Cadence Reports Fourth Quarter and Fiscal Year 2012 Financial Results

During the fourth quarter of 2012, Cadence's non-GAAP net income also excluded the effect of an income tax benefit associated with the release of a valuation allowance against Cadence's deferred tax assets. Cadence's management believes it is useful to exclude the tax benefit associated with the release of this valuation allowance as Cadence does not expect releases in the valuation allowance of the magnitude recorded in the fourth quarter of 2012 to be recorded frequently.

During the fourth quarter of 2012, Cadence's non-GAAP net income also excluded the effect of an income tax benefit associated with Cadence's effective settlement of a State of California examination of Cadence's state income tax returns for the tax years 2001 through 2003. Cadence's management believes it is useful to exclude the income tax benefit associated with this settlement because Cadence does not expect settlements resulting in income tax benefits of the magnitude recorded in the fourth quarter of 2012 to occur frequently.

During the third quarter of 2012, Cadence's non-GAAP net income also excluded the effect of an income tax benefit associated with Cadence's acquisition of Sigrity, Inc. During the second quarter of 2011, Cadence's non-GAAP net income also excluded the effect of an income tax benefit associated with an acquisition Cadence completed during the second quarter of 2011. Cadence's management believes it is useful to exclude the tax benefits associated with these acquisitions because exclusion of such tax benefits permits consistent evaluations of Cadence's performance. Cadence does not expect an acquisition-related income tax benefit of the magnitude recorded in the third quarter of 2012 to be recorded frequently.

Cadence's management believes that non-GAAP net income provides useful supplemental information to Cadence's management and investors regarding the performance of the company's business operations and facilitates comparisons to the company's historical operating results. Cadence's management also uses this information 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.

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          
                                       ------------------------------------ 
                                       December 29, 2012  December 31, 2011 
                                       -----------------  ----------------- 
                                                    (unaudited)             
(in thousands)                                                              
Net income on a GAAP basis             $         313,874  $          10,892 
  Amortization of acquired intangibles             7,649              6,681 
  Stock-based compensation expense                13,276             11,999 
  Non-qualified deferred compensation                                       
   expenses (credits)                              1,216             (3,560)
  Restructuring and other charges                     64                 83 
  Shareholder litigation costs                        --                192 
  Executive and other employee                                              
   severance costs                                    --              2,931 
  Integration and acquisition-related                                       
   costs                                           2,187                353 
  Amortization of debt discount                    5,354              6,432 
  Other income or expense related to                                        
   investments and non-qualified                                            
   deferred compensation plan assets*             (4,081)             3,482 
  Income tax benefit of valuation                                           
   allowance release                                                  (219,601)                                --  
    Income  tax  benefit  of  State  of                                                                                        
      California  settlement                                                  (36,564)                                --  
    Income  tax  effect  of  non-GAAP                                                                                          
      adjustments                                                                      (25,363)                          6,260  
                                                                              -----------------    -----------------  
Net  income  on  a  non-GAAP  basis                  $                    58,011    $                    45,745  
                                                                              =================    =================  
                                                                                                                                                        
*    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  (expense),  net.                                                                  
                                                                                                                                                        
Net  Income  Reconciliation                                                      Years  Ended                          
                                                                              ------------------------------------  
                                                                              December  29,  2012    December  31,  2011  
                                                                              -----------------    -----------------  
                                                                                                        (unaudited)                          
(in  thousands)                                                                                                                            
Net  income  on  a  GAAP  basis                          $                  439,948    $                    72,229  
    Amortization  of  acquired  intangibles                        28,618                          27,016  
    Stock-based  compensation  expense                                47,561                          43,588  
    Non-qualified  deferred  compensation                                                                              
      expenses  (credits)                                                            4,453                              (383)
    Restructuring  and  other  charges                                        113                                360  
    Shareholder  litigation  costs                                                46                            1,545  
    Executive  and  other  employee                                                                                            
      severance  costs                                                                        --                            6,178  
    Integration  and  acquisition-related                                                                              
      costs                                                                                      9,278                            2,598  
    Amortization  of  debt  discount                                      20,846                          26,214  
    Other  income  or  expense  related  to                                                                                
      investments  and  non-qualified                                                                                        
      deferred  compensation  plan  assets*                          (6,296)                      (15,682)
    Income  tax  benefit  of  valuation                                                                                      
      allowance  release                                                        (219,601)                                --  
    Income  tax  benefit  of  State  of                                                                                        
      California  settlement                                                  (36,564)                                --  
    Acquisition-related  income  tax                                                                                        
      benefit                                                                              (14,806)                        (5,021)
    Income  tax  effect  of  non-GAAP                                                                                          
      adjustments                                                                      (56,857)                      (20,366)
                                                                              -----------------    -----------------  
Net  income  on  a  non-GAAP  basis                  $                  216,739    $                  138,276  
                                                                              =================    =================  
                                                                                                                                                        
*    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  (expense),  net.                                                                  
                                                                                                                                                        
Diluted  Net  Income  per  Share                                                                                                
  Reconciliation                                                                  Three  Months  Ended                    
                                                                              ------------------------------------  
                                                                              December  29,  2012    December  31,  2011  
                                                                              -----------------    -----------------  
                                                                                                        (unaudited)                          
(in  thousands,  except  per  share  data)                                                                              
Diluted  net  income  per  share  on  a  GAAP                                                                            
  basis                                                                  $                        1.10    $                        0.04  
    Amortization  of  acquired  intangibles                            0.03                              0.03  
    Stock-based  compensation  expense                                    0.05                              0.05  
    Non-qualified  deferred  compensation                                                                              
      expenses  (credits)                                                                  --                            (0.01)
    Restructuring  and  other  charges                                          --                                  --  
    Shareholder  litigation  costs                                                --                                  --  
    Executive  and  other  employee                                                                                            
      severance  costs                                                                        --                              0.01  
    Integration  and  acquisition-related                                                                              
      costs                                                                                        0.01                                  --  
    Amortization  of  debt  discount                                          0.02                              0.02  
    Other  income  or  expense  related  to                                                                                
      investments  and  non-qualified                                                                                        
      deferred  compensation  plan  assets*                            (0.02)                            0.01  
    Income  tax  benefit  of  valuation                                                                                      
      allowance  release                                                              (0.77)                                --  
    Income  tax  benefit  of  State  of                                                                                        
      California  settlement                                                      (0.13)                                --  
    Income  tax  effect  of  non-GAAP                                                                                          
      adjustments                                                                          (0.09)                            0.02  
                                                                              -----------------    -----------------  
Diluted  net  income  per  share  on  a  non-                                                                            
  GAAP  basis                                                        $                        0.20    $                        0.17  
                                                                              =================    =================  
Shares  used  in  calculation  of  diluted                                                                              
  net  income  per  share  --  GAAP**                                    286,289                        273,057  
Shares  used  in  calculation  of  diluted                                                                              
  net  income  per  share  --  non-GAAP**                            286,289                        273,057  
                                                                                                                                                        
*    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  (expense),  net.                                                                  
                                                                                                                                                        
**  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.                                    
                                                                                                                                                        
Diluted  Net  Income  per  Share                                                                                                
  Reconciliation                                                                          Years  Ended                          
                                                                              ------------------------------------  
                                                                              December  29,  2012    December  31,  2011  
                                                                              -----------------    -----------------  
                                                                                                        (unaudited)                          
(in  thousands,  except  per  share  data)                                                                              
Diluted  net  income  per  share  on  a  GAAP                                                                            
  basis                                                                  $                        1.57    $                        0.27  
    Amortization  of  acquired  intangibles                            0.10                              0.10  
    Stock-based  compensation  expense                                    0.17                              0.16  
    Non-qualified  deferred  compensation                                                                              
      expenses  (credits)                                                              0.02                                  --  
    Restructuring  and  other  charges                                          --                                  --  
    Shareholder  litigation  costs                                                --                              0.01  
    Executive  and  other  employee                                                                                            
      severance  costs                                                                        --                              0.02  
    Integration  and  acquisition-related                                                                              
      costs                                                                                        0.03                              0.01  
    Amortization  of  debt  discount                                          0.07                              0.10  
    Other  income  or  expense  related  to                                                                                
      investments  and  non-qualified                                                                                        
      deferred  compensation  plan  assets*                            (0.02)                          (0.06)
    Income  tax  benefit  of  valuation                                                                                      
      allowance  release                                                              (0.78)                                --  
    Income  tax  benefit  of  State  of                                                                                        
      California  settlement                                                      (0.13)                                --  
    Acquisition-related  income  tax                                                                                        
      benefit                                                                                  (0.05)                          (0.02)
    Income  tax  effect  of  non-GAAP                                                                                          
      adjustments                                                                          (0.21)                          (0.08)
                                                                              -----------------    -----------------  
Diluted  net  income  per  share  on  a  non-                                                                            
  GAAP  basis                                                        $                        0.77    $                        0.51  
                                                                              =================    =================  
Shares  used  in  calculation  of  diluted                                                                              
  net  income  per  share  --  GAAP**                                    280,667                        270,816  
Shares  used  in  calculation  of  diluted                                                                              
  net  income  per  share  --  non-GAAP**                            280,667                        270,816  
                                                                                                                                                        
*    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  (expense),  net.                                                                  
                                                                                                                                                        
**  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.                                    
                                                                                                                                                        
 

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