Cadence Reports Q4 2008 Financial Results

SAN JOSE, Calif., 04 Feb 2009 --  Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the fourth quarter and fiscal year 2008.

Cadence reported fourth quarter 2008 revenue of $227 million, compared to revenue of $458 million reported for the same period in 2007. On a GAAP basis, Cadence recognized a net loss of $1.64 billion, or $(6.57) per share on a diluted basis, in the fourth quarter of 2008, compared to net income of $120 million, or $0.41 per share on a diluted basis in the same period in 2007. Revenue for fiscal year 2008 totaled $1.04 billion, compared to revenue of $1.62 billion in fiscal year 2007. The net loss for fiscal year 2008 was $1.85 billion, or $(7.29) per share on a diluted basis, compared to net income of $296 million, or $1.01 per share on a diluted basis for fiscal year 2007. The GAAP net loss for the fourth quarter and fiscal year 2008 includes a non-cash impairment charge of $1.36 billion, related to Cadence's goodwill, intangible assets, and fixed assets. The impairment charge, which was driven by adverse economic conditions and a decline in the company's market capitalization, has no effect on the company's cash flows.

In addition to using GAAP results in evaluating Cadence's business, management believes it is useful to measure results using a non-GAAP measure of net income or net loss, which excludes, as applicable, amortization of intangible assets, stock-based compensation expense, in-process research and development charges, certain termination and legal costs, costs related to Cadence's withdrawn proposal to acquire Mentor Graphics Corporation and losses on the sale of Mentor Graphics Corporation shares, integration and acquisition-related costs, gains or losses and expenses or credits related to non-qualified deferred compensation plan assets, executive severance costs, restructuring charges and credits, losses on extinguishment of debt, equity in losses (income) from investments, write-down of investments, impairment charges related to goodwill, intangible assets and fixed assets, and losses related to the liquidation of a subsidiary. Non-GAAP net income or net loss is adjusted by the amount of additional taxes or tax benefit that the company would accrue if it used non-GAAP results instead of GAAP results to calculate the company's tax liability. See "GAAP to non-GAAP Reconciliation" below for further information on the non-GAAP measure.

Using this non-GAAP measure, net loss in the fourth quarter of 2008 was $11 million, or $(0.04) per share on a diluted basis, as compared to net income of $133 million, or $0.46 per share on a diluted basis, in the same period in 2007. For fiscal year 2008, non-GAAP net loss was $10 million, or $(0.04) per share on a diluted basis, compared to net income of $397 million and $1.35 per share on a diluted basis in fiscal year 2007.

"While Cadence faced many challenges in 2008, we continue to develop and deliver quality products for our customers. During 2008, we refreshed each of our major product platforms," said Lip-Bu Tan, President and Chief Executive Officer. "We also made a number of important decisions in 2008 to position Cadence to build long-term shareholder value. Among the most important were the transition to a 90/10 ratable model and a significant restructuring."

"We made very good progress in Q4 toward our goal of a stable 90/10 ratable model with over 85 percent of orders booked under ratable licenses," added Kevin S. Palatnik, Senior Vice President and Chief Financial Officer. "And, the restructuring we announced in November is on track."

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.

Business Outlook
For the first quarter of 2009, the company expects total revenue in the range of $200 million to $210 million. First quarter GAAP net loss per diluted share is expected to be in the range of $(0.33) to $(0.31). Net loss per diluted share using the non-GAAP measure defined below is expected to be in the range of $(0.13) to $(0.11).

For the full year 2009, the company expects total revenue in the range of $830 million to $870 million. On a GAAP basis, net loss per diluted share for fiscal 2009 is expected to be in the range of $(0.99) to $(0.87). Using the non-GAAP measure defined below, net loss per diluted share for fiscal 2009 is expected to be in the range of $(0.36) to $(0.24).

A schedule showing a reconciliation of the business outlook from GAAP net loss and diluted net loss per share to the non-GAAP net loss and diluted net loss per share is included with this release.

Audio Webcast Scheduled
Lip-Bu Tan, Cadence's President and Chief Executive Officer, and Kevin S. Palatnik, Cadence's Senior Vice President and Chief Financial Officer, will host a fourth quarter 2008 financial results audio webcast today, February 4, 2009, at 2 p.m. (Pacific) / 5 p.m. (Eastern). Attendees are asked to register at the Web site at least 10 minutes prior to the scheduled webcast. An archive of the webcast will be available starting February 4, 2009 at 5 p.m. (Pacific) and ending February 11, 2009 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/company/investor_relations.

About Cadence
Cadence enables global electronic-design innovation and plays an essential role in the creation of today's integrated circuits and electronics. Customers use Cadence® software and hardware, methodologies, and services to design and verify advanced semiconductors, consumer electronics, networking and telecommunications equipment, and computer systems. The company is headquartered in San Jose, Calif., with sales offices, design centers, and research facilities around the world to serve the global electronics industry. More information about Cadence and its products and services is available at www.cadence.com.

Click here for the Q4 2008 Financial Schedules

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:

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