SAN JOSE, CA — (Marketwire) — 07/28/11 — 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 .
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 .
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:
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.
For more information, please contact:
Investors and Shareholders
Alan Lindstrom
Cadence Design Systems, Inc.
408-944-7100
Media and Industry Analysts
Nancy Szymanski
Cadence Design Systems, Inc.
408-473-8382
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