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Cadence Reports First Quarter 2014 Financial Results

Companies mentioned in this article: Cadence Design Systems, Inc.

SAN JOSE, Calif., April 21, 2014 /PRNewswire/ -- Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the first quarter of fiscal year 2014.

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Cadence reported first quarter 2014 revenue of $379 million, compared to revenue of $354 million reported for the same period in 2013. On a GAAP basis, Cadence recognized net income of $33 million, or $0.11 per share on a diluted basis, in the first quarter of 2014, compared to net income of $79 million, or $0.27 per share on a diluted basis, in the same period in 2013. GAAP net income for the first quarter of 2013 included a $34 million income tax benefit due to a release of an uncertain tax position.

Using the non-GAAP measure defined below, net income in the first quarter of 2014 was $59 million, or $0.20 per share on a diluted basis, as compared to net income of $61 million, or $0.21 per share on a diluted basis, in the same period in 2013.

"In Q1, Cadence continued to strengthen its product portfolio through internally developed products and key acquisitions," said Lip-Bu Tan, president and chief executive officer. "We advanced our functional verification platform by releasing our new Incisive® vManager(TM) solution and acquiring Forte Design Systems. And today, we announced that we entered into a definitive agreement to acquire Jasper Design Automation, Inc., which will meaningfully add to our verification capabilities. We also continued to see strong customer interest and growing adoption of our digital and new sign-off products with multiple design wins."

"Cadence produced solid operating results in Q1 while continuing to invest strategically to further our growth objectives," added Geoff Ribar, senior vice president and chief financial officer.

Business Outlook

For the second quarter of 2014, the company expects total revenue in the range of $370 million to $380 million. Second quarter GAAP net income per diluted share is expected to be in the range of $0.10 to $0.12. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.19 to $0.21.

For 2014, the company expects total revenue in the range of $1.550 billion to $1.590 billion. On a GAAP basis, net income per diluted share for 2014 is expected to be in the range of $0.56 to $0.66. Using the non-GAAP measure defined below, net income per diluted share for 2014 is expected to be in the range of $0.92 to $1.02.

The foregoing statements regarding the company's business outlook do not take into account the pending acquisition of Jasper Design Automation, Inc.

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 also included with this release.

Audio Webcast Scheduled

Lip-Bu Tan, president and chief executive officer, and Geoff Ribar, senior vice president and chief financial officer, will host a first quarter 2014 financial results audio webcast today, April 21, 2014, at 2 p.m. (Pacific) / 5 p.m. (Eastern). Attendees are asked to register at the website at least 10 minutes prior to the scheduled webcast. An archive of the webcast will be available starting April 21, 2014 at 5 p.m. (Pacific) and ending June 13, 2014 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/company/investor_relations.

About Cadence

Cadence enables global electronic design innovation and plays an essential role in the creation of today's integrated circuits and electronics. Customers use Cadence® software, hardware, IP, and services to design and verify advanced semiconductors, consumer electronics, networking and telecommunications equipment, and computer systems. The company is headquartered in San Jose, California, with sales offices, design centers, and research facilities around the world to serve the global electronics industry. More information about the company and its products and services is available at www.cadence.com.

Cadence, the Cadence logo, Forte, Incisive and vManager are trademarks or registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.

The statements contained above regarding Cadence's first quarter 2014 financial results and Cadence's expected benefits of the pending acquisition of Jasper Design Automation, Inc., as well as the information in the Business Outlook section and the statements by Lip-Bu Tan and Geoff Ribar, are or include forward-looking statements based on current expectations or beliefs and preliminary assumptions about future events that are subject to factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence's control, including, among others: (i) Cadence's ability to compete successfully in the electronic design automation product and the commercial electronic design and methodology services industries; (ii) the success of Cadence's efforts to improve operational efficiency and growth; (iii) the mix of products and services sold and the timing of significant orders for Cadence's products; (iv) change in customer demands, including those resulting from consolidation among Cadence's customers and the possibility that the restructurings and other efforts to improve operational efficiency of Cadence's customers could result in delays in purchases of Cadence's products and services; (v) economic and industry conditions in regions in which Cadence does business; (vi) fluctuations in rates of exchange between the U.S. dollar and the currencies of other countries in which Cadence does business; (vii) capital expenditure requirements, legislative or regulatory requirements, interest rates and Cadence's ability to access capital and debt markets; (viii) failure or inability to consummate the acquisition of Jasper, the effects of the acquisition of Jasper on Cadence's financial results, the effect of regulatory approval requirements, the potential inability to successfully operate or integrate Jasper's business, including the potential inability to retain customers, key employees or vendors; (ix) the acquisition of other companies or technologies or the failure to successfully integrate and operate these companies or technologies Cadence acquires, including the potential inability to retain customers, key employees or vendors; (x) the effects of Cadence's efforts to improve operational efficiency on Cadence's business, including strategic, customer and supplier relationships, and its ability to retain key employees; (xi) events that affect the reserves or settlement assumptions Cadence may take from time to time with respect to accounts receivable, taxes, litigation or other matters; and (xii) the effects of any litigation or other proceedings to which Cadence is or may become a party.

For a detailed discussion of these and other cautionary statements related to Cadence's business, please refer to Cadence's filings with the Securities and Exchange Commission. These include Cadence's most recent reports on Form 10-K and Form 10-Q, including Cadence's future filings.

GAAP to Non-GAAP Reconciliation

To supplement Cadence's financial results presented on a generally accepted accounting principles, or GAAP, basis, Cadence management uses non-GAAP measures that it believes are helpful in understanding Cadence's performance. One such measure is non-GAAP net income, which is a financial measure not calculated under GAAP, and is calculated by taking GAAP net income and excluding, as applicable, amortization and sale of intangible assets and debt discount related to our convertible notes, stock-based compensation expense, acquisition and integration-related costs including changes in fair value of contingent consideration and retention expenses for employees added from our 2013 and 2014 acquisitions, executive severance costs, investment gains or losses, income or expenses related to Cadence's non-qualified deferred compensation plan, restructuring and other significant items not directly related to Cadence's core business operations, and the income tax effect of non-GAAP pre-tax adjustments.

Cadence's management uses non-GAAP net income because it excludes items that are generally not directly related to the performance of the company's core business operations and therefore provides useful supplemental information to Cadence's management and investors regarding the performance of the company's business operations, facilitates comparisons to the company's historical operating results and enhances investors' ability to review Cadence's business from the same perspective as Cadence's management. Cadence's management also uses non-GAAP net income internally for forecasting and budgeting. Non-GAAP financial measures should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with their most directly comparable GAAP financial results. Investors are encouraged to look at the GAAP results as the best measure of financial performance.

The following tables reconcile the specific items excluded from GAAP net income and GAAP net income per diluted share in the calculation of non-GAAP net income and non-GAAP net income per diluted share for the periods shown below:

    Net Income Reconciliation          Three Months Ended
                                       ------------------

                                March 29,              March 30,
                                   2014                   2013
                               ----------             ----------

                                           (unaudited)

    (in thousands)

    Net income on a GAAP basis               $33,070              $78,609

    Amortization of acquired
     intangibles                   12,786                  7,598

    Stock-based compensation
     expense                       18,864                 13,810

    Non-qualified deferred
     compensation expenses          2,063                    152

    Restructuring and other
     charges (credits)                396                   (148)

    Integration and
     acquisition-related
     costs                          7,118                  4,935

    Amortization of debt
     discount                       4,209                  5,536

    Other income or expense
     related to investments
     and non-qualified
     deferred compensation
     plan assets*                  (3,609)                  (990)

    Income tax benefit due to
     a release of an uncertain
     tax position                       -                (33,719)

    Income tax effect of non-
     GAAP adjustments             (15,510)               (15,146)
                                  -------                -------

    Net income on a non-GAAP
     basis                                   $59,387              $60,637
                                             =======              =======


    *          Includes, as applicable, equity in
               losses or income from investments,
               write-down of investments, gains
               or losses on sale of investments
               and gains or losses on non-
               qualified deferred compensation
               plan assets recorded in other
               income or expense.

    Diluted Net Income per Share
     Reconciliation                  Three Months Ended
                                     ------------------

                                     March 29,           March 30,
                                        2014                2013
                                    ----------          ----------

                                         (unaudited)

    (in thousands, except per share
     data)

    Diluted net income per share on
     a GAAP basis                                $0.11              $0.27

    Amortization of acquired
     intangibles                          0.04                0.03

    Stock-based compensation
     expense                              0.06                0.05

    Non-qualified deferred
     compensation expenses                0.01                   -

    Restructuring and other charges
     (credits)                               -                   -

    Integration and acquisition-
     related costs                        0.02                0.02

    Amortization of debt discount         0.02                0.02

    Other income or expense related
     to investments and non-
     qualified deferred
     compensation plan assets*           (0.01)              (0.01)

    Income tax benefit due to a
     release of an uncertain tax
     position                                -               (0.12)

    Income tax effect of non-GAAP
     adjustments                         (0.05)              (0.05)
                                         -----               -----

    Diluted net income per share on
     a non-GAAP basis                            $0.20              $0.21
                                                 =====              =====

    Shares used in calculation of
     diluted net income per share -
     GAAP**                            301,034             292,151

    Shares used in calculation of
     diluted net income per share -
      non-GAAP**                       301,034             292,151


    *            Includes, as applicable, equity in
                 losses or income from investments,
                 write-down of investments, gains
                 or losses on sale of investments
                 and gains or losses on non-
                 qualified deferred compensation
                 plan assets recorded in other
                 income or expense.


    **           Shares used in the calculation of
                 GAAP net income per share are
                 expected to be the same as shares
                 used in the calculation of non-
                 GAAP net income per share, except
                 when the company reports a GAAP
                 net loss and non-GAAP net income,
                 or GAAP net income and a non-GAAP
                 net loss.

Cadence expects that its corporate representatives will meet privately during the quarter with investors, the media, investment analysts and others. At these meetings, Cadence may reiterate the business outlook published in this press release. At the same time, Cadence will keep this press release, including the business outlook, publicly available on its website.

Prior to the start of the Quiet Period (described below), the public may continue to rely on the business outlook contained herein as still being Cadence's current expectations on matters covered unless Cadence publishes a notice stating otherwise.

Beginning June 13, 2014, Cadence will observe a Quiet Period during which the business outlook as provided in this press release and the company's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q no longer constitute the company's current expectations. During the Quiet Period, the business outlook in these documents should be considered to be historical, speaking as of prior to the Quiet Period only and not subject to any update by the company. During the Quiet Period, Cadence's representatives will not comment on Cadence's business outlook, financial results or expectations. The Quiet Period will extend until the day when Cadence's second quarter 2014 earnings release is published, which is currently scheduled for July 21, 2014.

For more information, please contact:

Investors and Shareholders
Alan Lindstrom
Cadence Design Systems, Inc.
408-944-7100
investor_relations@cadence.com

Media and Industry Analysts
Anna del Rosario
Cadence Design Systems, Inc.
408-914-6884
newsroom@cadence.com


                                   Cadence Design Systems, Inc.

                               Condensed Consolidated Balance Sheets

                               March 29, 2014 and December 28, 2013

                                          (In thousands)

                                            (Unaudited)


                                                                   March 29, 2014        December 28, 2013
                                                                   --------------        -----------------


    Current assets:

              Cash and cash
              equivalents                                                       $532,761                $536,260

              Short-term
              investments                                                         97,006                  96,788

              Receivables,
              net                                                                106,322                 107,624

             Inventories                                                          55,605                  50,220

              2015 notes
              hedges                                                             369,731                 306,817

              Prepaid
              expenses and
              other                                                              136,300                 123,382


             Total current assets                                              1,297,725               1,221,091


    Property, plant and equipment, net
     of accumulated

              depreciation
              of $576,562
              and
              $568,494,
              respectively                                                       239,425                 238,715

    Goodwill                                                                     478,990                 456,905

    Acquired intangibles, net of
     accumulated amortization of

             $107,521 and $139,820, respectively                                 316,498                 311,693

    Long-term receivables                                                          6,193                   3,672

    Other assets                                                                 185,389                 196,525
                                                                                 -------

    Total assets                                                              $2,524,220              $2,428,601
                                                                              ==========              ==========


    Current liabilities:

              Convertible
              notes                                                             $329,058                $324,826

              2015 notes
              embedded
              conversion
              derivative                                                         369,731                 306,817

              Accounts
              payable and
              accrued
              liabilities                                                        189,200                 216,594

              Current
              portion of
              deferred
              revenue                                                            304,705                 299,973


             Total current liabilities                                         1,192,694               1,148,210
                                                                               ---------               ---------


    Long-term liabilities:

              Long-term
              portion of
              deferred
              revenue                                                             48,299                  52,850

              Other long-
              term
              liabilities                                                         69,025                  71,436

              Total long-term
              liabilities                                                        117,324                 124,286
                                                                                 -------                 -------


    Stockholders' equity                                                       1,214,202               1,156,105

    Total liabilities and
     stockholders' equity                                                     $2,524,220              $2,428,601
                                                                              ==========              ==========


                                                             Cadence Design Systems, Inc.

                                                       Condensed Consolidated Income Statements

                                             For the Three Months Ended March 29, 2014 and March 30, 2013

                                                       (In thousands, except per share amounts)

                                                                     (Unaudited)



                                                                                         Three Months Ended
                                                                                         ------------------

                                                                                              March 29,                    March 30,
                                                                                                            2014                        2013
                                                                                                            ----                        ----


    Revenue:

                         Product and
                         maintenance                                      $357,350                               $328,271

                        Services                                            21,200                                 25,995



                        Total revenue                                      378,550                                354,266
                                                                           -------                                -------


    Costs and expenses:

                         Cost of product
                         and maintenance                                    42,197                                 29,847

                        Cost of services                                    14,902                                 18,344

                         Marketing and
                         sales                                              98,323                                 90,402

                         Research and
                         development                                       146,466                                124,084

                         General and
                         administrative                                     28,744                                 29,810

                         Amortization of
                         acquired
                         intangibles                                         5,210                                  3,791

                         Restructuring and
                         other charges
                         (credits)                                             396                                   (148)



                         Total costs and
                         expenses                                          336,238                                296,130
                                                                           -------                                -------


                                            Income from operations                                        42,312                      58,136


                        Interest expense                                    (7,268)                                (9,262)

                        Other income, net                                    3,382                                  2,175



                                             Income before provision
                                             (benefit) for income taxes                                   38,426                      51,049


                         Provision
                         (benefit) for
                         income taxes                                        5,356                                (27,560)



                                            Net income                                                   $33,070                     $78,609
                                                                                                         =======                     =======



    Net income per share - basic                                                                           $0.12                       $0.29
                                                                                                           =====                       =====


    Net income per share - diluted                                                                         $0.11                       $0.27
                                                                                                           =====                       =====


    Weighted average common shares outstanding - basic                                                   281,615                     274,936
                                                                                                         =======                     =======


    Weighted average common shares outstanding -
     diluted                                                                                             301,034                     292,151
                                                                                                         =======                     =======

                                                   Cadence Design Systems, Inc.

                                          Condensed Consolidated Statements of Cash Flows

                                   For the Three Months Ended March 29, 2014 and March 30, 2013

                                                          (In thousands)

                                                            (Unaudited)



                                                         Three Months Ended
                                                         ------------------

                                                              March 29,                         March 30,

                                                                             2014                             2013
                                                                             ----                             ----


    Cash and cash equivalents at
     beginning of period                                                 $536,260                         $726,357

    Cash flows from operating
     activities:

       Net income                                                          33,070                           78,609

       Adjustments to reconcile net
        income to net cash provided
        by operating activities:

          Depreciation and amortization                                    26,017                           21,682

          Amortization of debt discount
           and fees                                                         4,882                            6,281

          Stock-based compensation                                         18,864                           13,810

          Gain on investments, net                                         (3,651)                          (1,006)

          Deferred income taxes                                             2,245                            8,695

          Other non-cash items                                              2,344                           (1,007)

          Changes in operating assets
           and liabilities, net of
           effect of acquired
           businesses:

             Receivables                                                     (108)                          23,652

             Inventories                                                   (9,373)                            (979)

             Prepaid expenses and other                                    (9,753)                          (1,099)

             Other assets                                                   3,157                            4,148

             Accounts payable and accrued
              liabilities                                                 (29,680)                         (11,003)

             Deferred revenue                                              (5,508)                         (16,648)

             Other long-term liabilities                                   (4,408)                         (49,799)

                Net cash provided by operating
                 activities                                                28,098                           75,336
                                                                           ------                           ------


    Cash flows from investing
     activities:

      Purchases of available-for-
       sale securities                                                    (47,005)                         (24,282)

      Proceeds from the sale of
       available-for-sale
       securities                                                          32,586                           14,985

      Proceeds from the maturity of
       available-for-sale
       securities                                                          13,905                            8,700

      Proceeds from the sale of
       long-term investments                                                    -                            6,102

      Purchases of property, plant
       and equipment                                                       (6,252)                          (6,569)

      Cash paid in business
       combinations and asset
       acquisitions, net of cash
       acquired                                                           (27,422)                            (757)

               Net cash used for investing
                activities                                                (34,188)                          (1,821)
                                                                          -------                           ------


    Cash flows from financing
     activities:

      Principal payments on
       receivable financing                                                     -                           (2,526)

      Payment of acquisition-
       related contingent
       consideration                                                       (1,835)                            (582)

      Tax effect related to employee
       stock transactions allocated
       to equity                                                            1,827                            5,276

      Proceeds from issuance of
       common stock                                                        23,377                           21,801

      Stock received for payment of
       employee taxes on vesting of
       restricted stock                                                   (10,981)                          (8,775)

      Payments for repurchases of
       common stock                                                       (12,517)                               -

               Net cash provided by (used
                for) financing activities                                    (129)                          15,194
                                                                             ----                           ------


    Effect of exchange rate
     changes on cash and cash
     equivalents                                                            2,720                           (4,914)
                                                                            -----                           ------


    Increase (decrease) in cash
     and cash equivalents                                                  (3,499)                          83,795
                                                                           ------                           ------


    Cash and cash equivalents at
     end of period                                                       $532,761                         $810,152
                                                                         ========                         ========

                                                                                                        Cadence Design Systems, Inc.

                                                                                                            As of April 21, 2014

                                                                               Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share

                                                                                                                 (Unaudited)



                                                                                                                    Three Months Ending                                               Year Ending

                                                                                                                       June 28, 2014                                                January 3, 2015

                                                                                                                         Forecast                                                      Forecast
                                                                                                                         --------                                                      --------


    Diluted net income per share on a GAAP basis                                                                                                              $0.10 to $0.12         $0.56 to $0.66


                                                     Amortization of acquired intangibles                                                                                     0.04                   0.17

                                                     Stock-based compensation expense                                                                                         0.06                   0.27

                                                     Non-qualified deferred compensation expenses                                                                                -                   0.01

                                                     Integration and acquisition-related costs                                                                                0.02                   0.06

                                                     Amortization of debt discount                                                                                            0.01                   0.06

                                                     Other income or expense related to investments and non-qualified

                                                         deferred compensation plan assets*                                                                                      -                  (0.01)

                                                     Income tax effect of non-GAAP adjustments                                                                               (0.04)                 (0.20)


    Diluted net income per share on a non-GAAP basis                                                                                                          $0.19 to $0.21         $0.92 to $1.02
                                                                                                                                                              ==============         ==============


     * Includes, as applicable, equity in
      losses or income from investments,
      write-down of investments, gains or
      losses on sale of  investments and
      gains or losses on non-qualified
      deferred compensation plan assets
      recorded in other income or expense.

                                                                                               Cadence Design Systems, Inc.

                                                                                                   As of April 21, 2014

                                                                               Impact of Non-GAAP Adjustments on Forward Looking Net Income

                                                                                                        (Unaudited)



                                                                                                  Three Months Ending                                         Year Ending

                                                                                                     June 28, 2014                                          January 3, 2015

    ($ in millions)                                                                                    Forecast                                                Forecast
                                                                                                       --------                                                --------


    Net income on a GAAP basis                                                                                                              $30 to $36         $172 to $202


                                   Amortization of acquired intangibles                                                                                 13                   52

                                   Stock-based compensation expense                                                                                     19                   83

                                   Non-qualified deferred compensation expenses                                                                          -                    2

                                   Integration and acquisition-related costs                                                                             5                   18

                                   Amortization of debt discount                                                                                         4                   18

                                   Other income or expense related to investments and non-qualified

                                       deferred compensation plan assets*                                                                                -                   (4)

                                   Income tax effect of non-GAAP adjustments                                                                           (14)                 (62)


    Net income on a non-GAAP basis                                                                                                          $57 to $63         $279 to $309
                                                                                                                                            ==========         ============

     * Includes, as applicable, equity in
      losses or income from investments,
      write-down of investments, gains or
      losses on sale of  investments and
      gains or losses on non-qualified
      deferred compensation plan assets
      recorded in other income or expense.

                                                               Cadence Design Systems, Inc.

                                                                       (Unaudited)



    Revenue Mix by Geography (% of Total Revenue)


                                                                          2013                       2014
                                                                          ----                       ----

    GEOGRAPHY                                          Q1            Q2                  Q3       Q4       Year       Q1
    ---------                                         ---           ---                 ---      ---       ----      ---


     Americas                                              44%              45%              48%       47%       46%      45%

     Europe, Middle East and Africa                        22%              21%              20%       20%       21%      20%

     Japan                                                 15%              13%              12%       14%       13%      12%

     Asia                                                  19%              21%              20%       19%       20%      23%

    Total                                                 100%             100%             100%      100%      100%     100%




    Revenue Mix by Product Group (% of Total Revenue)


                                                                          2013                       2014
                                                                          ----                       ----

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


     Functional Verification, including Emulation
      Hardware                                             22%              22%              24%       25%       23%      23%

     Digital IC Design and Signoff                         33%              31%              29%       29%       30%      30%

     Custom IC Design                                      28%              28%              28%       26%       27%      27%

     System Interconnect and Analysis                      10%              11%              10%       10%       11%      10%

     IP                                                     7%               8%               9%       10%        9%      10%

    Total                                                 100%             100%             100%      100%      100%     100%




                                                                                                    Cadence Design Systems, Inc.

                                                                                  Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures

                                                                                              For the Three Months Ended March 29, 2014

                                                                                                           (In thousands)

                                                                                                             (Unaudited)



                                                                                              Three Months Ended

                                                                                                March 29, 2014
                                                                                                --------------

                                                                                         GAAP                                                      Adjustments                   Non-GAAP


    Revenue:

                         Product and
                         maintenance                                    $357,350                                  $                     -                              $357,350

                        Services                                          21,200                                                        -                                21,200



                        Total revenue                                    378,550                                                        -                               378,550
                                                                         -------                                                      ---                               -------


    Costs and expenses:

                         Cost of product
                         and maintenance                                  42,197                                                   (8,082)             (A)               34,115

                        Cost of services                                  14,902                                                     (739)             (A)               14,163

                         Marketing and
                         sales                                            98,323                                                   (5,695)             (A)               92,628

                         Research and
                         development                                     146,466                                                  (15,751)             (A)              130,715

                         General and
                         administrative                                   28,744                                                   (5,354)             (A)               23,390

                         Amortization of
                         acquired
                         intangibles                                       5,210                                                   (5,210)             (A)                    -

                         Restructuring and
                         other charges                                       396                                                     (396)                                    -



                         Total costs and
                         expenses                                        336,238                                                  (41,227)                              295,011
                                                                         -------                                                  -------                               -------


                                           Income from operations                                         42,312                                                41,227                     83,539


                        Interest expense                                  (7,268)                                                   4,209              (B)               (3,059)

                         Other income
                         (expense), net                                    3,382                                                   (3,609)             (C)                 (227)
                                                                                                                                                       ---


                                            Income before provision for
                                            income taxes                                                  38,426                                                41,827                     80,253


                         Provision for
                         income taxes                                      5,356                                                   15,510              (D)               20,866
                                                                                                                                                       ---


                                           Net income                                                    $33,070                                               $26,317                    $59,387
                                                                                                         =======                                               =======                    =======

    Notes:

    (A) For the three months ended
     March 29, 2014 adjustments to
     GAAP are as follows for the
     line items specified:

                                         Amortization of            Stock-based           Non-qualified          Integration and             Total

                                             acquired              compensation              deferred              acquisition-           adjustments

                                           intangibles                expense              compensation           related costs

                                                                                             expenses
                                                                                             --------

    Cost of product and maintenance                         $7,576                   $482                    $24    $                   -                $8,082

    Cost of services                                           -                    703                     36                        -                   739

    Marketing and sales                                        -                  4,596                    111                      988                 5,695

    Research and development                                   -                  9,667                  1,123                    4,961                15,751

    General and administrative                                 -                  3,416                    769                    1,169                 5,354

    Amortization of acquired intangibles                   5,210                      -                      -                        -                 5,210

                             Total                       $12,786                $18,864                 $2,063                   $7,118               $40,831
                                                                                =======

    (B) Amortization of debt discount
     related to convertible notes

    (C) Other income or expense related
     to investments and non-qualified
     deferred compensation plan assets

    (D) Income tax effect of non-GAAP
     adjustments



                                                                                                   Cadence Design Systems, Inc.

                                                                                 Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures

                                                                                             For the Three Months Ended March 30, 2013

                                                                                                          (In thousands)

                                                                                                            (Unaudited)


                                                                                            Three Months Ended

                                                                                              March 30, 2013
                                                                                              --------------

                                                                                       GAAP                                                       Adjustments                     Non-GAAP


    Revenue:

                         Product and
                         maintenance                                   $328,271                                 $                     -                                 $328,271

                        Services                                         25,995                                                       -                                   25,995



                        Total revenue                                   354,266                                                       -                                  354,266
                                                                        -------                                                     ---                                  -------


    Costs and expenses:

                         Cost of product
                         and maintenance                                 29,847                                                  (4,175)              (E)                 25,672

                        Cost of services                                 18,344                                                    (530)              (E)                 17,814

                         Marketing and
                         sales                                           90,402                                                  (3,104)              (E)                 87,298

                         Research and
                         development                                    124,084                                                  (7,928)              (E)                116,156

                         General and
                         administrative                                  29,810                                                  (6,967)              (E)                 22,843

                         Amortization of
                         acquired
                         intangibles                                      3,791                                                  (3,791)              (E)                      -

                         Restructuring and
                         other charges
                         (credits)                                         (148)                                                    148                                        -



                         Total costs and
                         expenses                                       296,130                                                 (26,347)                                 269,783
                                                                        -------                                                 -------                                  -------


                                           Income from operations                                       58,136                                                  26,347                      84,483


                        Interest expense                                 (9,262)                                                  5,536               (F)                 (3,726)

                        Other income, net                                 2,175                                                    (990)              (G)                  1,185
                                                                                                                                                      ---


                                            Income before provision
                                            (benefit) for income taxes                                  51,049                                                  30,893                      81,942


                         Provision
                         (benefit) for
                         income taxes                                   (27,560)                                                 48,865               (H)                 21,305
                                                                                                                                                      ---


                                           Net income                                                  $78,609                                                $(17,972)                    $60,637
                                                                                                       =======                                                ========                     =======

    Notes:

    (E) For the three months ended
     March 30, 2013 adjustments to
     GAAP are as follows for the
     line items specified:

                                         Amortization of           Stock-based           Non-qualified        Integration and             Total

                                            acquired              compensation              deferred            acquisition-           adjustments

                                           intangibles               expense              compensation         related costs

                                                                                            expenses
                                                                                            --------

    Cost of product and maintenance                        $3,807                   $364                   $4    $                   -                $4,175

    Cost of services                                          -                    525                    5                        -                   530

    Marketing and sales                                       -                  3,018                   22                       64                 3,104

    Research and development                                  -                  6,553                   78                    1,297                 7,928

    General and administrative                                -                  3,350                   43                    3,574                 6,967

    Amortization of acquired intangibles                  3,791                      -                    -                        -                 3,791

                             Total                       $7,598                $13,810                 $152                   $4,935               $26,495
                                                                                ======

    (F) Amortization of debt discount
     related to convertible notes

    (G) Other income or expense related
     to investments and non-qualified
     deferred compensation plan assets

    (H) Income tax benefit due to a
     release of an uncertain tax
     position $33,719 and income tax
     effect of non-GAAP adjustments
     $15,146

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SOURCE Cadence Design Systems, Inc.