UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

 

CADENCE DESIGN SYSTEMS, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware		000-15867		77-0148231
(State or Other Jurisdiction		(Commission File Number)		(I.R.S. Employer
of Incorporation)				Identification No.)

2655 Seely Avenue, Building 5
San Jose, California		95134
(Address of Principal Executive Offices)		(Zip Code)

(408) 943-1234
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02. Results of Operations and Financial Condition.

As part of the final review of the Form 10-Q for the quarter ended July 3, 2010 it was determined that, as a result of the accounting treatment for certain deferred payments in connection with Cadence Design Systems, Inc.’s (“Cadence”) acquisition of Denali Software, Inc., the second quarter 2010 Financial Schedules (“Q2 2010 Financial Schedules”) to Cadence’s earnings release dated July 28, 2010 (the “Q2 Earnings Release”) incorrectly categorized certain amounts reflected in the Q2 2010 Financial Schedules. The corrected amounts are provided herein and are in thousands, except for per share amounts.

•

In the Condensed Consolidated Balance Sheets as of July 3, 2010:

	•		The actual amount of Prepaid expenses and other is $71,448 instead of $62,308, and the actual amount of Goodwill is $158,227 instead of $167,367, but Total Assets remains unchanged at $1,695,755.
	•		The actual amount of Accounts payable and accrued liabilities is $153,982 instead of $153,220, and the actual amount of Accumulated deficit is $1,215,391 instead of $1,214,629, but Total liabilities and stockholders’ equity remains unchanged at $1,695,755.

	•		In the Condensed Consolidated Statements of Operations for the three months ended July 3, 2010, the actual amount of Research and development expense is $91,880 instead of $91,118, and the actual amount of Net income is $48,607 instead of $49,369. Diluted net income per share for the same period is decreased because of the $762 in additional Research and development expense, which reduces Diluted net income per share by $0.003, which, with rounding, results in Diluted net income per share of $0.18 instead of $0.19.
	•		In the Condensed Consolidated Statements of Cash Flows for the three months ended July 3, 2010, the actual amount of Net income is $48,607 instead of $49,369, the actual amount of Change in Prepaid expenses and other is $(12,260) instead of $(3,120), the actual amount of Change in Accounts payable and accrued liabilities is $5,101 instead of $4,339, and the actual amount of Cash paid in business combinations and asset acquisitions, net of cash acquired is $(253,951) instead of $(263,091), but Cash and cash equivalents remained unchanged at $475,603.

Appropriate changes in subtotal amounts are also reflected below and in the Q2 2010 Financial Schedules, which are posted on Cadence’s website at www.cadence.com, and the correct amounts are reflected in Cadence’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2010, filed today.

As a result of this accounting treatment, the guidance for third quarter 2010 GAAP net loss per diluted share is expected to be in the range of $(0.10) to $(0.08) instead of $(0.08) to $(0.06) and the guidance for fiscal 2010 GAAP net loss per diluted share is expected to be in the range of $(0.04) to $(0.00) instead of $(0.01) to $0.03.

All other guidance under “Business Outlook” in the Q2 Earnings Release remains unchanged, including the guidance for net income per diluted share using the non-GAAP measure set forth in the Q2 Earnings Release.

Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
July 3, 2010, As Reflected in Financial Statement Schedules Dated July 28, 2010 and
As Updated on August 4, 2010
(In thousands)
(Unaudited)

		July 3, 2010				Adjustments				July 3, 2010
		As reflected in								As updated on
		financial statement								August 4, 2010
		schedules dated
		July 28, 2010
Current Assets:
Cash and cash equivalents		$	475,603			$	—			$	475,603
Short-term investments			2,860				—				2,860
Receivables, net of allowances of $11,194			191,291				—				191,291
Inventories			23,874				—				23,874
Prepaid expenses and other			62,308				9,140				71,448
Total current assets			755,936				9,140				765,076
Property, plant and equipment, net of accumulated depreciation of $652,965			295,073				—				295,073
Goodwill			167,367				(9,140	)			158,227
Acquired intangibles, net of accumulated amortization of $90,983			192,422				—				192,422
Installment contract receivables			40,296				—				40,296
Other assets			244,661				—				244,661
Total Assets		$	1,695,755			$	—			$	1,695,755
Current Liabilities:
Accounts payable and accrued liabilities		$	153,220			$	762			$	153,982
Current portion of deferred revenue			290,105				—				290,105
Total current liabilities			443,325				762				444,087
Long-Term Liabilities:
Long-term portion of deferred revenue			92,477				—				92,477
Convertible notes			541,767				—				541,767
Other long-term liabilities			454,744				—				454,744
Total long-term liabilities			1,088,988				—				1,088,988
Stockholders’ Equity:
Common stock and capital in excess of par value			1,708,610				—				1,708,610
Treasury stock, at cost			(370,700	)			—				(370,700	)
Accumulated deficit			(1,214,629	)			(762	)			(1,215,391	)
Accumulated other comprehensive income			40,161				—				40,161
Total stockholders’ equity			163,442				(762	)			162,680
Total liabilities and stockholders’ equity		$	1,695,755			$	—			$	1,695,755

Cadence Design Systems, Inc.
Condensed Consolidated Statements of Operations
For the Three Months Ended July 3, 2010, As Reflected in Financial Statement Schedules Dated July 28, 2010 and
As Updated on August 4, 2010
(In thousands, except per share amounts)
(Unaudited)

		Three Months Ended
		July 3, 2010				Adjustments				July 3, 2010
		As reflected in								As updated on
		financial								August 4, 2010
		statement
		schedules dated
		July 28, 2010
Revenue:
Product		$	117,066				—			$	117,066
Services			25,258				—				25,258
Maintenance			84,740				—				84,740
Total revenue			227,064				—				227,064
Costs and Expenses:
Cost of product			7,123				—				7,123
Cost of services			21,556				—				21,556
Cost of maintenance			10,481				—				10,481
Marketing and sales			71,513				—				71,513
Research and development			91,118				762				91,880
General and administrative			17,058				—				17,058
Amortization of acquired intangibles			2,551				—				2,551
Restructuring and other charges (credits)			(317	)			—				(317	)
Total costs and expenses			221,083				762				221,845
Income from operations			5,981				(762	)			5,219
Interest expense			(7,972	)			—				(7,972	)
Other expense, net			(3,100	)			—				(3,100	)
Loss before benefit for income taxes			(5,091	)			(762	)			(5,853	)
Benefit for income taxes			(54,460	)			—				(54,460	)
Net income		$	49,369			$	(762	)		$	48,607
Basic net income per share		$	0.19							$	0.19
Diluted net income per share *		$	0.19							$	0.18
Weighted average common shares outstanding — basic			262,163								262,163
Weighted average common shares outstanding — diluted			266,423								266,423

Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended July 3, 2010, As Reflected in Financial Statement Schedules Dated July 28, 2010 and
As Updated on August 4, 2010
(In thousands)
(Unaudited)

		Three Months Ended								Three Months Ended
		July 3, 2010				Adjustments				July 3, 2010
		As reflected in								As updated on
		financial statement schedules dated July 28, 2010								August 4, 2010
Cash and Cash Equivalents at Beginning of Period		$	619,303			$	—			$	619,303
Cash Flows from Operating Activities:
Net income			49,369				(762	)			48,607
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			19,868				—				19,868
Amortization of debt discounts and fees			5,778				—				5,778
Loss on extinguishment of debt			5,321				—				5,321
Stock-based compensation			10,435				—				10,435
Loss on equity method investments			46				—				46
Gain on investments, net			(1,344	)			—				(1,344	)
Write-down of investment securities			1,500				—				1,500
Impairment of property, plant and equipment			263				—				263
Deferred income taxes			(67,560	)			—				(67,560	)
Provisions (recoveries) for losses (gains) on trade and installment contract receivables			(10,385	)			—				(10,385	)
Other non-cash items			2,400				—				2,400
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables			(1,395	)			—				(1,395	)
Installment contract receivables			12,710				—				12,710
Inventories			(4,876	)			—				(4,876	)
Prepaid expenses and other			(3,120	)			(9,140	)			(12,260	)
Other assets			(1,788	)			—				(1,788	)
Accounts payable and accrued liabilities			4,339				762				5,101
Deferred revenue			28,069				—				28,069
Other long-term liabilities			8,508				—				8,508
Net cash provided by operating activities			58,138				(9,140	)			48,998
Cash Flows from Investing Activities:
Proceeds from the sale of long-term investments			1,169				—				1,169
Purchases of property, plant and equipment			(8,866	)			—				(8,866	)
Purchases of software licenses			(2,030	)			—				(2,030	)
Investment in venture capital partnerships and equity investments			(500	)			—				(500	)
Cash paid in business combinations and asset acquisitions, net of cash acquired			(263,091	)			9,140				(253,951	)
Net cash used for investing activities			(273,318	)			9,140				(264,178	)
Cash Flows from Financing Activities:
Proceeds from issuance of 2015 Notes			350,000				—				350,000
Payment of Convertible Senior Notes			(187,150	)			—				(187,150	)
Payment of 2015 Notes issuance costs			(9,800	)			—				(9,800	)
Purchase of 2015 Notes Hedges			(76,635	)			—				(76,635	)
Proceeds from termination of Convertible Senior Notes Hedges			280				—				280
Proceeds from sale of 2015 Warrants			37,450				—				37,450
Tax benefit from employee stock transactions			29				—				29
Proceeds from issuance of common stock			75				—				75
Stock received for payment of employee taxes on vesting of restricted stock			(2,035	)			—				(2,035	)
Purchases of treasury stock			(39,997	)			—				(39,997	)
Net cash provided by financing activities			72,217				—				72,217
Effect of exchange rate changes on cash and cash equivalents			(737	)			—				(737	)
Decrease in cash and cash equivalents			(143,700	)			—				(143,700	)
Cash and Cash Equivalents at End of Period		$	475,603			$	—			$	475,603

Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income (Loss) Per Share
As Reflected in Financial Statement Schedules dated July 28, 2010 and
As Updated on August 4, 2010
(Unaudited)

		Three Months Ending				Three Months Ending				Year Ending				Year Ending
		October 2, 2010				October 2, 2010				January 1, 2011				January 1, 2011
		Forecast				Forecast				Forecast				Forecast
		As reflected in				As updated on				As reflected in				As updated on
		financial statement				August 4, 2010				financial statement				August 4, 2010
		schedules dated								schedules dated
		July 28, 2010								July 28, 2010
Diluted net income (loss) per share on a GAAP basis		$(0.08) to $(0.06)				$(0.10) to $(0.08)				$(0.01) to $0.03				$(0.04) to $(0.00)
Amortization of acquired intangibles			0.03				0.03				0.08				0.08
Stock-based compensation expense			0.04				0.04				0.16				0.16
Non-qualified deferred compensation expenses			—				—				0.01				0.01
Restructuring and other charges (credits)			—				—				(0.01	)			(0.01	)
Shareholder litigation costs			—				—				0.01				0.01
Integration and acquisition-related costs			—				0.02				0.01				0.04
Other income or expense related to investments and non-qualified deferred compensation plan assets*			—				—				(0.02	)			(0.02	)
Loss on extinguishment of debt			—				—				0.02				0.02
Amortization of debt discount			0.02				0.02				0.09				0.09
Acquisition-related income tax benefit			—				—				(0.25	)			(0.25	)
Income tax effect of non-GAAP adjustments			—				—				0.03				0.03
Diluted net income per share on a non-GAAP basis		$0.01 to $0.03				$0.01 to $0.03				$0.12 to $0.16				$0.12 to $0.16

Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Net Income (Loss)
As Reflected in Financial Statement Schedules dated July 28, 2010 and
As Updated on August 4, 2010
(Unaudited)

		Three Months Ending				Three Months Ending				Year Ending				Year Ending
		October 2, 2010				October 2, 2010				January 1, 2011				January 1, 2011
		Forecast				Forecast				Forecast				Forecast
		As reflected in				As updated on				As reflected in				As updated on
		financial statement				August 4, 2010				financial statement				August 4, 2010
		schedules dated								schedules dated
($ in Millions)		July 28, 2010								July 28, 2010
Net income (loss) on a GAAP basis		$(22) to $(16)				$(26) to $(20)				$(2) to $8				$(11) to $(1)
Amortization of acquired intangibles			7				7				21				21
Stock-based compensation expense			12				12				43				43
Non-qualified deferred compensation expenses			—				—				2				2
Restructuring and other charges (credits)			—				—				(1	)			(1	)
Shareholder litigation costs			—				—				3				3
Integration and acquisition-related costs			1				5				3				12
Other income or expense related to investments and non-qualified deferred compensation plan assets*			—				—				(5	)			(5	)
Loss on extinguishment of debt			—				—				5				5
Amortization of debt discount			6				6				23				23
Acquisition-related income tax benefit			—				—				(67	)			(67	)
Income tax effect of non-GAAP adjustments			(1	)			(1	)			7				7
Net income on a non-GAAP basis		$3 to $9				$3 to $9				$32 to $42				$32 to $42

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: August 4, 2010