SOURCE: CADENCE DESIGN SYSTEMS, INC.

January 31, 2007 16:05 ET

Cadence Reports Q4 Revenue Up 14% Over Q4 2005

SAN JOSE, CA -- (MARKET WIRE) -- January 31, 2007 -- Cadence Design Systems, Inc. (NASDAQ: CDNS) today reported fourth quarter 2006 revenue of $431 million, an increase of 14 percent over the $378 million reported for the same period in 2005. On a GAAP basis, Cadence recognized net income of $48 million, or $0.16 per share on a diluted basis, in the fourth quarter of 2006, compared to $27 million, or $0.08 per share on a diluted basis, in the same period in 2005. Revenues for the fiscal year 2006 totaled $1.48 billion, an increase of 12 percent over 2005 total revenues of $1.33 billion. Net income for the fiscal year 2006 was $143 million, or $0.46 per share, compared to net income of $49 million, or $0.16 per share for the year 2005.

In addition to using GAAP results in evaluating 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, in-process research and development charges, integration and acquisition-related costs, gains and expenses related to non-qualified deferred compensation plan assets, executive severance payments, restructuring charges, losses on extinguishment of debt, and equity in losses (income) from 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.

Using this non-GAAP measure, net income in the fourth quarter of 2006 was $116 million, or $0.38 per share on a diluted basis, as compared to $93 million, or $0.29 per share on a diluted basis, in the same period in 2005. For the fiscal year 2006, non-GAAP net income was $336 million, or $1.08 per share, compared to $258 million and $0.83 per share in 2005.

"We had outstanding execution across all elements of our business, especially fueled by technology innovation and significant customer engagements in all regions," said Mike Fister, president and CEO of Cadence.

Bill Porter, executive vice president and chief financial officer, added, "We had a very good fourth quarter and year led by 20% or better year over year growth in our verification and custom businesses."

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 completed after Dec. 30, 2006.

Business Outlook

For the first quarter of 2007, the company expects total revenue in the range of $355 million to $365 million. First quarter GAAP earnings per diluted share are expected to be in the range of $0.10 to $0.12. Diluted earnings per share using the non-GAAP measure defined below are expected to be in the range of $0.23 to $0.25.

For the full year 2007, the company expects total revenue in the range of $1.575 billion to $1.625 billion. On a GAAP basis, net income per diluted share for fiscal 2007 is expected to be in the range of $0.69 to $0.77. Using the non-GAAP measure defined below, diluted earnings per share for fiscal 2007 are expected to be in the range of $1.26 to $1.34.

A schedule showing a reconciliation of the business outlook from GAAP net income and diluted net income per share to the non-GAAP net income and diluted net income per share is included with this release.

Audio Webcast Scheduled

Fister and Porter will host a fourth quarter 2006 financial results audio webcast today, Jan. 31, 2007, at 2 p.m. (Pacific) / 5 p.m. (Eastern). Attendees are asked to register at the Web site at least 10 minutes prior to the scheduled webcast. An archive of the webcast will be available starting Jan. 31, 2007, at 5 p.m. Pacific time and ending at 5 p.m. Pacific time on Feb. 7, 2007. 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 and hardware, methodologies, and services to design and verify advanced semiconductors, consumer electronics, networking and telecommunications equipment, and computer systems. Cadence reported 2006 revenues of approximately $1.5 billion, and has approximately 5,200 employees. The company is headquartered in San Jose, Calif., with sales offices, design centers, and research facilities around the world to serve the global electronics industry. More information about the company, its products, and services is available at www.cadence.com.

Cadence is a registered trademark and the Cadence logo is a trademark of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.

The statements contained above regarding the company's fourth quarter and fiscal year 2006 results, those contained in the Business Outlook section above and the statements by Mike Fister and Bill Porter 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 technologies 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 Dec. 31, 2005 and the company's Quarterly report on Form 10-Q for the quarter ended Sep. 30, 2006.

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 (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, stock-based compensation expense, in-process research and development charges, integration and acquisition-related costs, gains and expenses related to non-qualified deferred compensation plan assets, executive severance payments, restructuring charges (severance and benefits, excess facilities and asset-related restructuring charges), losses on extinguishment of debt, and equity in losses (income) from 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 (loss) 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.

Management believes it is useful in measuring Cadence's operations to exclude amortization of intangibles, in-process research and development and integration and acquisition-related costs because these costs are primarily fixed at the time of an acquisition and generally cannot be changed by management in the short term. In addition, management believes it is useful to exclude stock-based compensation expense because it enhances investors' ability to review Cadence's business from the same perspective as Cadence's management, which believes that stock-based compensation expense is not directly attributable to the underlying performance of the company's business operations. Management also believes that it 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 several years. As a result, in 2001, 2002 and 2003, Cadence's GAAP statements of operations have included significant charges relating to such restructurings. Management 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 executive severance costs as these costs do not occur frequently. Management also believes it is useful to exclude gains and expenses related to its non-qualified deferred compensation plan assets as these gains and expenses are not part of Cadence's direct costs of operations, but reflect changes in the value of assets held in the plan. Finally, management also believes it is useful to exclude the equity in losses (income) from investments and investment write-downs, as these items are not part of Cadence's direct cost of operations. Rather, these are non-operating items that are included in other income (expense) and are part of the company's investment activities.

In the fourth quarter of 2006, Cadence's non-GAAP measure also excluded the loss associated with retiring a portion of its previously-issued convertible notes at a premium, and writing off related debt issuance costs. Management believes that in measuring Cadence's operations it is useful to exclude the loss on extinguishment of debt as the loss is not directly related to Cadence's operating performance and the associated transaction does not occur frequently.

In the fourth quarter of 2005, Cadence's non-GAAP measure also excluded the impact of the tax expense associated with Cadence's repatriation in 2005 of foreign earnings under the American Jobs Creation Act of 2004. This expense had no impact on Cadence's non-GAAP measure for 2006. Management believes it was useful to exclude the tax expense associated with the repatriation in 2005 of foreign earnings under the American Jobs Creation Act of 2004 as it eliminated a tax charge resulting from an event which is not expected to recur.

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 tables reconcile the specific items excluded from GAAP net income in the calculation of non-GAAP net income for the periods shown below:


Net Income Reconciliation                        Quarters Ended
                                      ------------------------------------
                                      December 30, 2006  December 31, 2005
                                      -----------------  -----------------
                                                  (Unaudited)
                                      ------------------------------------
(In thousands)

Net income on a GAAP basis            $          48,365  $          26,566
  Amortization of acquired intangibles           12,801             21,012
  Stock-based compensation expense               23,549              7,696
  Non-qualified deferred compensation
   expense                                        1,698              2,210
  Restructuring and other charges                   (71)               549
  Integration and acquisition-related
   costs                                            360                516
  Equity in losses from investments,
   gain on non-qualified deferred
   compensation plan assets -
   recorded in Other income, net                    (54)             1,450
  Loss on extinguishment of debt                 40,768                  -
  Income tax related to repatriation
   of foreign earnings                                -             30,082
  Income tax effect of non-GAAP
   adjustments                                  (11,576)             2,939
                                      -----------------  -----------------
Net income on a non-GAAP basis        $         115,840  $          93,020
                                      =================  =================


Net Income Reconciliation                         Years Ended
                                      ------------------------------------
                                      December 30, 2006  December 31, 2005
                                      -----------------  -----------------
                                                  (Unaudited)
                                      ------------------------------------
(In thousands)

Net income on a GAAP basis            $         142,592  $          49,343
  Amortization of acquired intangibles           63,251            105,710
  Stock-based compensation expense              103,986             39,902
  Non-qualified deferred compensation
   expense                                        5,829              5,409
  Restructuring and other charges                  (797)            35,334
  Write-off of acquired in-process
   technology                                       900              9,400
  Executive severance payments                        -              7,582
  Integration and acquisition-related
   costs                                          1,748              3,644
  Equity in losses from investments,
   gain on non-qualified deferred
   compensation plan assets -
   recorded in Other income, net                 (3,744)            13,434
  Loss on extinguishment of debt                 40,768                  -
  Income tax related to repatriation
   of foreign earnings                                -             30,082
  Income tax effect of non-GAAP
   adjustments                                  (18,289)           (41,656)
  Cumulative effect of change in
   accounting principle                            (418)                 -
                                      -----------------  -----------------
Net income on a non-GAAP basis        $         335,826  $         258,184
                                      =================  =================


Diluted Net Income per Share
 Reconciliation                                  Quarters Ended
                                      ------------------------------------
                                      December 30, 2006  December 31, 2005
                                      -----------------  -----------------
                                                  (Unaudited)
                                      ------------------------------------
(In thousands, except per share data)

Diluted net income per share on a
 GAAP basis                           $            0.16  $            0.08
  Amortization of acquired intangibles             0.04               0.07
  Stock-based compensation expense                 0.08               0.03
  Non-qualified deferred compensation
   expense                                         0.01                  -
  Restructuring and other charges                     -                  -
  Integration and acquisition-related
   costs                                              -                  -
  Equity in losses from investments,
   gain on non-qualified deferred
   compensation plan assets -
   recorded in Other income, net                      -                  -
  Loss on extinguishment of debt                   0.13                  -
  Income tax related to repatriation
   of foreign earnings                                -               0.09
  Income tax effect of non-GAAP
   adjustments                                    (0.04)              0.02

Diluted net income per share on a     -----------------  -----------------
 non-GAAP basis                       $            0.38  $            0.29
                                      =================  =================
Shares used in calculation of diluted
 net income per share - GAAP                    307,472            319,647

Shares used in calculation of diluted
 net income per share - non-GAAP (A)            307,472            319,647


Diluted Net Income per Share
 Reconciliation                                   Years Ended
                                      ------------------------------------
                                      December 30, 2006  December 31, 2005
                                      -----------------  -----------------
                                                  (Unaudited)
                                      ------------------------------------
(In thousands, except per share data)

Diluted net income per share on a
 GAAP basis                           $            0.46  $            0.16
  Amortization of acquired intangibles             0.20               0.34
  Stock-based compensation expense                 0.33               0.13
  Non-qualified deferred compensation
   expense                                         0.02               0.01
  Restructuring and other charges                     -               0.11
  Write-off of acquired in-process
   technology                                         -               0.03
  Executive severance payments                        -               0.02
  Integration and acquisition-related
   costs                                           0.01               0.01
  Equity in losses from investments,
   gain on non-qualified deferred
   compensation plan assets -
   recorded in Other income, net                  (0.01)              0.04
  Loss on extinguishment of debt                   0.13                  -
  Income tax related to repatriation
   of foreign earnings                                -               0.10
  Income tax effect of non-GAAP
   adjustments                                    (0.06)             (0.12)
  Cumulative effect of change in
   accounting principle                               -                  -

Diluted net income per share on a     -----------------  -----------------
 non-GAAP basis                       $            1.08  $            0.83
                                      =================  =================
Shares used in calculation of diluted
 net income per share - GAAP                    312,457            314,383

Shares used in calculation of diluted
 net income per share - non-GAAP (A)            312,457            314,383


(A) 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 in-process technology are important to consider because they may represent initial expenditures that under GAAP are 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. Losses on extinguishment of debt can be incurred on remaining convertible notes. All of these metrics are important to financial performance generally.

Though Cadence management finds its non-GAAP measure is useful in evaluating 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 baseline 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 reconciliation to GAAP, it may provide additional insight into its 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.

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 Mar. 16, 2007, 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 update by the company. During the Quiet Period, Cadence representatives will not comment on Cadence's business outlook or its financial results or expectations. The Quiet Period will extend until the day when Cadence's First Quarter 2007 Earnings Release is published, which is currently scheduled for Apr. 25, 2007.


                       Cadence Design Systems, Inc.
                  Condensed Consolidated Balance Sheets
                  December 30, 2006 and December 31, 2005
                              (In thousands)
                                (Unaudited)


                                                December 30,   December 31,
                                                    2006           2005
                                               -------------  -------------

Current Assets:
  Cash and cash equivalents                    $     934,342  $     861,315
  Short-term investments                              24,089         33,276
  Receivables, net of allowance for doubtful
   accounts of $3,804 and $10,979, respectively      238,438        282,073
  Inventories                                         37,179         28,902
  Prepaid expenses and other                          77,957         70,736
                                               -------------  -------------
    Total current assets                           1,312,005      1,276,302

Property, plant and equipment, net of
 accumulated depreciation of $615,768 and
 $549,593, respectively                              354,575        356,945
Goodwill                                           1,267,579      1,232,926
Acquired intangibles, net                            112,738        153,847
Installment contract receivables                     149,584        102,748
Other assets                                         246,341        278,544
                                               -------------  -------------
Total Assets                                   $   3,442,822  $   3,401,312
                                               =============  =============

Current Liabilities:
  Current portion of long-term debt            $      28,000  $      32,000
  Accounts payable and accrued liabilities           259,790        300,586
  Current portion of deferred revenue                260,275        273,265
                                               -------------  -------------
    Total current liabilities                        548,065        605,851
                                               -------------  -------------

Long-term Liabilities:
  Long-term portion of deferred revenue               95,018         51,864
  Convertible notes                                  730,385        420,000
  Long-term debt                                           -        128,000
  Other long-term liabilities                        370,063        350,893
                                               -------------  -------------
    Total long-term liabilities                    1,195,466        950,757
                                               -------------  -------------

Stockholders' Equity                               1,699,291      1,844,704
                                               -------------  -------------
Total Liabilities and Stockholders' Equity     $   3,442,822  $   3,401,312
                                               =============  =============



                       Cadence Design Systems, Inc.
                 Condensed Consolidated Income Statements
 For the Quarters and Years Ended December 30, 2006 and December 31, 2005
                 (In thousands, except per share amounts)
                                (Unaudited)


                          Quarters Ended               Years Ended
                    --------------------------  --------------------------
                    December 30,  December 31,  December 30,  December 31,
                        2006          2005          2006          2005
                    ------------  ------------  ------------  ------------
Revenue:
  Product           $    297,847  $    257,684  $    982,673  $    851,496
  Services                35,097        32,656       134,895       126,169
  Maintenance             98,076        88,023       366,327       351,527
                    ------------  ------------  ------------  ------------

    Total revenue        431,020       378,363     1,483,895     1,329,192
                    ------------  ------------  ------------  ------------

Costs and Expenses:
  Cost of product         12,100        17,047        66,769        79,721
  Cost of services        25,502        22,261        96,497        91,893
  Cost of
   maintenance            16,319        15,280        63,833        59,794
  Marketing and sales    116,515        98,152       405,579       366,164
  Research and
   development           117,931        98,774       460,064       390,740
  General and
   administrative         34,050        27,706       143,317       129,552
  Amortization of
   acquired
   intangibles             5,159         8,562        23,141        47,762
  Restructuring and
   other charges             (71)          549          (797)       35,334
  Write-off of
   acquired
   in-process
   technology                  -             -           900         9,400
                    ------------  ------------  ------------  ------------

    Total costs
     and expenses        327,505       288,331     1,259,303     1,210,360
                    ------------  ------------  ------------  ------------

     Income from
      operations         103,515        90,032       224,592       118,832

  Loss on
   extinguishment
   of debt               (40,768)            -       (40,768)            -
  Interest expense        (2,468)       (1,503)      (12,348)       (5,446)
  Other income, net       17,211         3,741        70,402        15,097
                    ------------  ------------  ------------  ------------

     Income before
      provision for
      income taxes
      and cumulative
      effect of
      change in
      accounting
      principle           77,490        92,270       241,878       128,483

  Provision for
   income taxes           29,125        65,704        99,704        79,140
                    ------------  ------------  ------------  ------------

  Net income
   before
   cumulative
   effect of
   change in
   accounting
   principle              48,365        26,566       142,174        49,343

  Cumulative
   effect of
   change in
   accounting
   principle,
   net of tax                  -             -           418             -
                    ------------  ------------  ------------  ------------

     Net income     $     48,365  $     26,566  $    142,592  $     49,343
                    ============  ============  ============  ============

Net income per
 share before
 cumulative effect
 of change in
 accounting
 principle:
    Basic           $       0.18  $       0.09  $       0.51  $       0.18
                    ============  ============  ============  ============
    Diluted         $       0.16  $       0.08  $       0.46  $       0.16
                    ============  ============  ============  ============

Net income per
 share after
 cumulative effect
 of change in
 accounting
 principle:
    Basic           $       0.18  $       0.09  $       0.51  $       0.18
                    ============  ============  ============  ============
    Diluted         $       0.16  $       0.08  $       0.46  $       0.16
                    ============  ============  ============  ============


Weighted average
 common shares
 outstanding -
 basic                   274,164       281,628       279,354       278,520
                    ============  ============  ============  ============

Weighted average
 common shares
 outstanding -
 diluted                 307,472       319,647       312,457       314,383
                    ============  ============  ============  ============



                       Cadence Design Systems, Inc.
              Condensed Consolidated Statements of Cash Flows
                              (In thousands)
                                (Unaudited)


                                                       Years Ended
                                               ---------------------------
                                               December 30,   December 31,
                                                   2006           2005
                                               ------------   ------------

Cash and Cash Equivalents at Beginning of
 Period                                        $    861,315   $    448,517
                                               ------------   ------------
Cash Flows from Operating Activities:
   Net income                                       142,592         49,343
   Adjustments to reconcile net income to net
    cash provided by operating activities:
      Cumulative effect of change in
       accounting principle                            (418)             -
      Depreciation and amortization                 147,117        184,717
      Loss on extinguishment of debt                 40,768              -
      Stock-based compensation                      103,986         39,902
      Equity in loss from investments, net            1,200          6,492
      Gain on investments, net                      (32,903)       (18,297)
      Write-down of investment securities             2,467         10,934
      Write-off of acquired in-process technology       900          9,400
      Non-cash restructuring and other charges          194          2,352
      Tax benefit from employee stock transactions        -         11,715
      Tax benefit (expense) of call options          (6,159)         6,167
      Deferred income taxes                          29,535        (22,968)
      Proceeds from the sale of receivables, net    180,580        192,079
      Recoveries for gains on trade accounts
       receivable and sales returns                  (6,777)        (1,755)
      Other non-cash items                            4,630          5,569
      Changes in operating assets and liabilities,
       net of effect of acquired businesses:
         Receivables                                 92,977         54,928
         Inventories                                (10,872)        (7,588)
         Prepaid expenses and other                   6,128         (8,094)
         Installment contract receivables          (261,983)      (155,648)
         Other assets                                   749          1,640
         Accounts payable and accrued liabilities   (51,462)        20,330
         Deferred revenue                            24,444         32,616
         Other long-term liabilities                 13,523         12,449
                                               ------------   ------------
            Net cash provided by operating
             activities                             421,216        426,283
                                               ------------   ------------

Cash Flows from Investing Activities:
  Proceeds from sale of available-for-sale
   securities                                         7,637         14,921
  Proceeds from sale of short-term investments            -        289,225
  Purchases of short-term investments                  (147)      (180,975)
  Proceeds from the sale of long-term
   investments                                       26,054          6,075
  Proceeds from sale of property, plant and
   equipment                                            317         33,625
  Purchases of property, plant and equipment        (67,636)       (71,656)
  Purchases of software licenses                     (8,409)        (2,600)
  Investment in venture capital partnerships
   and equity investments                            (3,800)       (14,184)
  Cash paid in business combinations and asset
   acquisitions, net of cash acquired,
   and acquisition of intangibles                   (65,778)      (297,128)
                                               ------------   ------------
           Net cash used for investing
            activities                             (111,762)      (222,697)
                                               ------------   ------------

Cash Flows from Financing Activities:
  Proceeds from term loan                                 -        160,000
  Principal payments on term loan and
   long-term debt                                  (132,000)           (62)
  Proceeds from issuance of convertible notes
   due 2011 and 2013                                500,000              -
  Payment of convertible notes due 2023            (228,480)             -
  Payment of convertible notes due 2011 and
   2013 issuance costs                              (12,032)             -
  Purchase of call options in connection with
   convertible notes due 2011 and 2013             (119,750)             -
  Proceeds from sale of call options in
   connection with convertible notes due 2023        55,864              -
  Proceeds from sale of common stock warrants
   in connection with convertible notes due
   2011 and 2013                                     39,400              -
  Purchase of common stock warrants in
   connection with convertible notes due 2023       (10,201)             -
  Tax benefit from employee stock transactions       10,712              -
  Proceeds from issuance of common stock            156,648        146,481
  Purchases of treasury stock                      (494,088)      (101,070)
                                               ------------   ------------
           Net cash provided by (used for)
            financing activities                   (233,927)       205,349
                                               ------------   ------------

Effect of exchange rate changes on cash and
 cash equivalents                                    (2,500)         3,863
                                               ------------   ------------

Increase in cash and cash equivalents                73,027        412,798
                                               ------------   ------------

Cash and Cash Equivalents at End of Period     $    934,342   $    861,315
                                               ============   ============



                       Cadence Design Systems, Inc.
                          As of January 31, 2007
             Impact of Non-GAAP Adjustments on Forward Looking
                        Diluted Net Income Per Share
                                (Unaudited)


                                         Quarter ended       Year ended
                                         March 31, 2007   December 29, 2007
                                        ----------------- -----------------
                                            Forecast          Forecast
                                        ----------------- -----------------

Diluted net income per share on a GAAP
 basis                                    $0.10 to $0.12   $0.69 to $0.77

  Amortization of acquired intangibles         0.04              0.14
  Stock-based compensation expense             0.09              0.33
  Equity in losses from investments,
   gain on non-qualified deferred
   compensation plan assets                      -               0.01
  Income tax effect of non-GAAP
   adjustments                                   -               0.09

Diluted net income per share on a       ----------------- -----------------
 non-GAAP basis                           $0.23 to $0.25   $1.26 to $1.34
                                        ================= =================



                       Cadence Design Systems, Inc.
                          As of January 31, 2007
        Impact of Non-GAAP Adjustments on Forward Looking Net Income
                                (Unaudited)


                                         Quarter ended       Year ended
                                         March 31, 2007   December 29, 2007
                                        ----------------- -----------------
($ in millions)                             Forecast          Forecast
                                        ----------------- -----------------

Net income on a GAAP basis                  $29 to $35       $198 to $222

  Amortization of acquired intangibles          11                41
  Stock-based compensation expense              26                97
  Integration and acquisition-related
   costs                                         -                 1
  Equity in losses from investments,
   gain on non-qualified deferred
   compensation plan assets                      1                 4
  Income tax effect of non-GAAP
   adjustments                                   -                25
                                        ----------------- -----------------
Net income on a non-GAAP basis              $67 to $73       $366 to $390
                                        ================= =================



                       Cadence Design Systems, Inc.
                                (Unaudited)



Revenue Mix by Geography (% of Total Revenue)


                             2004                          2005
                 ============================  ============================
GEOGRAPHY         Q1    Q2    Q3    Q4   Year   Q1    Q2    Q3    Q4   Year
---------        ============================  ============================

 North America    53%   57%   55%   45%   52%   46%   49%   53%   42%   48%
 Europe           16%   19%   21%   30%   22%   16%   17%   21%   20%   18%
 Japan            22%   14%   15%   14%   16%   30%   25%   20%   26%   25%
 Asia              9%   10%    9%   11%   10%    8%    9%    6%   12%    9%
Total            100%  100%  100%  100%  100%  100%  100%  100%  100%  100%


                             2006
                 ============================
GEOGRAPHY         Q1    Q2    Q3    Q4   Year
---------        ============================

 North America    51%   48%   54%   60%   54%
 Europe           19%   18%   22%   19%   19%
 Japan            21%   24%   13%   10%   17%
 Asia              9%   10%   11%   11%   10%
Total            100%  100%  100%  100%  100%



Revenue Mix by Product Group (% of Total Revenue)


                             2004                          2005
                 ============================  ============================
PRODUCT GROUP     Q1    Q2    Q3    Q4   Year   Q1    Q2    Q3    Q4   Year
-------------    ============================  ============================

 Functional
  Verification    20%   20%   18%   19%   19%   20%   19%   21%   25%   21%
 Digital IC
  Design          25%   21%   24%   27%   24%   27%   23%   26%   29%   28%
 Custom IC
  Design          27%   24%   27%   27%   27%   23%   31%   27%   22%   25%
 Design for
  Manufacturing    6%    9%   12%    8%    9%    9%    9%    9%    8%    9%
 System
  Interconnect    10%    9%    8%    9%    9%   10%    9%    8%    7%    8%
 Services & Other 12%   17%   11%   10%   12%   11%    9%    9%    9%    9%
Total            100%  100%  100%  100%  100%  100%  100%  100%  100%  100%


                             2006
                 ============================
PRODUCT GROUP     Q1    Q2    Q3    Q4   Year
-------------    ============================

 Functional
  Verification    26%   22%   24%   23%   24%
 Digital IC
  Design          20%   26%   19%   26%   24%
 Custom IC
  Design          27%   27%   30%   26%   27%
 Design for
  Manufacturing    8%    8%    8%    6%    7%
 System
  Interconnect     9%    8%   10%   11%    9%
 Services & Other 10%    9%    9%    8%    9%
Total            100%  100%  100%  100%  100%


Note: Product Group total revenue includes Product + Maintenance

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