Cadence Announces Solid Third Quarter Results; 32 Percent Product Revenue Growth.Business Editors SAN JOSE San Jose, city, United States San Jose (sănəzā`, săn hōzā`), city (1990 pop. 782,248), seat of Santa Clara co., W central Calif.; founded 1777, inc. 1850. , Calif.--(BUSINESS WIRE)--Oct. 16, 2001 Cadence Design Systems (company) Cadence Design Systems - A company that sells electronic design automation software and services. http://cadence.com/. See also Verilog. , Inc. (NYSE NYSE See: New York Stock Exchange : CDN (Content Delivery Network) A system of distributed content on a large intranet or the public Internet in which copies of content are replicated and cached throughout the network. ), the world's leading supplier of electronic design products and services, today announced third quarter revenues of $360 million and $0.22 diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of . Product revenue grew 32 percent to $217 million over the comparable quarter in 2000. For comparative purposes, except where noted, the results discussed throughout this release reflect earnings before goodwill and unusual items. "In the face of an extremely difficult economic environment, I am very proud of the fact that Cadence cadence, in music, the ending of a phrase or composition. In singing the voice may be raised or lowered, or the singer may execute elaborate variations within the key. has just completed its best third quarter ever," said Ray Bingham Bing·ham , George Caleb 1811-1879. American painter noted for his portraits and genre paintings of the American frontier. , president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Cadence. "At a time when most electronics companies are seeing steep declines in their business, our software business is still showing strong growth." Cadence recorded $105 million -- 41 percent -- of its software bookings as subscription licenses. Services revenue was $58 million in the third quarter, down 21 percent sequentially, reflecting the economic downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. . Tality Corporation, the Cadence(R) design services business, contributed $34 million of total revenue. "As a result of customers reducing their capital investments and making other short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. spending adjustments, our services and hardware emulation Hardware emulation is the process of imitating the behavior of one or more pieces of hardware (typically a system under design) with another piece of hardware, typically a special purpose emulation system. The goal is normally debugging of the system being designed. businesses softened soft·en v. soft·ened, soft·en·ing, soft·ens v.tr. 1. To make soft or softer. 2. To undermine or reduce the strength, morale, or resistance of. 3. further in the third quarter," added Bingham. "We have taken action to size these two businesses accordingly." Unusual items during the quarter netted $155 million, which included $170 million in initial criminal restitution In the context of Criminal Law, state programs under which an offender is required, as a condition of his or her sentence, to repay money or donate services to the victim or society; with respect to maritime law, the restoration of articles lost by jettison, done when the payments from Avant A`vant´ n. 1. The front of an army. [Obs.] See Van. ! Corporation, and a $13 million write down of excess hardware inventory. Cadence will discuss its third quarter results in an audio Webcast beginning today at 1:45 p.m. (Pacific) / 4:45 p.m. (Eastern). Access to the Webcast can be found at: http://www.cadence.com/company/investor_relations. Third Quarter Highlights The synthesis/place & route (SP&R) product business had a particularly strong quarter, fueled by the on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" retooling cycle, Cadence's innovative technology, and the software renewal cycle. Nine of the top 10 Cadence customers this quarter bought new-generation SP&R design technology. SP&R bookings nearly doubled over the same period in 2000, including two major semiconductor companies moving to the Cadence synthesis place & route solution. Other SP&R highlights include the adoption by Hitachi Hitachi (hētä`chē), city (1990 pop. 202,141), Ibaraki prefecture, E central Honshu, Japan, on the Kashima Sea. The city is a leading producer of Japan's electrical equipment. of a complete front-to-back flow for its 0.13 micron micron: see micrometer. One micrometer, which is one millionth of a meter or approximately 1/25,000 of an inch. The tiny elements that make up a transistor on a chip are measured in micrometers and nanometers. See process technology. process, and Sunplus of Taiwan Taiwan (tī`wän`), Portuguese Formosa, officially Republic of China, island nation (2005 est. pop. 22,894,000), 13,885 sq mi (35,961 sq km), in the Pacific Ocean, separated from the mainland of S China by the 100-mi-wide (161-km) Taiwan achieving first pass timing closure and tape-out In electronics design, tape-out or tapeout is the final stage of the design cycle of integrated circuits or printed circuit boards, the point at which the description of a circuit is sent for manufacture. of a million-gate design using the SP&R front-to-back flow. The Cadence software product renewal cycle showed continuing strength during the quarter, with renewed contract values more than 50 percent higher than previous contracts. Two significant contracts this quarter included: -- Agere, the world leader in communications components and subsystems, which signed an expanded multi-year agreement to deploy the full Cadence design technology flow--from system level, through SP&R, to physical verification, extraction and signal integrity analysis; and -- Motorola's Semiconductor Products Sector, which will also use all Cadence design technology through a multi-year agreement. During the quarter, Cadence expanded relationships with important semiconductor foundries, including a partnership with Chartered Semiconductor for its new 0.10 micron process, and an agreement with United Microelectronics microelectronics, branch of electronic technology devoted to the design and development of extremely small electronic devices that consume very little electric power. Corp. (UMC UMC United Methodist Church UMC United Microelectronics Corporation UMC University Medical Center UMC United Microelectronics Corp (Republic of China) UMC University of Missouri-Columbia ) that adds 10 new process design kits (PDKs). The new PDKs will streamline the UMC design process for digital, analog and mixed-signal ICs. Earlier this year, Cadence announced key foundry A semiconductor manufacturer that makes chips for third parties. It may be a large chip maker that sells its excess manufacturing capacity or one that makes chips exclusively for other companies. relationships with Taiwan Semiconductor Manufacturing Corp.(TSMC TSMC Taiwan Semiconductor Manufacturing Company, Ltd TSMC Taiwan Semiconductor Manufacturing Corporation TSMC Traffic Systems Management Center TSMC Toll Station Management Controller TSMC Transportation Supply Maintenance Command TSMC Technical Services Manager Code ), IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) and PolarFab. "The severe economic climate is prompting customers to rethink re·think tr. & intr.v. re·thought , re·think·ing, re·thinks To reconsider (something) or to involve oneself in reconsideration. re their approach to design, in particular moving to standard tool platforms and work with those suppliers who can be strategic partners. This trend plays to the strengths of Cadence. In fact, some 70 percent of the company's top customers purchased from all six product segments this quarter," said Bingham. "Our scale, breadth of offerings and continuous innovation enable us to deliver more value to customers." Business Outlook The following statements are based on current expectations. These statements are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. , and actual results may differ materially. Based on the company's experience year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. and visibility going forward, Cadence expects its business to continue as it has - with strong software and continued weak services and emulation (architecture) emulation - When one system performs in exactly the same way as another, though perhaps not at the same speed. A typical example would be emulation of one computer by (a program running on) another. . Cadence anticipates total revenue in Q4 will increase sequentially approximately 5 percent. It anticipates service revenue will decline approximately 5 percent from Q3 levels. Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: is expected to be in the 25 percent range. In 2002, Cadence anticipates total revenue growth in the mid-teens, with services growth in the mid-to-high single digits. Based on the timing of product renewals, the company expects modest sequential growth in the first half of the year and stronger sequential growth in the second half - similar to 2001. Cadence expects to continue to aggressively manage costs, leading to an annual operating margin in the mid- mid- pref. Middle: midbrain. 20 percent range, and exiting 2002 at approximately 30 percent. The statements by Ray Bingham and the above statements contained in this Outlook are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. based on current expectations or beliefs, as well as a number of 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 the control of Cadence, including among others: Cadence's ability to compete successfully in the design automation product and methodology services industries; Cadence's ability to achieve widespread market acceptance for its electronic design services; the mix of products and services sold and the timing of significant orders for its products; recent economic uncertainty, including weakness in the business of Cadence's customers; and the cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. nature of the integrated circuit integrated circuit (IC), electronic circuit built on a semiconductor substrate, usually one of single-crystal silicon. The circuit, often called a chip, is packaged in a hermetically sealed case or a nonhermetic plastic capsule, with leads extending from it for industry and the electronics systems industry. 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 Cadence Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 30, 2000 and Form 10Q for the quarter ended June June: see month. 30, 2001. 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 re·it·er·ate tr.v. re·it·er·at·ed, re·it·er·at·ing, re·it·er·ates To say or do again or repeatedly. See Synonyms at repeat. re·it the 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 (www.cadence.com). Prior to the start of the Quiet Period (described below), the public may continue to rely on the Outlook on the Web site as still being Cadence's current expectations on matters covered, unless Cadence publishes a notice stating otherwise. Beginning December 15, 2001, Cadence will observe a "Quiet Period" during which the Outlook as provided in this press release and the company's quarterly report on Form 10-Q Form 10-Q See 10-Q. no longer constitute the company's current expectations. During the Quiet Period, the 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 concerning Outlook or Cadence financial results or expectations. The Cadence Quiet Period will extend two days after the next quarterly Earnings Release is published currently scheduled for January 22, 2002. About Cadence Cadence is the largest supplier of electronic design automation products, methodology services, and design services. Cadence solutions are used to accelerate and manage the design of semiconductors, computer systems, networking and telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. equipment, consumer electronics, and a variety of other electronics-based products. With approximately 5,700 employees and 2000 revenues of approximately $1.3 billion, Cadence has sales offices, design centers, and research facilities around the world. The company is headquartered in San Jose, Calif., and traded on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the symbol CDN. More information about the company, its products and services are available at www.cadence.com. Cadence and the Cadence logo are registered trademarks of Cadence Design Systems, Inc. Tality is a trademark of Tality Corporation.
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
September 29, 2001 and December 30, 2000
(In $000's)
September 29, December 30,
2001 2000
---------- ----------
(Unaudited)
Cash and short-term investments $ 175,893 $ 136,969
Receivables, net 262,202 289,468
Inventories 14,076 20,149
Prepaid expenses and other 60,413 110,262
---------- ----------
Total current assets 512,584 556,848
Property, plant and equipment, net 406,725 368,879
Software development costs, net 11,638 10,738
Acquired intangibles, net 333,972 326,518
Installment contract receivables 39,122 38,420
Other assets 205,021 175,918
---------- ----------
Total assets $1,509,062 $1,477,321
========== ==========
Notes payable and current portion
of capital leases $ 1,636 $ 2,212
Accounts payable and
accrued liabilities 227,495 273,594
Income taxes payable 33,950 -
Deferred revenue 216,980 215,768
---------- ----------
Total current liabilities 480,061 491,574
Long-term debt and capital leases 1,700 3,298
Other long-term liabilities 62,716 72,984
Stockholders' equity 964,585 909,465
---------- ----------
Total liabilities and
stockholders' equity $1,509,062 $1,477,321
========== ==========
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Operations
For the Quarters and Nine Months Ended
September 29, 2001 and September 30, 2000
(in $000's, except per share amounts)
(Unaudited)
Quarters Ended Nine Months Ended
------------------- -------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2001 2000 2001 2000
-------- -------- -------- --------
Revenue
Product $217,408 $165,341 $588,831 $411,256
Services 57,992 87,320 211,810 243,312
Maintenance 84,608 79,800 251,599 234,068
-------- -------- -------- --------
Total revenue 360,008 332,461 1,052,240 888,636
-------- -------- -------- --------
Costs and Expenses
Cost of product 19,161 22,931 62,644 63,910
Cost of services 48,652 55,991 151,133 157,174
Cost of maintenance 16,849 17,183 49,725 46,701
Marketing and sales 96,593 97,845 286,243 279,043
Research and development 74,247 66,614 219,129 194,959
General and
administrative 27,640 24,121 85,849 70,404
Amortization of
acquired intangibles 23,995 20,648 71,915 60,182
Amortization of deferred
stock compensation 2,480 5,164 15,595 5,164
Unusual items (168,501) 4,937 (149,145) 4,937
Restructure 13,683 - 53,281 -
Goodwill write-off - - 25,834 -
-------- -------- -------- --------
Total costs and
expenses 154,799 315,434 872,203 882,474
-------- -------- -------- --------
Income from
operations 205,209 17,027 180,037 6,162
Other income, net 277 1,573 435 4,026
-------- -------- -------- --------
Income before
provision for
income taxes 205,486 18,600 180,472 10,188
Provision for
income taxes 78,061 4,929 78,114 2,700
-------- -------- -------- --------
Net income $127,425 $ 13,671 $102,358 $ 7,488
======== ======== ======== ========
Basic net income
per share $ 0.52 $ 0.06 $ 0.41 $ 0.03
======== ======== ======== ========
Diluted net income
per share $ 0.50 $ 0.05 $ 0.40 $ 0.03
======== ======== ======== ========
Weighted average common
shares outstanding 246,487 244,597 246,864 244,543
======== ======== ======== ========
Weighted average common
and potential common
shares outstanding -
assuming dilution 256,978 262,823 258,700 261,803
======== ======== ======== ========
----------------------------------------------------------------------
Supplemental diluted
earnings per share before
amortization of acquired
intangibles, amortization
of deferred stock
compensation, unusual
items, restructure, and
goodwill write-off $ 0.22 $ 0.14 $ 0.56 $ 0.23
======== ======== ======== ========
Cadence Design Systems, Inc.
Supplemental Condensed Consolidated Statements of Operations
Excluding Amortization of Acquired Intangibles,
Amortization of Deferred Stock Compensation,
Unusual Items, Restructure, and Goodwill Write-Off
For the Quarters and Nine Months Ended September 29, 2001 and
September 30, 2000 (in $000's, except per share amounts)
(Unaudited)
Supplemental
----------------------------------------------------
Quarters Ended Nine Months Ended
------------------- -------------------------
Sept. 29, Sept. 30, % Sept. 29, Sept. 30, %
2001 2000 Change 2001 2000 Change
-----------------------------------------------------
Revenue
Product $217,408 $165,341 31% $588,831 $411,256 43%
Services 57,992 87,320 -34% 211,810 243,312 -13%
Maintenance 84,608 79,800 6% 251,599 234,068 7%
-------- -------- -------- --------
Total revenue 360,008 332,461 8% 1,052,240 888,636 18%
-------- -------- -------- --------
Costs and Expenses
Cost of product 19,161 22,931 -16% 62,644 63,910 -2%
Cost of services 48,652 55,991 -13% 151,133 157,174 -4%
Cost of
maintenance 16,849 17,183 -2% 49,725 46,701 6%
Marketing and
sales 96,593 97,845 -1% 286,243 279,043 3%
Research and
development 74,247 66,614 11% 219,129 194,959 12%
General and
administrative 27,640 24,121 15% 85,849 70,404 22%
-------- -------- -------- --------
Total costs
and expenses 283,142 284,685 -1% 854,723 812,191 5%
-------- -------- -------- --------
Income from
operations 76,866 47,776 197,517 76,445
Other income, net 277 1,573 435 4,026
-------- -------- -------- --------
Income before
provision for
income taxes 77,143 49,349 197,952 80,471
Provision for
income taxes 20,443 13,077 52,458 21,325
-------- -------- -------- --------
Net income $ 56,700 $ 36,272 $145,494 $ 59,146
======== ======== ======== ========
Diluted net income
per share $ 0.22 $ 0.14 $ 0.56 $ 0.23
======== ======== ======== ========
Weighted average
common and potential
common shares
outstanding -
assuming dilution 256,978 262,823 -2% 258,700 261,803 -1%
======== ======== ======== ========
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