Cadence Reports Profitable Q2 2010 Financial Results

Cadence's management believes it is useful in measuring Cadence's operations to exclude amortization of intangible assets and integration and acquisition-related costs because these costs are primarily fixed at the time of an acquisition and generally cannot be changed by Cadence's management in the short term. In addition, Cadence's management believes it is useful to exclude stock-based compensation expense because such exclusion enhances investors' ability to review Cadence's business from the same perspective as Cadence's management, which believes that stock-based compensation expense is based on many subjective inputs at a point in time and many of these inputs are not necessarily directly attributable to the underlying performance of Cadence's business operations. Cadence's management also believes it is useful to exclude costs related to shareholder litigation because these costs are not related to Cadence's core business operations. Cadence's management also believes that it is useful to exclude restructuring charges and credits. During fiscal 2009, Cadence commenced a restructuring program that it expects to complete during the first fiscal quarter of 2011. Cadence's management believes that in measuring the company's operations, it is useful to exclude any such restructuring charges and credits because exclusion of such charges and credits permits consistent evaluations of Cadence's performance before and after such actions are taken. Cadence's management believes it is useful to exclude gains or losses and expenses or credits related to the non-qualified deferred compensation plan assets because these gains or losses and expenses or credits are not part of Cadence's direct costs of operations, but reflect changes in the value of assets held in the non-qualified deferred compensation plan. Cadence's management also believes it is useful to exclude the amortization of the discount on convertible notes because this incremental cost recorded as interest expense does not represent a cash obligation of the company and is not part of Cadence's direct cost of operations. Finally, Cadence's management believes it is useful to exclude the equity in losses or income from investments, write-down of investments and gains or losses on the sale of investments because these items are not part of Cadence's direct cost of operations. Rather, these are non-operating items that are included in other income or expense and are part of the company's investment activities.

During the second quarter of fiscal 2010, Cadence's non-GAAP net income also excluded losses associated with its repurchase of a portion of its 1.375% Convertible Senior Notes Due December 15, 2011 and a portion of its 1.500% Convertible Senior Notes Due December 15, 2013. Cadence's management believes it is useful to exclude the losses on the extinguishment of debt as the losses are not directly related to Cadence's core business operations and similar transactions are not expected to occur frequently.

During the second quarter of fiscal 2010, Cadence's non-GAAP net income also excluded the impact of an income tax benefit associated with Cadence's acquisition of Denali Software, Inc. Cadence's management believes it is useful to exclude the tax benefit associated with this acquisition because Cadence does not expect an acquisition-related income tax benefit of the magnitude recorded in the second quarter of 2010 to be recorded frequently.

During the fourth quarter of fiscal 2009, Cadence's non-GAAP net loss also excluded the impact of an income tax benefit associated with the temporary increase in the net operating loss carryback period for operating losses Cadence incurred in the United States. Cadence's management believes it is useful to exclude the tax benefit associated with this change in the United States tax law because the extended net operating loss carryback period is only applicable for operating losses incurred during either fiscal 2008 or fiscal 2009.

Cadence's management believes that non-GAAP net income or net loss 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 or net loss and GAAP net income or net loss per diluted share in the calculation of non-GAAP net income or net loss and non-GAAP net income or net loss per diluted share for the periods shown below:

Net Income (Loss) Reconciliation                       Three Months Ended
                                                      --------------------
                                                       July 3,    July 4,
                                                        2010       2009
                                                      ---------  ---------
                                                          (unaudited)
(in thousands)
Net income (loss) on a GAAP basis                     $  49,369  $ (74,357)
   Amortization of acquired intangibles                   3,142      4,820
   Stock-based compensation expense                      10,435     16,507
   Non-qualified deferred compensation expenses
    (credits)                                             1,192     (1,523)
   Restructuring and other charges (credits)               (317)    18,528
   Shareholder litigation costs                           2,862          -
   Integration and acquisition-related costs              1,707        180
   Amortization of debt discount                          5,248      4,770
   Other income or expense related to investments and
    non-qualified deferred compensation plan assets*        202      2,321
   Loss on extinguishment of debt                         5,321          -
   Acquisition-related income tax benefit               (66,707)         -
   Income tax effect of non-GAAP adjustments                    5,825          15,453
                                                                                                            ---------    ---------
Net  income  (loss)  on  a  non-GAAP  basis                                  $    18,279    $  (13,301)
                                                                                                            =========    =========

*  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  (Loss)  per  Share  Reconciliation          Three  Months  Ended
                                                                                                            --------------------
                                                                                                              July  3,        July  4,
                                                                                                                2010              2009
                                                                                                            ---------    ---------
                                                                                                                    (unaudited)
(in  thousands,  except  per  share  data)
Diluted  net  income  (loss)  per  share  on  a  GAAP  basis      $        0.19    $      (0.29)
      Amortization  of  acquired  intangibles                                        0.01              0.02
      Stock-based  compensation  expense                                                0.04              0.06
      Non-qualified  deferred  compensation  expenses
        (credits)                                                                                                  -                    -
      Restructuring  and  other  charges  (credits)                                    -              0.07
      Shareholder  litigation  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*                    -              0.01
      Loss  on  extinguishment  of  debt                                                    0.02                    -
      Acquisition-related  income  tax  benefit                                  (0.25)                  -
      Income  tax  effect  of  non-GAAP  adjustments                              0.02              0.06
                                                                                                            ---------    ---------
Diluted  net  income  (loss)  per  share  on  a  non-GAAP
  basis                                                                                                $        0.07    $      (0.05)
                                                                                                            =========    =========
Shares  used  in  calculation  of  diluted  net  income
  (loss)  per  share  --GAAP**                                                            266,423        256,883
Shares  used  in  calculation  of  diluted  net  income
  (loss)  per  share  --non-GAAP**                                                    266,423        256,883


*    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  (loss)  per  share  are
      expected  to  be  the  same  as  shares  used  in  the  calculation  of  non-GAAP
      net  income  (loss)  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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