
  Principal payments on receivable sale
   financing                                          (2,829)       (1,719)
  Proceeds from issuance of 2015 Notes                     -       350,000
  Payment of Convertible Senior Notes                      -      (187,150)
  Payment of 2015 Notes issuance costs                     -        (9,800)
  Purchase of 2015 Notes Hedges                            -       (76,635)
  Proceeds from termination of Convertible
   Senior Notes Hedges                                     -           280
  Proceeds from sale of 2015 Warrants                      -        37,450
  Tax effect related to employee stock
   transactions allocated to equity                      967            59
  Proceeds from issuance of common stock              10,302         8,119
  Stock received for payment of employee taxes
   on vesting of restricted stock                     (7,389)       (4,114)
  Purchases of treasury stock                              -       (39,997)
                                              ------------- ---------------
           Net cash provided by financing
            activities                                 1,051        76,493
                                                ------------  ------------
Effect of exchange rate changes on cash and
 cash equivalents                                      3,491          (106)
                                                ------------  ------------
Increase (decrease) in cash and cash
 equivalents                                         107,908       (93,512)
                                                ------------  ------------
Cash and Cash Equivalents at End of Period      $    665,317  $    475,603
                                                ============  ============

                       Cadence Design Systems, Inc.
                            As of July 28, 2011
        Impact of Non-GAAP Adjustments on Forward Looking Diluted
                           Net Income Per Share
                                (Unaudited)

                                  Three Months Ending      Year Ending
                                    October 1, 2011     December 31, 2011
                                  -------------------  -------------------
                                        Forecast             Forecast
                                  -------------------  -------------------
Diluted net income per share on a
 GAAP basis                          $0.04 to $0.06       $0.20 to $0.26
  Amortization of acquired
   intangibles                            0.03                 0.10
  Stock-based compensation
   expense                                0.04                 0.16
  Non-qualified deferred
   compensation expenses                    -                  0.01
  Restructuring and other charges           -                    -
  Shareholder litigation costs              -                    -
  Executive and other employee
   severance costs                          -                  0.01
  Integration and
   acquisition-related costs                -                  0.01
  Amortization of debt discount           0.03                 0.10
  Other income or expense related
   to investments and non-qualified
   deferred compensation plan assets*       -                 (0.05)
  Acquisition-related income tax
   benefit                                  -                 (0.02)
  Income tax benefit of IRS
   settlement                               -                 (0.02)
  Income tax effect of non-GAAP
   adjustments                           (0.03)               (0.09)
                                  -------------------  -------------------
Diluted net income per share on a
 non-GAAP basis                      $0.11 to $0.13       $0.41 to $0.47
                                  ===================  ===================

   * 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 (expense), net.

                       Cadence Design Systems, Inc.
                            As of July 28, 2011
       Impact of Non-GAAP Adjustments on Forward Looking Net Income
                               (Unaudited)

                                  Three Months Ending      Year Ending
                                    October 1, 2011     December 31, 2011
                                  -------------------  -------------------
($ in Millions)                         Forecast             Forecast
                                  -------------------  -------------------
Net income on a GAAP basis             $12 to $18           $55 to $71
  Amortization of acquired
   intangibles                              7                   27
  Stock-based compensation
   expense                                 12                   44
  Non-qualified deferred
   compensation expenses                    -                    3
  Restructuring and other charges           -                    1
  Shareholder litigation costs              -                    1
  Executive and other employee
   severance costs                          -                    2
  Integration and
   acquisition-related costs                -                    2
  Amortization of debt discount             7                   26
  Other income or expense related
   to investments and non-qualified
   deferred compensation plan assets*       -                  (14)
  Acquisition-related income tax
   benefit                                  -                   (5)
  Income tax benefit of IRS
   settlement                               -                   (6)
  Income tax effect of non-GAAP
   adjustments                             (8)                 (24)
                                  -------------------  -------------------
Net income on a non-GAAP basis         $30 to $36          $112 to $128
                                  ===================  ===================

   * 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 (expense), net.

                       Cadence Design Systems, Inc.
                                (Unaudited)

Revenue Mix by Geography (% of Total Revenue)

                                              2010                 2011
                                  ----------------------------  ----------
GEOGRAPHY                          Q1    Q2    Q3    Q4   Year   Q1    Q2
                                  ----  ----  ----  ----  ----  ----  ----
  Americas                          40%   46%   43%   45%   43%   44%   47%
  Europe                            22%   23%   20%   23%   22%   21%   20%
  Japan                             23%   14%   20%   14%   18%   19%   17%
  Asia                              15%   17%   17%   18%   17%   16%   16%
Total                              100%  100%  100%  100%  100%  100%  100%


Revenue Mix by Product Group (% of Total Revenue)

                                              2010                 2011
                                  ----------------------------  ----------
PRODUCT GROUP                      Q1    Q2    Q3    Q4  Year    Q1    Q2
                                  ----  ----  ----  ----  ----  ----  ----
  Functional Verification and
   Design IP                        22%   26%   25%   22%   24%   28%   33%
  Digital IC Design                 21%   21%   23%   26%   23%   24%   21%
  Custom IC Design                  27%   26%   24%   27%   26%   20%   22%
  Design for Manufacturing           9%    6%    8%    7%    7%    8%    6%
  System Interconnect                9%   10%   10%    8%    9%   10%    8%
  Services & Other                  12%   11%   10%   10%   11%   10%   10%
Total                              100%  100%  100%  100%  100%  100%  100%


Note: Product Group total revenue includes Product + Maintenance

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