FORM 10-Q
| (Mark One) | ||||
| x |
QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the quarterly period ended June 28, 2003 | ||||
| OR | ||||
| o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from to | ||||
| Commission file number 1-10606 | ||||
CADENCE DESIGN SYSTEMS, INC.
|
Delaware
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77-0148231 | |
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(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
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| 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 |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes X No
On August 2, 2003, 271,486,612 shares of the registrant’s common stock, $0.01 par value, were outstanding.
CADENCE DESIGN SYSTEMS, INC.
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PART I.
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FINANCIAL INFORMATION
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Item 1.
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Financial Statements:
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Condensed Consolidated Balance Sheets:
June 28, 2003 and December 28, 2002 |
3 | ||||||
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Condensed Consolidated Statements of
Operations:
Three and Six Months Ended June 28, 2003 and June 29, 2002 |
4 | ||||||
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Condensed Consolidated Statements of Cash
Flows:
Six Months Ended June 28, 2003 and June 29, 2002 |
5 | ||||||
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Notes to Condensed Consolidated Financial
Statements
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6 | ||||||
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Item 2.
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Management’s Discussion and Analysis of
Financial Condition and
Results of Operations |
20 | |||||
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Item 3.
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Quantitative and Qualitative Disclosures About
Market Risk
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41 | |||||
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Item 4.
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Controls and Procedures
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44 | |||||
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PART II.
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OTHER INFORMATION
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Item 1.
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Legal Proceedings
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45 | |||||
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Item 2.
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Changes in Securities and Use of Proceeds
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46 | |||||
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Item 3.
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Defaults Upon Senior Securities
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47 | |||||
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Item 4.
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Submission of Matters to a Vote of Security
Holders
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47 | |||||
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Item 5.
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Other Information
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48 | |||||
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Item 6.
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Exhibits and Reports on Form 8-K
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48 | |||||
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Signatures
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49 | ||||||
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CADENCE DESIGN SYSTEMS, INC.
ASSETS
| June 28, | December 28, | |||||||||
| 2003 | 2002 | |||||||||
| (Unaudited) | ||||||||||
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Current Assets:
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Cash and cash equivalents
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$ | 207,213 | $ | 371,327 | ||||||
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Short-term investments
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34,205 | 24,286 | ||||||||
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Receivables, net
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327,977 | 313,968 | ||||||||
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Inventories
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11,277 | 9,614 | ||||||||
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Prepaid expenses and other
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46,103 | 39,448 | ||||||||
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Total current assets
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626,775 | 758,643 | ||||||||
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Property, plant and equipment, net
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421,728 | 434,491 | ||||||||
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Acquired intangibles, net
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1,058,115 | 883,339 | ||||||||
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Installment contract receivables, net
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121,170 | 113,185 | ||||||||
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Other assets
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211,881 | 248,603 | ||||||||
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Total Assets
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$ | 2,439,669 | $ | 2,438,261 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
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Current Liabilities:
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Current portion of capital lease obligations
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$ | 933 | $ | 1,609 | ||||||
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Accounts payable and accrued liabilities
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268,020 | 297,399 | ||||||||
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Deferred revenue
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218,060 | 212,882 | ||||||||
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Total current liabilities
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487,013 | 511,890 | ||||||||
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Long-Term Liabilities:
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Long-term debt and capital lease obligations
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35,125 | 52,659 | ||||||||
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Other long-term liabilities
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285,757 | 214,407 | ||||||||
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Total long-term liabilities
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320,882 | 267,066 | ||||||||
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Stockholders’ Equity:
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Common stock and capital in excess of par value
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1,091,518 | 1,100,380 | ||||||||
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Deferred stock compensation
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(42,954 | ) | (44,426 | ) | ||||||
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Retained earnings
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580,491 | 607,460 | ||||||||
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Accumulated other comprehensive income (loss)
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2,719 | (4,109 | ) | |||||||
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Total stockholders’ equity
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1,631,774 | 1,659,305 | ||||||||
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Total Liabilities and Stockholders’ Equity
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$ | 2,439,669 | $ | 2,438,261 | ||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
3
CADENCE DESIGN SYSTEMS, INC.
| Three Months Ended | Six Months Ended | |||||||||||||||||
| June 28, | June 29, | June 28, | June 29, | |||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
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Revenue:
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Product
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$ | 160,630 | $ | 226,064 | $ | 301,912 | $ | 445,113 | ||||||||||
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Services
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34,801 | 37,026 | 67,189 | 80,292 | ||||||||||||||
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Maintenance
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81,006 | 81,730 | 163,212 | 164,129 | ||||||||||||||
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Total revenue
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276,437 | 344,820 | 532,313 | 689,534 | ||||||||||||||
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Costs and Expenses:
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Cost of product
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7,019 | 29,822 | 15,230 | 47,922 | ||||||||||||||
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Cost of services
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23,971 | 28,784 | 47,598 | 61,550 | ||||||||||||||
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Cost of maintenance
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13,929 | 17,340 | 29,004 | 33,768 | ||||||||||||||
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Marketing and sales
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85,265 | 96,170 | 168,880 | 192,951 | ||||||||||||||
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Research and development
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88,376 | 78,255 | 173,498 | 156,445 | ||||||||||||||
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General and administrative
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20,107 | 25,552 | 46,784 | 63,082 | ||||||||||||||
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Amortization of acquired intangibles
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26,017 | 19,048 | 51,303 | 37,697 | ||||||||||||||
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Amortization of deferred stock
compensation (A)
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9,517 | 7,454 | 19,137 | 10,947 | ||||||||||||||
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Restructuring and other charges
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1,352 | 55,523 | 1,352 | 73,231 | ||||||||||||||
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Write-off of acquired in-process technology
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3,800 | 27,400 | 5,500 | 27,400 | ||||||||||||||
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Total costs and expenses
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279,353 | 385,348 | 558,286 | 704,993 | ||||||||||||||
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Loss from operations
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(2,916 | ) | (40,528 | ) | (25,973 | ) | (15,459 | ) | ||||||||||
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Interest expense
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(640 | ) | (421 | ) | (1,314 | ) | (900 | ) | ||||||||||
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Other expense, net
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(6,192 | ) | (9,401 | ) | (5,284 | ) | (3,919 | ) | ||||||||||
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Loss before provision (benefit) for income
taxes
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(9,748 | ) | (50,350 | ) | (32,571 | ) | (20,278 | ) | ||||||||||
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Provision (benefit) for income taxes
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(1,895 | ) | (4,029 | ) | (5,602 | ) | 4,698 | |||||||||||
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Net loss
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$ | (7,853 | ) | $ | (46,321 | ) | $ | (26,969 | ) | $ | (24,976 | ) | ||||||
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Basic net loss per share
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$ | (0.03 | ) | $ | (0.18 | ) | $ | (0.10 | ) | $ | (0.10 | ) | ||||||
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Diluted net loss per share
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$ | (0.03 | ) | $ | (0.18 | ) | $ | (0.10 | ) | $ | (0.10 | ) | ||||||
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Weighted average common shares outstanding
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267,887 | 251,250 | 268,128 | 250,453 | ||||||||||||||
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Weighted average common and potential common
shares outstanding –– assuming dilution
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267,887 | 251,250 | 268,128 | 250,453 | ||||||||||||||
| (A) Amortization of deferred stock compensation would be further classified as follows: | ||||||||||||||||||
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Cost of services
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$ | 1,103 | $ | 467 | $ | 1,347 | $ | 771 | ||||||||||
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Marketing and sales
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2,864 | 2,681 | 6,703 | 3,888 | ||||||||||||||
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Research and development
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4,942 | 2,175 | 9,955 | 3,214 | ||||||||||||||
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General and administrative
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608 | 2,131 | 1,132 | 3,074 | ||||||||||||||
| $ | 9,517 | $ | 7,454 | $ | 19,137 | $ | 10,947 | |||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4
CADENCE DESIGN SYSTEMS, INC.
| Six Months Ended | ||||||||||||
| June 28, | June 29, | |||||||||||
| 2003 | 2002 | |||||||||||
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Cash and Cash Equivalents at Beginning of Period
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$ | 371,327 | $ | 206,311 | ||||||||
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Cash Flows from Operating Activities:
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Net loss
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(26,969 | ) | (24,976 | ) | ||||||||
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Adjustments to reconcile net loss to net cash
provided by
operating activities: |
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Depreciation and amortization
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95,215 | 99,488 | ||||||||||
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Amortization of deferred stock compensation
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19,137 | 10,947 | ||||||||||
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Net investment gain on sale, equity
(income) loss and write-down
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(152 | ) | (23,046 | ) | ||||||||
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Write-off of long-term investment securities
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5,127 | 13,400 | ||||||||||
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Write-off of acquired in-process technology
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5,500 | 27,400 | ||||||||||
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Write-off of inventory
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- - - - | 9,338 | ||||||||||
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Non-cash restructuring and other charges
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- - - - | 4,208 | ||||||||||
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Tax benefits from employee stock transactions
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- - - - | 418 | ||||||||||
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Deferred income taxes
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- - - - | 553 | ||||||||||
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Provisions for losses on trade accounts receivable
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13,582 | 5,426 | ||||||||||
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Other non-cash items
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3,249 | 2,167 | ||||||||||
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Changes in operating assets and liabilities, net
of effect of
acquired businesses: |
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Receivables
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(5,078 | ) | (49,257 | ) | ||||||||
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Proceeds from the sale of receivables
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27,880 | 138,767 | ||||||||||
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Inventories
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(1,663 | ) | 1,599 | |||||||||
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Prepaid expenses and other
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(2,859 | ) | (13,826 | ) | ||||||||
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Installment contract receivables
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(33,529 | ) | (143,944 | ) | ||||||||
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Other assets
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20,953 | (38,196 | ) | |||||||||
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Accounts payable and accrued liabilities
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(90,132 | ) | (28,118 | ) | ||||||||
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Deferred revenue
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(738 | ) | 16,411 | |||||||||
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Other long-term liabilities
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8,393 | 44,902 | ||||||||||
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Net cash provided by operating activities
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37,916 | 53,661 | ||||||||||
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Cash Flows from Investing Activities:
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Proceeds from sale and maturities of short-term
investments –– available-for-sale
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- - - - | 37,745 | ||||||||||
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Purchases of short-term
investments –– available-for-sale
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- - - - | (10,050 | ) | |||||||||
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Purchases of property, plant and equipment
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(37,460 | ) | (68,015 | ) | ||||||||
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Investment in venture capital partnerships and
equity investments
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(9,402 | ) | (5,337 | ) | ||||||||
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Net cash (paid) acquired for business
combinations and
acquired intangibles |
(104,635 | ) | 28,518 | |||||||||
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Net cash used for investing activities
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(151,497 | ) | (17,139 | ) | ||||||||
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Cash Flows from Financing Activities:
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Proceeds from credit facility
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45,000 | - - - - | ||||||||||
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Principal payments on credit facility and capital
leases
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(63,247 | ) | (710 | ) | ||||||||
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Proceeds from issuance of common stock
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28,796 | 52,419 | ||||||||||
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Purchases of stock
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(61,964 | ) | (58,154 | ) | ||||||||