FORM 10-Q
| (Mark One) | ||||
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||
| For the quarterly period ended October 2, 2004 | ||||
| OR | ||||
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||
| For the transition period from to | ||||
| Commission file number 1-10606 | ||||
CADENCE DESIGN SYSTEMS, INC.
|
Delaware
|
77-0148231 | |
|
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer 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 |
||
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 Exchange Act). Yes X No
On October 2, 2004, 270,336,902 shares of the registrant’s common stock, $0.01 par value, were outstanding.
CADENCE DESIGN SYSTEMS, INC.
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Condensed Consolidated
Balance Sheets:
October 2, 2004 and January 3, 2004 |
3 | |||||||
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Condensed Consolidated
Statements of Operations:
Three and Nine Months Ended October 2, 2004 and September 27, 2003 |
4 | |||||||
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Condensed Consolidated
Statements of Cash Flows:
Nine Months Ended October 2, 2004 and September 27, 2003 |
5 | |||||||
| 6 | ||||||||
| 27 | ||||||||
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| 64 | ||||||||
| 66 | ||||||||
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| 67 | ||||||||
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| 68 | ||||||||
| EXHIBIT 31.01 | ||||||||
| EXHIBIT 31.02 | ||||||||
| EXHIBIT 32.01 | ||||||||
| EXHIBIT 32.02 | ||||||||
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CADENCE DESIGN SYSTEMS, INC.
ASSETS
| October 2, | January 3, | |||||||||
| 2004 | 2004 | |||||||||
|
Current Assets:
|
||||||||||
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Cash and cash equivalents
|
$ | 423,557 | $ | 384,525 | ||||||
|
Short-term investments
|
28,943 | 33,898 | ||||||||
|
Receivables, net of allowance for doubtful
accounts of $9,832 and $9,067, respectively
|
355,692 | 348,680 | ||||||||
|
Inventories
|
20,293 | 16,926 | ||||||||
|
Prepaid expenses and other
|
67,725 | 58,212 | ||||||||
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Total current assets
|
896,210 | 842,241 | ||||||||
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Property, plant and equipment, net
|
394,723 | 403,847 | ||||||||
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Goodwill
|
988,919 | 922,797 | ||||||||
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Acquired intangibles, net
|
218,869 | 237,508 | ||||||||
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Installment contract receivables, net
|
85,986 | 121,627 | ||||||||
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Other assets
|
235,259 | 289,882 | ||||||||
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Total Assets
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$ | 2,819,966 | $ | 2,817,902 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
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Current Liabilities:
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||||||||||
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Accounts payable and accrued liabilities
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$ | 244,820 | $ | 243,450 | ||||||
|
Current portion of deferred revenue
|
250,559 | 238,478 | ||||||||
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Total current liabilities
|
495,379 | 481,928 | ||||||||
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Long-Term Liabilities:
|
||||||||||
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Long-term portion of deferred revenue
|
18,019 | 16,287 | ||||||||
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Convertible notes
|
420,000 | 420,000 | ||||||||
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Other long-term liabilities
|
292,490 | 327,406 | ||||||||
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Total long-term liabilities
|
730,509 | 763,693 | ||||||||
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Stockholders’ Equity:
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||||||||||
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Common stock and capital in excess of par value
|
1,042,974 | 1,034,190 | ||||||||
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Deferred stock compensation
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(49,650 | ) | (48,856 | ) | ||||||
|
Retained earnings
|
581,033 | 566,354 | ||||||||
|
Accumulated other comprehensive income
|
19,721 | 20,593 | ||||||||
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Total stockholders’ equity
|
1,594,078 | 1,572,281 | ||||||||
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Total Liabilities and Stockholders’ Equity
|
$ | 2,819,966 | $ | 2,817,902 | ||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
3
CADENCE DESIGN SYSTEMS, INC.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| October 2, | September 27, | October 2, | September 27, | ||||||||||||||||
| 2004 | 2003 | 2004 | 2003 | ||||||||||||||||
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Revenue:
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|||||||||||||||||||
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Product
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$ | 183,030 | $ | 151,962 | $ | 503,053 | $ | 461,194 | |||||||||||
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Services
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34,447 | 33,773 | 104,064 | 100,962 | |||||||||||||||
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Maintenance
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84,104 | 83,025 | 247,267 | 246,237 | |||||||||||||||
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Total revenue
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301,581 | 268,760 | 854,384 | 808,393 | |||||||||||||||
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Costs and Expenses:
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|||||||||||||||||||
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Cost of product
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25,033 | 15,418 | 58,590 | 49,663 | |||||||||||||||
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Cost of services
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23,132 | 22,678 | 69,526 | 71,529 | |||||||||||||||
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Cost of maintenance
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12,643 | 13,266 | 39,813 | 43,399 | |||||||||||||||
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Marketing and sales
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76,736 | 80,758 | 238,131 | 246,993 | |||||||||||||||
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Research and development
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85,300 | 84,179 | 263,541 | 257,677 | |||||||||||||||
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General and administrative
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22,917 | 18,814 | 62,890 | 65,598 | |||||||||||||||
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Amortization of acquired intangibles
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12,741 | 16,357 | 44,672 | 46,263 | |||||||||||||||
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Amortization of deferred stock compensation (A)
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5,772 | 11,626 | 21,924 | 25,558 | |||||||||||||||
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Legal settlements
|
- - - - | (14,500 | ) | - - - - | (14,500 | ) | |||||||||||||
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Restructuring and other charges
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1,036 | 62,874 | 9,400 | 64,226 | |||||||||||||||
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Write-off of acquired in-process
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|||||||||||||||||||
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technology
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2,000 | 2,000 | 9,000 | 7,500 | |||||||||||||||
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Total costs and expenses
|
267,310 | 313,470 | 817,487 | 863,906 | |||||||||||||||
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Income (loss) from operations
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34,271 | (44,710 | ) | 36,897 | (55,513 | ) | |||||||||||||
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Interest expense
|
(1,564 | ) | (2,392 | ) | (4,820 | ) | (3,706 | ) | |||||||||||
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Other income (expense), net
|
(4,172 | ) | 1,208 | (10,016 | ) | (10,199 | ) | ||||||||||||
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Income (loss) before provision (benefit) for
income taxes
|
28,535 | (45,894 | ) | 22,061 | (69,418 | ) | |||||||||||||
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Provision (benefit) for income taxes
|
8,904 | (31,438 | ) | 7,382 | (36,620 | ) | |||||||||||||
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Net income (loss)
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$ | 19,631 | $ | (14,456 | ) | $ | 14,679 | $ | (32,798 | ) | |||||||||
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Basic net income (loss) per share
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$ | 0.07 | $ | (0.05 | ) | $ | 0.05 | $ | (0.12 | ) | |||||||||
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Diluted net income (loss) per share
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$ | 0.07 | $ | (0.05 | ) | $ | 0.05 | $ | (0.12 | ) | |||||||||
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Weighted average common shares outstanding
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270,509 | 266,755 | 271,514 | 267,605 | |||||||||||||||
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Weighted average common and potential common
shares outstanding – – assuming dilution
|
274,877 | 266,755 | 280,050 | 267,605 | |||||||||||||||
| (A) Amortization of deferred stock compensation would be further classified as follows: | |||||||||||||||||||
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Cost of services
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$ | 303 | $ | 1,082 | $ | 2,074 | $ | 2,781 | |||||||||||
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Marketing and sales
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1,706 | 3,082 | 5,565 | 7,322 | |||||||||||||||
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Research and development
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3,567 | 6,850 | 11,444 | 13,451 | |||||||||||||||
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General and administrative
|
196 | 612 | 2,841 | 2,004 | |||||||||||||||
| $ | 5,772 | $ | 11,626 | $ | 21,924 | $ | 25,558 | ||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4
CADENCE DESIGN SYSTEMS, INC.
| Nine Months Ended | ||||||||||||
| Restated | ||||||||||||
| October 2, | September 27, | |||||||||||
| 2004 | 2003 | |||||||||||
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Cash and Cash Equivalents at Beginning of Period
|
$ | 384,525 | $ | 371,327 | ||||||||
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Cash Flows from Operating Activities:
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||||||||||||
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Net income (loss)
|
14,679 | (32,798 | ) | |||||||||
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Adjustments to reconcile net income
(loss) to net cash provided by operating activities:
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||||||||||||
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Depreciation and amortization
|
138,510 | 143,347 | ||||||||||
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Amortization of deferred stock compensation
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21,924 | 25,558 | ||||||||||
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Equity in loss from investments, net
|
16,167 | 7,059 | ||||||||||
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Gain on sale of investments
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(7,985 | ) | - - - - | |||||||||
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Write-off of investment securities
|
2,995 | 4,785 | ||||||||||
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Write-off of acquired in-process technology
|
9,000 | 7,500 | ||||||||||
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Non-cash restructuring and other charges
|
- - - - | 19,035 | ||||||||||
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Proceeds from the sale of receivables
|
15,198 | 33,661 | ||||||||||
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Provisions for losses on trade accounts
receivable and sales returns
|
2,168 | 16,598 | ||||||||||
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Other non-cash items
|
1,008 | 3,309 | ||||||||||
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Changes in operating assets and liabilities, net
of effect of acquired businesses:
|
||||||||||||
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Receivables
|
6,411 | 69,414 | ||||||||||
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Inventories
|
(3,367 | ) | (5,527 | ) | ||||||||
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Prepaid expenses and other
|
(4,470 | ) | (11,357 | ) | ||||||||
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Installment contract receivables
|
6,514 | (74,949 | ) | |||||||||
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Other assets
|
9,022 | 20,842 | ||||||||||
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Accounts payable and accrued liabilities
|
(22,846 | ) | (74,741 | ) | ||||||||
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Deferred revenue
|
13,295 | (19,668 | ) | |||||||||
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Other long-term liabilities
|
15,721 | (21,102 | ) | |||||||||
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Net cash provided by operating activities
|
233,944 | 110,966 | ||||||||||
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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
|
3,557 | - - - - | ||||||||||
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Proceeds from the sale of long-term investments
|
6,942 | - - - - | ||||||||||
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Proceeds from sale of equipment
|
3,625 | 9,147 | ||||||||||
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Purchases of property, plant and equipment
|
(46,788 | ) | (54,998 | ) | ||||||||
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Purchases of software licenses
|
(757 | ) | (2,282 | ) | ||||||||
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Investment in venture capital partnerships and
equity investments
|
(17,353 | ) | (34,341 | ) | ||||||||
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Cash paid in business combinations, net of cash
acquired
|
(115,170 | ) | (140,854 | ) | ||||||||
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Net cash used for investing activities
|
(165,944 | ) | (223,328 | ) | ||||||||
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Cash Flows from Financing Activities:
|
||||||||||||
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Proceeds from credit facility
|
- - - - | 45,000 | ||||||||||
|
Principal payments on credit facility and capital
leases
|
(354 | ) | (98,424 | ) | ||||||||
|
Proceeds from issuance of convertible notes
|
- - - - | 420,000 | ||||||||||
|
Payment of convertible notes issuance costs
|
(1,920 | ) | (11,463 | ) | </||||||||