Cadence Reports Record 2001 Results; Product Revenue Grows 32 Percent and Earnings Per Share Increase 79 Percent.Business Editors/High Tech Writers 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)--Jan. 22, 2002 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 fourth quarter revenue of $378 million and pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma 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 of $0.27. Product revenue grew 11 percent sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen to $242 million in the fourth quarter. 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. booked $119 million--41 percent--of its software products as subscription licenses during the quarter. Total revenue for 2001 was a record $1.43 billion, up 12 percent from 2000 and pro forma diluted earnings per share were $0.84, up 79 percent over 2000. For comparative purposes, except where noted, the results discussed throughout this release reflect earnings before unusual items and amortization of acquired intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. . "We had our best year ever as customers continued to invest in critical design technologies despite a very tough economy," 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 Design Systems. "Product revenue increased 32 percent, driven by our strength in analog/mixed-signal and synthesis/place-and-route (SP&R) design solutions." The weakness in the semiconductor industry continues to affect the Cadence(R) services business. Total services revenue was $52 million in the fourth quarter, a 12 percent decline sequentially. Services revenue for the year totaled $263 million, down 22 percent from 2000. Including amortization of acquired intangibles, deferred stock compensation, and unusual items in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), the company reported net income of $39 million and diluted earnings per share of $0.15 for the fourth quarter. On a GAAP basis, the company reported net income of $141 million and diluted earnings per share of $0.55 for the year. Business Highlights Cadence showed strong growth in both analog/mixed-signal and digital SP&R product areas. The need for analog, RF and mixed-signal capability is driven by the rapid growth in communications designs and the convergence convergence Mathematical property of infinite series, integrals on unbounded regions, and certain sequences of numbers. An infinite series is convergent if the sum of its terms is finite. of communications, computing computing - computer and multi-media--all on a single device. Bookings of custom IC analog/mixed-signal solutions were up almost 40 percent for the year while 19 of the top 20 customers purchased Custom IC solutions in the fourth quarter. In digital IC, the continuing evolution of the semiconductor industry to smaller geometries of 0.18, 0.13 and 0.10 micrometers, coupled with the technology leadership of Cadence in this area, drove growth. In the fourth quarter, eight out of the top 10 customers purchased new-generation Cadence SP&R design technology--the first fully integrated solution available in the market. For the year, Cadence booked more than $170 million in new-generation SP&R, up 54 percent over 2000. Cadence strengthened its digital design flow with the fourth-quarter acquisition of Silicon Perspective Corporation (SPC 1. (business) SPC - Statistical Process Control. Something to do with quality management. 2. (body) SPC - Software Productivity Centre. 3. (company) SPC - Software Publishing Corporation. 4. ), the leader in full chip virtual prototyping (1) Creating a demo of a new system. Prototyping is essential for clarifying information requirements. The design of a system (functional specs) must be finalized before the system can be built. . The acquisition enables Cadence to provide a solution that accelerates the implementation of very large designs containing many millions of gates, based on SPC technology and combined with the proven Cadence SP&R design technology. "The core of our business is strong and growing," said Bingham. "We offer the leading technology for today's designs, the best technology for next-generation designs, clear strength in the key growth areas, and the most-complete portfolio of solutions in the industry." 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. These statements do not include the potential impact of any mergers, acquisitions or other business combinations that may be completed after December December: see month. 31, 2001. Based on its 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 the business to continue as it has--with software strong, and 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. weak. Cadence expectations do not assume any meaningful recovery in the economy in 2002. As a result, it expects earnings per share for Q1 to be approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $0.22, and for the year in the range of $1.10--a 30 percent increase in earnings per share from 2001. In Q1, reflecting normal seasonality, Cadence expects product revenue to decline sequentially approximately 11 percent, with total revenue declining approximately eight percent. Cadence expects services revenue to decline approximately seven percent from Q4 levels--reflecting weak bookings from previous quarters. Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: for Q1 is expected to be in the 20 percent range. In 2002, Cadence anticipates product revenue growth in the 17 percent range, with services revenue down approximately 10 percent. Cadence expects modest sequential One after the other in some consecutive order such as by name or number. growth in the first half of the year based on the timing of product renewals--similar to the pattern in 2001. Cadence expects stronger sequential growth in the second half of 2002 and accelerating into 2003, as its renewals have an even larger impact. In 2002, due to lower expectations for 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. parts of its business--services and emulation--Cadence sees a total revenue growth rate in the 10 percent range. When the economy does recover, Cadence expects services and emulation to recover quickly. Costs are expected to remain firmly under control, leading to an annual operating margin in the mid- mid- pref. Middle: midbrain. 20 percent range for 2002, and exiting the year at approximately 30 percent--no change from previous expectations. During 2002, other income should increase to about $3 million per quarter from investment sales, and the company's tax rate will be 26 percent, down from the previous 26.5 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: The ability of Cadence to successfully compete in the design automation product and the commercial electronic design and methodology services industries; the mix of products and services sold and the timing of significant orders for its products; recent economic uncertainty; fluctuations in rates of exchange between the U.S. dollar and the currencies of other countries; and the acquisition of other companies or the failure to successfully integrate them. For a detailed discussion of these and other cautionary statements, please refer to the Company's filings with the Securities and Exchange Commission. These include the Company's Annual Report on Form 10-K 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 December30, 2000 and the Company's Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the quarter ended September September: see month. 29, 2001. In the calculation of the Company's Earnings Before Goodwill (EBG EBG Electromagnetic Band Gap EBG Ernst-Barlach-Gymnasium (German high school name; several cities) EBG European Board of Gastroenterology EBG EuroBonus Gold EBG Electron Beam Gun EBG Electronic Book G EBG Extended Boolean Graphs ) or pro forma earnings pro forma earnings Income not necessarily calculated in accordance with generally accepted accounting principles. For example, a company might report pro forma earnings that exclude depreciation expense and nonrecurring expenses such as restructuring costs. , Cadence excludes certain non-cash items such as amortization of goodwill and other acquired intangibles, amortization of deferred stock compensation, and write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. in-process R&D from acquisitions. Also excluded are non-operating and non-recurring items such as unusual items and restructure expenses. A reconciliation of EBG net income to GAAP net income is posted on the Cadence website (www.cadence.com/company/investor_relations/index.html). Cadence expects that its corporate representatives will meet privately during the quarter with investors, 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 website (www.cadence.com). Prior to the start of the Quiet Period (described below), the public can continue to rely on the Outlook on the website as still being the current expectations of Cadence on matters covered, unless Cadence publishes a notice stating otherwise. Beginning March 15, 2002, Cadence will observe TO OBSERVE, civil law. To perform that which has been prescribed by some law or usage. Dig., 1, 3, 32. a "Quiet Period" during which the Outlook as provided in this press release and the Company's quarterly report on Form 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 the Outlook or financial results or expectations of Cadence. The Quiet Period will extend until the day when the next quarterly Cadence Earnings Release is published, presently scheduled for April 16, 2002. About Cadence Cadence is the largest supplier of electronic design automation products, methodology services, and design services 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 2001 revenues of approximately $1.43 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 is available at http://www.cadence.com. Note to Editors: 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
December 29, 2001 and December 30, 2000
(In $000's)
December 29, December 30,
2001 2000
------------- -------------
Cash and short-term investments $ 207,271 $ 136,969
Receivables, net 258,402 289,468
Inventories, net 18,151 20,149
Prepaid expenses and other 83,575 110,262
---------- ----------
Total current assets 567,399 556,848
Property, plant and equipment, net 417,189 368,879
Software development costs, net 11,938 10,738
Acquired intangibles, net 413,641 326,518
Installment contract receivables 58,918 38,420
Other assets 260,945 175,918
---------- ----------
Total assets $1,730,030 $1,477,321
========== ==========
Notes payable and current
portion of capital leases $ 1,397 $ 2,212
Accounts payable and accrued
liabilities 254,740 273,594
Income taxes payable 4,289 --
Deferred revenue 211,965 215,768
---------- ----------
Total current liabilities 472,391 491,574
Long-term debt and capital leases 1,476 3,298
Other long-term liabilities 134,816 72,984
Stockholders' equity 1,121,347 909,465
---------- ----------
Total liabilities and
stockholders' equity $1,730,030 $1,477,321
========== ==========
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Operations
For the Quarters and Years Ended
December 29, 2001 and December 30, 2000
(in $000's, except per share amounts)
Quarters Ended Years Ended
------------------------- -------------------------
December 29, December 30, December 29, December 30,
2001 2000 2001 2000
----------- ----------- ----------- -----------
Revenue
Product $241,659 $216,173 $830,490 $627,429
Services 51,545 92,655 263,355 335,967
Maintenance 84,996 82,086 336,595 316,154
----------- ----------- ----------- -----------
Total revenue 378,200 390,914 1,430,440 1,279,550
----------- ----------- ----------- -----------
Costs and
Expenses
Cost of product 16,618 26,027 79,262 89,937
Cost of
services 37,485 58,431 188,618 215,605
Cost of
maintenance 15,574 16,614 65,299 63,315
Marketing and
sales 107,371 111,096 393,614 390,139
Research and
development 78,200 68,988 297,329 263,947
General and
administrative 28,745 24,074 114,594 94,478
Amortization of
acquired
intangibles 20,415 20,321 92,330 80,503
Amortization of
deferred stock
compensation 2,316 6,226 17,911 11,390
Unusual items (17,457) 1,884 (168,102) 6,821
Restructure 28,519 -- 83,300 --
Goodwill
write-off -- -- 25,834 --
----------- ----------- ----------- -----------
Total costs
and expenses 317,786 333,661 1,189,989 1,216,135
----------- ----------- ----------- -----------
Income from
operations 60,414 57,253 240,451 63,415
Other income,
net 1,262 555 1,697 4,581
----------- ----------- ----------- -----------
Income before
provision
for income
taxes 61,676 57,808 242,148 67,996
Provision for
income taxes 22,747 15,319 100,861 18,019
----------- ----------- ----------- -----------
Net income $38,929 $42,489 $141,287 $49,977
=========== =========== =========== ===========
Basic net income
per share $0.16 $0.17 $0.57 $0.20
=========== =========== =========== ===========
Diluted net
income
per share $0.15 $0.16 $0.55 $0.19
=========== =========== =========== ===========
Weighted average
common shares
outstanding 244,095 244,629 245,839 244,565
=========== =========== =========== ===========
Weighted average
common and
potential common
shares
outstanding -
assuming
dilution 255,526 265,377 257,660 262,696
=========== =========== =========== ===========
----------------------------------------------------------------------
Supplemental diluted
earnings per share
before amortization of
acquired intangibles,
amortization of
deferred stock
compensation,
unusual items,
restructure, and
goodwill
write-off $ 0.27 $ 0.24 $ 0.84 $ 0.47
=========== =========== =========== ===========
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 Years Ended
December 29, 2001 and December 30, 2000
(in $000's, except per share amounts)
Supplemental
------------------------------------------------------
Quarters Ended Years Ended
------------------- -------------------
Dec. 29, Dec. 30, % Dec. 29, Dec. 30, %
2001 2000 Change 2001 2000 Change
-------- -------- ------ -------- -------- ------
Revenue
Product $241,659 $216,173 12% $830,490 $627,429 32%
Services 51,545 92,655 -44% 263,355 335,967 -22%
Maintenance 84,996 82,086 4% 336,595 316,154 6%
-------- -------- -------- --------
Total
revenue 378,200 390,914 -3% 1,430,440 1,279,550 12%
-------- -------- -------- --------
Costs and Expenses
Cost of
product 16,618 26,027 -36% 79,262 89,937 -12%
Cost of
services 37,485 58,431 -36% 188,618 215,605 -13%
Cost of
maintenance 15,574 16,614 -6% 65,299 63,315 3%
Marketing and
sales 107,371 111,096 -3% 393,614 390,139 1%
Research and
development 78,200 68,988 13% 297,329 263,947 13%
General and
admin-
istrative 28,745 24,074 19% 114,594 94,478 21%
-------- -------- -------- --------
Total costs
and
expenses 283,993 305,230 -7% 1,138,716 1,117,421 2%
-------- -------- -------- --------
Income from
operations 94,207 85,684 291,724 162,129
Other income,
net 1,262 555 1,697 4,581
-------- -------- -------- --------
Income before
provision
for income
taxes 95,469 86,239 293,421 166,710
Provision
for income
taxes 25,299 22,853 77,757 44,178
-------- -------- -------- --------
Net
income $70,170 $63,386 $215,664 $122,532
======== ======== ======== ========
Diluted net
income per
share $0.27 $0.24 $0.84 $0.47
======== ======== ======== ========
Weighted
average common
and potential
common shares
outstanding -
assuming
dilution 255,526 265,377 -4% 257,660 262,696 -2%
======== ======== ======== ========
Cadence Design Systems, Inc.
Reconciliation of Pro Forma and GAAP Net Income
For the Quarters and Years Ended
December 29, 2001 and December 30, 2000
(In $000's)
The following pro forma supplemental information provides a
reconciliation between pro forma operating income and net income
according to generally accepted accounting principles (GAAP). This pro
forma information is not prepared in accordance with GAAP.
Quarters Ended Years Ended
--------------------- ---------------------
Dec. 29, Dec. 30, Dec. 29, Dec. 30,
2001 2000 2001 2000
--------- --------- --------- ---------
Pro forma operating
income $70,170 $63,386 $215,664 $122,532
Reconciling items to
GAAP Net income
Avant! criminal
restitution, net
of expense 26,057 -- 194,558 --
Amortization of
deferred stock
compensation (2,316) (6,226) (17,911) (11,390)
Write-off of
goodwill -- -- (25,834) --
Restructure
expense (28,519) -- (83,300) --
Amortization of
acquired
intangibles (20,415) (20,321) (92,330) (80,503)
Write-off of
in-process R&D
expenses (8,600) -- (21,700) --
Tality IPO fees
and separation
costs -- (1,884) (4,756) (6,821)
Income tax effect
of reconciling
items 2,552 7,534 (23,104) 26,159
--------- --------- --------- ---------
GAAP Net income $38,929 $42,489 $141,287 $49,977
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