CIMdata PLM Industry Summary Online Archive

21 July 2004

Financial News

Cadence Reports Solid Second Quarter Results

Cadence Design Systems, Inc. announced total revenue for the second quarter of 2004 of $287 million compared to $277 million in the same period last year. On a GAAP basis, Cadence® recognized net income of $4 million, or $0.01 per share in the second quarter of 2004, compared to a net loss of $5 million, or $0.02 per share in the same period last year.

In addition to using GAAP results in evaluating Cadence's business, management also believes it is useful to measure results using a non-GAAP measure of net income (loss), which excludes as applicable amortization of intangible assets and deferred stock compensation, in-process research and development charges, integration and other acquisition-related expenses, restructuring charges and equity in losses (income) from investments. Non-GAAP net income (loss) is reduced 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.Using this non-GAAP measure, earnings in the second quarter were $42 million, or $0.15 per share, on a fully diluted basis as compared to $29 million, or $0.10 per share, on a fully diluted basis, in the same period last year.

"We had solid financial results demonstrated by growth in the second quarter and we delivered innovative new technology," said Mike Fister, Cadence President and CEO. "Through collaboration and innovation, we have continued to help our customers address their most important design and manufacturing challenges."

Business Highlights of Q2 2004

Cadence made significant gains in digital design with the release of EncounterT 4.1 and First Encounter® Global Physical Synthesis (GPS), a second-generation global physical synthesis solution. GPS enables larger and more complex chips to be created, and in less time, than is possible using first generation methods. The company also introduced NanoRouteT with super-threaded route acceleration, giving what was already the industry's fastest router another 10 to 20 times performance boost.

Cadence continued to drive collaboration to solve complex design and design-to-manufacturing challenges. A partnership was created with ASML to develop advanced resolution enhancement, or RET, solutions that operate with Cadence custom design flows. Cadence also signed an agreement with Rambus, which underscored the company's strategy of providing differentiated design intellectual property (IP) through extensive collaboration with world-class third-party IP providers. The agreement will provide customers with first-time access to industry-leading serial-link IP and design services from a single source, lowering design-in cost and design-cycle time.

"Our new technology is being adopted by companies ranging from our premier design partners to leading-edge new ventures like Digeo, Inc.," Fister said. "Moving forward, our focus will be on developing even deeper partnerships with our customers to help them achieve their business goals."

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 that may be completed after July 21, 2004.

Business Outlook

For the third quarter of 2004, the company expects total revenue in the range of $300 million to $310 million. Third quarter GAAP earnings per fully diluted share are expected to be in the range of $0.08 to $0.10. Diluted earnings per share using our non-GAAP measure defined below are expected to be in the range of $0.18 to $0.20.

For the full year 2004, the company expects total revenue in the range of $1.175 billion to $1.225 billion. On a GAAP basis, we expect net income per fully diluted share for fiscal 2004 in the range of $0.25 to $0.32. Using our non-GAAP measure defined below, we expect fully diluted earnings per share for fiscal 2004 to be in the range of $0.70 to $0.77.

Cadence Design Systems, Inc.'s Ray Bingham, Chairman of the Board, Mike Fister, President and CEO, and Bill Porter, Chief Financial Officer, will host a second quarter Financial Results audio webcast today, July 21, 2004, at 2:00 p.m. (Pacific) / 5:00 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 21 at 5:00 p.m. Pacific time and ending at 5:00 p.m. Pacific time on July 28. Webcast access is available at http://www.cadence.com/company/investor_relations

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 and deferred stock compensation, in-process research and development charges, integration and other acquisition-related expenses, restructuring charges (severance and benefits, excess facilities and asset-related restructuring charges) and equity in losses (income) from investments. Intangible assets consist primarily of purchased technology, backlog, patents, trademarks, distribution rights, customer contracts and related relationships and non-compete agreements. Non-GAAP net income (loss) is reduced 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, deferred stock compensation, in-process research and development and acquisition-related expenses because these costs are primarily fixed at the time of an acquisition and generally cannot be changed by management in the short term. Management believes that it also 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 three years. As a result, in 2001, 2002 and 2003, Cadence's GAAP statements of operations have included significant charges relating to such restructurings. Cadence 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 the equity in losses (income) from investments and investment write-downs, as these costs are not part of the company's direct cost of operations. Rather, these are non-operating costs that are included in other income (expense) and are part of the company's investment activities.

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.

 

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