Cadence Reports Q2 Revenue Up 12% Over Q2 2005

Though Cadence management finds its non-GAAP measure is useful in evaluating the performance of Cadence's business, its reliance on this measure is limited because items excluded from such measures often have a material effect on Cadence's earnings and earnings per share calculated in accordance with GAAP. Therefore, Cadence management typically uses its non-GAAP earnings and earnings per share measures, in conjunction with GAAP earnings and earnings per share measures, to address these limitations.

Cadence believes that presenting its non-GAAP measure of earnings and earnings per share provides investors with an additional tool for evaluating the performance of the company's business, which management uses in its own evaluation of performance, and an additional base line for assessing the future earnings potential of the company. While the GAAP results are more complete, the company prefers to allow investors to have this supplemental measure since, with reconciliation to GAAP, it may provide additional insight into its financial results.

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 outlook, publicly available on its Web site.

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 Sept. 15, 2006, 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 update by the company. During the Quiet Period, Cadence representatives will not comment on Cadence's business outlook or its financial results or expectations. The Quiet Period will extend until the day when Cadence's Third Quarter 2006 Earnings Release is published, which is currently scheduled for Oct. 25, 2006.




                         Cadence Design Systems, Inc.
                    Condensed Consolidated Balance Sheets
                      July 1, 2006 and December 31, 2005
                              (In thousands)
                               (Unaudited)

                                         July 1, 2006         Dec. 31, 2005
                                         -------------        -------------

Current Assets:
  Cash and cash equivalents              $     825,863        $     861,315
  Short-term investments                        30,913               33,276
  Receivables, net of allowance for
   doubtful accounts of $9,212 and
   $10,979, respectively                       295,454              282,073
  Inventories                                   25,628               28,902
  Prepaid expenses and other                    84,091               70,736
                                         -------------        -------------
    Total current assets                     1,261,949            1,276,302

Property, plant and equipment, net of
 accumulated depreciation of $586,985
 and $549,593, respectively                    358,541              356,945
Goodwill                                     1,269,171            1,232,926
Acquired intangibles, net                      139,334              153,847
Installment contract receivables               101,025              102,748
Other assets                                   274,082              278,544
                                         -------------        -------------
Total Assets                             $   3,404,102        $   3,401,312
                                         =============        =============

Current Liabilities:
  Current portion of long-term debt      $      40,000        $      32,000
  Accounts payable and accrued
   liabilities                                 256,978              300,586
  Current portion of deferred revenue          312,257              273,265
                                         -------------        -------------
    Total current liabilities                  609,235              605,851
                                                  -------------                -------------

Long-term  Liabilities:
    Long-term  portion  of  deferred  revenue                  64,889                              51,864
    Convertible  notes                                                        420,000                            420,000
    Long-term  debt                                                                54,000                            128,000
    Other  long-term  liabilities                                    373,002                            350,893
                                                                                  -------------                -------------
        Total  long-term  liabilities                                911,891                            950,757
                                                                                  -------------                -------------

Stockholders'  Equity                                                  1,882,976                        1,844,704
                                                                                  -------------                -------------
Total  Liabilities  and  Stockholders'
  Equity                                                                    $      3,404,102                $      3,401,312
                                                                                  =============                =============


                                              Cadence  Design  Systems,  Inc.
                                  Condensed  Consolidated  Income  Statements
        For  the  Quarters  and  Six  Months  Ended  July  1,  2006  and  July  2,  2005
                                  (In  thousands,  except  per  share  amounts)
                                                                (Unaudited)

                                                                      Quarters  Ended              Six  Months  Ended
                                                                ------------------------------------------
                                                                  July  1,        July  2,        July  1,        July  2,
                                                                    2006              2005              2006              2005
                                                                ---------    ---------    ---------    ---------
Revenue:
    Product                                              $  232,143    $  201,844    $  440,265    $  375,253
    Services                                                  33,105          29,386          65,536          61,829
    Maintenance                                            93,265          89,681        180,926        176,366
                                                                ---------    ---------    ---------    ---------
        Total  revenue                                  358,513        320,911        686,727        613,448
                                                                ---------    ---------    ---------    ---------

Costs  and  Expenses:
    Cost  of  product                                    20,092          22,153          40,572          44,109
    Cost  of  services                                  23,894          23,108          47,961          46,087
    Cost  of  maintenance                            15,860          14,770          31,910          29,352
    Marketing  and  sales                            97,089          89,100        191,565        171,515
    Research  and  development                115,537          96,370        231,798        191,391
    General  and  administrative              38,986          37,633          74,027          66,738
    Amortization  of  acquired
      intangibles                                            5,026          14,677          13,376          25,288
    Restructuring  and  other
      charges                                                      (281)        13,514              (711)        31,003
    Write-off  of  acquired
      in-process  technology                                -            9,400                900            9,400
                                                                ---------    ---------    ---------    ---------
        Total  costs  and  expenses            316,203        320,725        631,398        614,883
                                                                ---------    ---------    ---------    ---------

            Income  (loss)  from
              operations                                    42,310                186          55,329          (1,435)

    Interest  expense                                  (3,381)        (1,345)        (6,921)        (2,726)
    Other  income,  net                                14,748            2,182          43,198            6,689
                                                                ---------    ---------    ---------    ---------

            Income  before  provision
              for  income  taxes  and
              cumulative  effect  of
              change  in  accounting
              principle                                      53,677            1,023          91,606            2,528

    Provision  for  income  taxes              23,289                540          39,857            1,022
                                                                ---------    ---------    ---------    ---------

    Net  income  before  cumulative
      effect  of  change  in
      accounting  principle                        30,388                483          51,749            1,506

    Cumulative  effect  of  change
      in  accounting  principle,  net
      of  tax                                                              -                    -                418                    -
                                                                ---------    ---------    ---------    ---------
            Net  income                                $    30,388    $          483    $    52,167    $      1,506
                                                                =========    =========    =========    =========

Net  income  per  share  before
  cumulative  effect  of  change  in
  accounting  principle:
        Basic                                              $        0.11    $        0.00    $        0.18    $        0.01
                                                                =========    =========    =========    =========
        Diluted                                          $        0.10    $        0.00    $        0.17    $        0.01
                                                                =========    =========    =========    =========

Net  income  per  share  after
  cumulative  effect  of  change  in
  accounting  principle:
        Basic                                              $        0.11    $        0.00    $        0.19    $        0.01
                                                                =========    =========    =========    =========
        Diluted                                          $        0.10    $        0.00    $        0.17    $        0.01
                                                                =========    =========    =========    =========

Weighted  average  common  shares
  outstanding  -  basic                            282,313        277,000        281,960        275,603
                                                                =========    =========    =========    =========

Weighted  average  common  shares
  outstanding  -  diluted                        317,000        310,822        316,048        309,506
                                                                =========    =========    =========    =========


                                              Cadence  Design  Systems,  Inc.
                            Condensed  Consolidated  Statements  of  Cash  Flows
                                                            (In  thousands)
                                                                (Unaudited)

                                                                                                                Six  Months  Ended
                                                                                                            --------------------
                                                                                                              July  1,        July  2,
                                                                                                                2006              2005
                                                                                                            ---------    ---------

Cash  and  Cash  Equivalents  at  Beginning  of  Period            $  861,315    $  448,517
                                                                                                            ---------    ---------
Cash  Flows  from  Operating  Activities:
      Net  income                                                                                        52,167            1,506
      Adjustments  to  reconcile  net  income  to  net  cash
        provided  by  operating  activities:
            Cumulative  effect  of  change  in  accounting
              principle                                                                                      (418)                  -
            Depreciation  and  amortization                                            79,544          95,405
            Stock-based  compensation                                                      56,164          18,316
            Equity  in  loss  from  investments,  net                                    600            4,704
            Gain  on  investments,  net                                                    (25,138)      (11,858)
            Write-down  of  investment  securities                                  1,001            7,106
            Write-off  of  acquired  in-process  technology                      900            9,400
            Non-cash  restructuring  and  other  charges                              82            1,874
            Tax  benefit  of  call  options                                                  2,431                    -
            Deferred  income  taxes                                                              8,293                    -
            Proceeds  from  the  sale  of  receivables                            74,016        111,452
            Recoveries  for  gains  on  trade  accounts
              receivable  and  sales  returns                                            (1,550)              (23)
            Other  non-cash  items                                                                4,898            1,628
            Changes  in  operating  assets  and  liabilities,
              net  of  effect  of  acquired  businesses:
                  Receivables                                                                          38,052          61,070
                  Inventories                                                                                690              (245)
                  Prepaid  expenses  and  other                                          (11,477)        (1,053)
                  Installment  contract  receivables                            (113,939)      (60,062)
                  Other  assets                                                                        (1,099)              265
                  Accounts  payable  and  accrued  liabilities              (68,035)      (38,737)
                  Deferred  revenue                                                                46,864          11,503
                  Other  long-term  liabilities                                          12,303        (16,269)
                                                                                                            ---------    ---------
                        Net  cash  provided  by  operating  activities      156,349        195,982
                                                                                                            ---------    ---------

Cash  Flows  from  Investing  Activities:
    Proceeds  from  sale  of  available-for-sale  securities          3,687          13,200
    Proceeds  from  sale  of  short-term  investments                                -        289,225
    Purchases  of  short-term  investments                                                  -      (180,975)
    Proceeds  from  the  sale  of  long-term  investments                20,000            5,019
    Proceeds  from  sale  of  property,  plant  and  equipment                  -          33,625
    Purchases  of  property,  plant  and  equipment                        (34,942)      (33,261)
    Purchases  of  software  licenses                                                  (6,409)                  -
    Investment  in  venture  capital  partnerships  and
      equity  investments                                                                        (2,000)        (6,934)
    Cash  paid  in  business  combinations,  net  of  cash
      acquired,  and  acquisition  of  intangibles                          (43,710)    (277,441)
                                                                                                            ---------    ---------
                      Net  cash  used  for  investing  activities              (63,374)    (157,542)
                                                                                                            ---------    ---------

Cash  Flows  from  Financing  Activities:
    Principal  payments  on  long-term  debt                                    (66,000)              (51)
    Tax  benefits  from  employee  stock  transactions                      7,173                    -
    Proceeds  from  issuance  of  common  stock                                  95,973          51,915
    Purchases  of  treasury  stock                                                    (160,830)                  -
                                                                                                            ---------    ---------
                      Net  cash  provided  by  (used  for)  financing
                        activities                                                                  (123,684)        51,864
                                                                                                            ---------    ---------

Effect  of  exchange  rate  changes  on  cash  and  cash
  equivalents                                                                                          (4,743)          4,734
                                                                                                            ---------    ---------
Increase  (decrease)  in  cash  and  cash  equivalents                (35,452)        95,038
                                                                                                            ---------    ---------
Cash  and  Cash  Equivalents  at  End  of  Period                        $  825,863    $  543,555
                                                                                                            =========    =========


                                              Cadence  Design  Systems,  Inc.
                                                        As  of  July  26,  2006
                        Impact  of  Non-GAAP  Adjustments  on  Forward  Looking
                                              Diluted  Net  Income  Per  Share
                                                                (Unaudited)

                                                                                Quarter  ended              Year  ended
                                                                            September  30,  2006  December  30,  2006
                                                                            ------------------  -----------------
                                                                                    Forecast                      Forecast
                                                                            ------------------  -----------------

Diluted  net  income  per  share  on  a
  GAAP  basis                                                        $  0.12  to  $  0.14      $  0.45  to  $  0.53

    Amortization  of  acquired
      intangibles                                                                0.04                            0.20
    Stock-based  compensation  expense                        0.07                            0.31
    Non-qualified  deferred  compensation
      expense                                                                          -                                0.01
    Integration  and  acquisition-related
      costs                                                                              -                                0.01
    Equity  in  losses  from  investments,
      gain  on  non-qualified
      deferred  compensation  plan  assets                      -                              (0.01)
    Income  tax  effect  of  non-GAAP
      adjustments                                                                0.01                            0.01

Diluted  net  income  per  share  on  a          ------------------  -----------------
  non-GAAP  basis                                                $  0.24  to  $  0.26      $  0.98  to  $  1.06
                                                                            ==================  =================


                                              Cadence  Design  Systems,  Inc.
                                                        As  of  July  26,  2006
                Impact  of  Non-GAAP  Adjustments  on  Forward  Looking  Net  Income
                                                                (Unaudited)

                                                                                Quarter  ended              Year  ended
                                                                            September  30,  2006  December  30,  2006
                                                                            ------------------  -----------------
($  in  Millions)                                                      Forecast                      Forecast
                                                                            ------------------  -----------------

Net  income  on  a  GAAP  basis                                $38  to  $45              $143  to  $167

    Amortization  of  acquired
      intangibles                                                                12                                63
    Stock-based  compensation  expense                        23                              101
    Non-qualified  deferred  compensation
      expense                                                                          -                                  5
    Restructuring  and  other  charges                            1                                  1
    Write-off  of  acquired  in-process
      technology                                                                    -                                  1
    Integration  and  acquisition-related
      costs                                                                              -                                  2
    Equity  in  losses  from  investments,
      gain  on  non-qualified
      deferred  compensation  plan  assets                      1                                (3)
    Income  tax  effect  of  non-GAAP
      adjustments                                                                  2                                  2

                                                                            ------------------  -----------------
Net  income  on  a  non-GAAP  basis                        $77  to  $84              $315  to  $339
                                                                            ==================  =================


                                              Cadence  Design  Systems,  Inc.
                                                                (Unaudited)

Revenue  Mix  by  Geography  (%  of  Total  Revenue)

                                              2004                                          2005                                2006
                              -------------------------  -----------------------    --------
GEOGRAPHY              Q1      Q2      Q3      Q4      Year  Q1      Q2      Q3      Q4    Year    Q1      Q2
                              -------------------------  -----------------------    --------
  North  America    53%    57%    55%    45%    52%    46%    49%    53%    42%    48%    51%    48%
  Europe                  16%    19%    21%    30%    22%    16%    17%    21%    20%    18%    19%    18%
  Japan                    22%    14%    15%    14%    16%    30%    25%    20%    26%    25%    21%    24%
  Asia                        9%    10%      9%    11%    10%      8%      9%      6%    12%      9%      9%    10%

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


 




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