x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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) |
Large accelerated filer | x | Accelerated filer | o | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | o |
Page | ||
PART I. | FINANCIAL INFORMATION | |
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II. | OTHER INFORMATION | |
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
June 29, 2013 | December 29, 2012 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 577,233 | $ | 726,357 | |||
Short-term investments | 101,251 | 100,704 | |||||
Receivables, net of allowances of $0 and $85, respectively | 92,581 | 97,821 | |||||
Inventories | 38,705 | 36,163 | |||||
2015 notes hedges | 335,131 | 303,154 | |||||
Prepaid expenses and other | 120,598 | 127,036 | |||||
Total current assets | 1,265,499 | 1,391,235 | |||||
Property, plant and equipment, net of accumulated depreciation of $623,356 and $635,450, respectively | 243,288 | 244,439 | |||||
Goodwill | 457,556 | 233,266 | |||||
Acquired intangibles, net of accumulated amortization of $115,406 and $104,351, respectively | 337,705 | 184,938 | |||||
Long-term receivables | 5,929 | 7,559 | |||||
Other assets | 253,112 | 225,566 | |||||
Total assets | $ | 2,563,089 | $ | 2,287,003 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Revolving credit facility | $ | 100,000 | $ | — | |||
Convertible notes | 458,179 | 447,011 | |||||
2015 notes embedded conversion derivative | 335,131 | 303,154 | |||||
Accounts payable and accrued liabilities | 185,809 | 171,318 | |||||
Current portion of deferred revenue | 282,784 | 295,787 | |||||
Total current liabilities | 1,361,903 | 1,217,270 | |||||
Long-term liabilities: | |||||||
Long-term portion of deferred revenue | 43,892 | 50,529 | |||||
Other long-term liabilities | 117,034 | 104,033 | |||||
Total long-term liabilities | 160,926 | 154,562 | |||||
Commitments and contingencies (Note 11) | |||||||
Stockholders’ equity: | |||||||
Common stock and capital in excess of par value | 1,744,261 | 1,721,556 | |||||
Treasury stock, at cost | (168,573 | ) | (200,786 | ) | |||
Accumulated deficit | (561,511 | ) | (649,549 | ) | |||
Accumulated other comprehensive income | 26,083 | 43,950 | |||||
Total stockholders’ equity | 1,040,260 | 915,171 | |||||
Total liabilities and stockholders’ equity | $ | 2,563,089 | $ | 2,287,003 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
Revenue: | |||||||||||||||
Product and maintenance | $ | 337,983 | $ | 297,510 | $ | 666,254 | $ | 583,798 | |||||||
Service | 24,498 | 28,966 | 50,493 | 58,508 | |||||||||||
Total revenue | 362,481 | 326,476 | 716,747 | 642,306 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of product and maintenance | 28,095 | 32,406 | 57,942 | 59,618 | |||||||||||
Cost of service | 15,148 | 17,071 | 33,492 | 36,445 | |||||||||||
Marketing and sales | 95,277 | 80,418 | 185,679 | 164,213 | |||||||||||
Research and development | 136,395 | 112,031 | 260,479 | 220,625 | |||||||||||
General and administrative | 34,441 | 30,244 | 64,251 | 58,014 | |||||||||||
Amortization of acquired intangibles | 5,327 | 3,643 | 9,118 | 7,429 | |||||||||||
Restructuring and other charges (credits) | 2,656 | 43 | 2,508 | (8 | ) | ||||||||||
Total costs and expenses | 317,339 | 275,856 | 613,469 | 546,336 | |||||||||||
Income from operations | 45,142 | 50,620 | 103,278 | 95,970 | |||||||||||
Interest expense | (9,528 | ) | (8,566 | ) | (18,790 | ) | (17,103 | ) | |||||||
Other income, net | 2,018 | 3,669 | 4,193 | 6,103 | |||||||||||
Income before provision for income taxes | 37,632 | 45,723 | 88,681 | 84,970 | |||||||||||
Provision for income taxes | 28,203 | 9,337 | 643 | 17,480 | |||||||||||
Net income | $ | 9,429 | $ | 36,386 | $ | 88,038 | $ | 67,490 | |||||||
Net income per share – basic | $ | 0.03 | $ | 0.13 | $ | 0.32 | $ | 0.25 | |||||||
Net income per share – diluted | $ | 0.03 | $ | 0.13 | $ | 0.30 | $ | 0.24 | |||||||
Weighted average common shares outstanding – basic | 277,146 | 269,739 | 276,018 | 268,840 | |||||||||||
Weighted average common shares outstanding – diluted | 294,443 | 275,318 | 293,274 | 276,526 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
Net income | $ | 9,429 | $ | 36,386 | $ | 88,038 | $ | 67,490 | |||||||
Other comprehensive loss, net of tax effects: | |||||||||||||||
Foreign currency translation loss | (11,705 | ) | (2,366 | ) | (17,867 | ) | (4,832 | ) | |||||||
Changes in unrealized holding gains or losses on available-for-sale securities, net of reclassification adjustment for realized gains and losses | (99 | ) | (1,017 | ) | (383 | ) | (1,021 | ) | |||||||
Changes in defined benefit plan liabilities | 65 | 84 | 383 | 54 | |||||||||||
Total other comprehensive loss, net of tax effects | (11,739 | ) | (3,299 | ) | (17,867 | ) | (5,799 | ) | |||||||
Comprehensive income (loss) | $ | (2,310 | ) | $ | 33,087 | $ | 70,171 | $ | 61,691 |
Six Months Ended | |||||||
June 29, 2013 | June 30, 2012 | ||||||
Cash and cash equivalents at beginning of period | $ | 726,357 | $ | 601,602 | |||
Cash flows from operating activities: | |||||||
Net income | 88,038 | 67,490 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 46,977 | 43,736 | |||||
Amortization of debt discount and fees | 12,625 | 11,529 | |||||
Stock-based compensation | 28,921 | 21,886 | |||||
Gain on investments, net | (2,477 | ) | (4,169 | ) | |||
Deferred income taxes | (4,413 | ) | 459 | ||||
Other non-cash items | 433 | 3,564 | |||||
Changes in operating assets and liabilities, net of effect of acquired businesses: | |||||||
Receivables | 8,719 | 16,513 | |||||
Inventories | (2,672 | ) | 499 | ||||
Prepaid expenses and other | 26,516 | 414 | |||||
Other assets | (45,274 | ) | (169 | ) | |||
Accounts payable and accrued liabilities | 10,023 | (4,694 | ) | ||||
Deferred revenue | (24,359 | ) | (27,446 | ) | |||
Other long-term liabilities | 7,174 | (1,424 | ) | ||||
Net cash provided by operating activities | 150,231 | 128,188 | |||||
Cash flows from investing activities: | |||||||
Purchases of available-for-sale securities | (63,705 | ) | (49,083 | ) | |||
Proceeds from the sale of available-for-sale securities | 46,857 | 136 | |||||
Proceeds from the maturity of available-for-sale securities | 15,716 | — | |||||
Proceeds from the sale of long-term investments | 6,102 | 44 | |||||
Purchases of property, plant and equipment | (23,739 | ) | (18,269 | ) | |||
Investment in venture capital partnerships and equity investments | — | (250 | ) | ||||
Cash paid in business combinations and asset acquisitions, net of cash acquired | (392,139 | ) | (1,041 | ) | |||
Net cash used for investing activities | (410,908 | ) | (68,463 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from revolving credit facility | 100,000 | — | |||||
Principal payments on receivable financing | (2,526 | ) | (2,907 | ) | |||
Payment of acquisition-related contingent consideration | (582 | ) | (39 | ) | |||
Tax effect related to employee stock transactions allocated to equity | 7,300 | 4,075 | |||||
Proceeds from issuance of common stock | 30,227 | 13,063 | |||||
Stock received for payment of employee taxes on vesting of restricted stock | (11,758 | ) | (9,897 | ) | |||
Net cash provided by financing activities | 122,661 | 4,295 | |||||
Effect of exchange rate changes on cash and cash equivalents | (11,108 | ) | (3,964 | ) | |||
Increase (decrease) in cash and cash equivalents | (149,124 | ) | 60,056 | ||||
Cash and cash equivalents at end of period | $ | 577,233 | $ | 661,658 | |||
Supplemental cash flow information: | |||||||
Interest paid | $ | 6,294 | $ | 5,677 | |||
Income taxes paid, including foreign withholding tax | $ | 6,598 | $ | 9,801 | |||
Non-cash investing and financing activities: | |||||||
Stock options assumed for acquisition | $ | 529 | $ | — | |||
Available-for-sale securities received from customer | $ | 232 | $ | 15 |
June 29, 2013 | December 29, 2012 | ||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Principal | Unamortized Discount | Carrying Value | Principal | Unamortized Discount | Carrying Value | ||||||||||||||||||
2015 Notes | $ | 350,000 | $ | (33,320 | ) | $ | 316,680 | $ | 350,000 | $ | (41,181 | ) | $ | 308,819 | |||||||||
2013 Notes | 144,461 | (3,140 | ) | 141,321 | 144,461 | (6,447 | ) | 138,014 | |||||||||||||||
2023 Notes | 178 | — | 178 | 178 | — | 178 | |||||||||||||||||
Revolving credit facility | 100,000 | — | 100,000 | — | — | — | |||||||||||||||||
Total outstanding debt | $ | 594,639 | $ | (36,460 | ) | $ | 558,179 | $ | 494,639 | $ | (47,628 | ) | $ | 447,011 |
2015 Notes | ||
(In thousands, except percentages and per share amounts) | ||
Outstanding principal maturity value – at June 29, 2013 | $350,000 | |
Contractual interest rate | 2.625% | |
Contractual maturity date | June 1, 2015 | |
Initial conversion rate | 132.5205 shares of common stock per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $7.55 per share of Cadence common stock. | |
Conversion feature (in addition to principal amount payable in cash) | Cash to the extent Cadence’s stock price exceeds approximately $7.55 per share, calculated based on the applicable conversion rate multiplied by the volume weighted average price of Cadence common stock over a specified period. | |
Early conversion conditions (or the Early Conversion Conditions) | • Closing stock price greater than $9.81 for at least 20 of the last 30 trading days in a fiscal quarter (convertible only for subsequent quarter); • Specified corporate transactions; or • Note trading price falls below a calculated minimum. | |
Conversion immediately preceding maturity | From March 1, 2015 until the second trading day immediately preceding the maturity date, holders may convert their 2015 Notes at any time into cash as described above under “Conversion feature.” | |
Redemption at Cadence’s option prior to maturity | None. | |
Fundamental change put right | Upon certain fundamental corporate changes prior to maturity, the 2015 Note holders could require Cadence to repurchase their notes for cash equal to the principal amount of the notes plus accrued interest. | |
Make-whole premium | Upon certain fundamental changes prior to maturity, if Cadence’s stock price were between $6.16 and $40.00 per share at that time, the 2015 Note holders would be entitled to an increase to the conversion rate. This is referred to as a “make-whole premium.” | |
Financial covenants | None. |
Three Months Ended | Six Months Ended | ||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
(In thousands, except percentages) | |||||||||||||||
Effective interest rate | 8.1 | % | 8.1 | % | 8.1 | % | 8.1 | % | |||||||
Contractual interest expense | $ | 2,289 | $ | 2,289 | $ | 4,578 | $ | 4,578 | |||||||
Amortization of debt discount | $ | 3,951 | $ | 3,638 | $ | 7,861 | $ | 7,231 |
2013 Notes | ||
(In thousands, except percentages and per share amounts) | ||
Principal maturity value – at issuance | $250,000 | |
Outstanding principal maturity value – at June 29, 2013 | $144,461 | |
Contractual interest rate | 1.500% | |
Contractual maturity date | December 15, 2013 | |
Equity component - included in common stock - at June 29, 2013 and December 29, 2012 | $63,027 | |
Initial conversion rate | 47.2813 shares of common stock per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $21.15 per share of Cadence common stock. | |
Conversion feature (in addition to principal amount payable in cash) | Shares to the extent Cadence’s stock price exceeds $21.15 per share, calculated based on the applicable conversion rate multiplied by the volume weighted average price of Cadence common stock over a specified period. | |
Early conversion conditions (or the Early Conversion Conditions) | • Closing stock price greater than $27.50 for at least 20 of the last 30 trading days in a calendar quarter (convertible only for subsequent quarter); • Specified corporate transactions; or • Note trading price falls below calculated minimum. | |
Conversion immediately preceding maturity | From November 1, 2013, and until the trading day immediately preceding the maturity date, holders may convert their 2013 Notes at any time into cash and Cadence shares as described above under “Conversion feature.” | |
Redemption at Cadence’s option prior to maturity | None. | |
Fundamental change put right | Upon a fundamental change prior to maturity, the 2013 Note holders could require Cadence to repurchase their notes for cash equal to the principal amount of the notes plus accrued interest. | |
Make-whole premium | Upon certain fundamental changes, prior to maturity, if Cadence’s stock price were between $18.00 and $60.00 per share at that time, the 2013 Note holders would be entitled to an increase to the conversion rate. This is referred to as a “make-whole premium.” | |
Financial covenants | None. |
Three Months Ended | Six Months Ended | ||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
(In thousands, except percentages) | |||||||||||||||
Effective interest rate | 6.4 | % | 6.4 | % | 6.4 | % | 6.4 | % | |||||||
Contractual interest expense | $ | 540 | $ | 540 | $ | 1,080 | $ | 1,080 | |||||||
Amortization of debt discount | $ | 1,657 | $ | 1,547 | $ | 3,307 | $ | 3,086 |
(In thousands) | |||||||||||
Tensilica | Cosmic | Other | |||||||||
Cash and cash equivalents | $ | 26,331 | $ | 1,724 | 149 | ||||||
Trade receivables | 4,454 | 668 | — | ||||||||
Property, plant and equipment | 1,938 | 185 | 91 | ||||||||
Other assets | 46,832 | 1,681 | — | ||||||||
Acquired intangibles: | |||||||||||
Existing technology | 102,000 | 16,300 | 2,014 | ||||||||
Agreements and relationships | 33,000 | 5,100 | 1,667 | ||||||||
Tradenames and trademarks | 3,000 | — | — | ||||||||
In-process technology | 5,300 | 4,200 | 1,200 | ||||||||
Goodwill | 176,461 | 41,911 | 9,587 | ||||||||
Total assets acquired | $ | 399,316 | $ | 71,769 | $ | 14,708 | |||||
Deferred revenue | (8,100 | ) | (129 | ) | — | ||||||
Other liabilities | (4,959 | ) | (1,982 | ) | (277 | ) | |||||
Long-term deferred tax liabilities | (40,147 | ) | (8,428 | ) | — | ||||||
Net assets acquired | $ | 346,110 | $ | 61,230 | $ | 14,431 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
(In thousands) | |||||||||||||||
Total revenue | $ | 364,870 | $ | 333,840 | $ | 729,353 | $ | 656,171 | |||||||
Net income | $ | 25,998 | $ | 22,032 | $ | 96,429 | $ | 38,100 |
Gross Carrying Amount | |||
(In thousands) | |||
Balance as of December 29, 2012 | $ | 233,266 | |
Goodwill resulting from acquisitions | 227,959 | ||
Effect of foreign currency translation | (3,669 | ) | |
Balance as of June 29, 2013 | $ | 457,556 |
Gross Carrying Amount | Accumulated Amortization | Acquired Intangibles, Net | |||||||||
(In thousands) | |||||||||||
Existing technology | $ | 231,562 | $ | (39,088 | ) | $ | 192,474 | ||||
Agreements and relationships | 171,550 | (44,018 | ) | 127,532 | |||||||
Distribution rights | 30,100 | (30,100 | ) | — | |||||||
Tradenames, trademarks and patents | 9,519 | (2,200 | ) | 7,319 | |||||||
In-process technology | 10,380 | — | 10,380 | ||||||||
Total acquired intangibles | $ | 453,111 | $ | (115,406 | ) | $ | 337,705 |
Gross Carrying Amount | Accumulated Amortization | Acquired Intangibles, Net | |||||||||
(In thousands) | |||||||||||
Existing technology | $ | 112,940 | $ | (30,171 | ) | $ | 82,769 | ||||
Agreements and relationships | 133,764 | (37,769 | ) | 95,995 | |||||||
Distribution rights | 30,100 | (28,595 | ) | 1,505 | |||||||
Tradenames, trademarks and patents | 12,485 | (7,816 | ) | 4,669 | |||||||
Total acquired intangibles | $ | 289,289 | $ | (104,351 | ) | $ | 184,938 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
(In thousands) | |||||||||||||||
Cost of product and maintenance | $ | 5,760 | $ | 2,891 | $ | 9,567 | $ | 5,790 | |||||||
Amortization of acquired intangibles | 5,327 | 3,643 | 9,118 | 7,429 | |||||||||||
Total amortization of acquired intangibles | $ | 11,087 | $ | 6,534 | $ | 18,685 | $ | 13,219 |
(In thousands) | |||
2013 – remaining period | $ | 24,531 | |
2014 | 50,152 | ||
2015 | 49,590 | ||
2016 | 43,854 | ||
2017 | 40,236 | ||
Thereafter | 129,342 | ||
Total estimated amortization expense | $ | 337,705 |
• | Federal, state and foreign tax expense on anticipated fiscal 2013 income; and |
• | Tax expense related to integrating the acquisitions; |
• | A tax benefit of $33.7 million from the release of an uncertain tax position recorded in a previous business combination and the release of related interest and penalties; and |
• | A tax benefit of $5.9 million for the fiscal 2012 federal research tax credit that was retroactively enacted. |
Unrecognized tax benefits | |||
(In thousands) | |||
Unrecognized tax benefits as of December 29, 2012 | $ | 92,378 | |
Gross amount of the increases (decreases) in unrecognized tax benefits of tax positions taken during a prior year | 1,025 | ||
Gross amount of the increases (decreases) in unrecognized tax benefits as a result of tax positions taken during the current year | 13,262 | ||
Amount of decreases in unrecognized tax benefits relating to settlements with taxing authorities, including the utilization of tax attributes | (13,635 | ) | |
Reductions to unrecognized tax benefits resulting from the lapse of the applicable statute of limitations | (12,044 | ) | |
Effect of foreign currency translation | 155 | ||
Unrecognized tax benefits as of June 29, 2013 | $ | 81,141 | |
Total amounts of unrecognized tax benefits that, if upon resolution of the uncertain tax positions would reduce Cadence's effective tax rate as of June 29, 2013 | 45,127 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
(In thousands) | |||||||||||||||
Interest | $ | (14 | ) | $ | 1,194 | $ | (13,459 | ) | $ | 1,763 | |||||
Penalties | 1,347 | (6 | ) | (6,959 | ) | (975 | ) |
As of | |||||||
June 29, 2013 | December 29, 2012 | ||||||
(In thousands) | |||||||
Interest | $ | 3,096 | $ | 24,427 | |||
Penalties | 1,964 | 8,953 |
As of | |||||||
June 29, 2013 | December 29, 2012 | ||||||
(In thousands) | |||||||
Accounts receivable | $ | 66,966 | $ | 67,259 | |||
Installment contract receivables, short-term | 25,615 | 30,647 | |||||
Long-term receivables | 5,929 | 7,559 | |||||
Total receivables | $ | 98,510 | $ | 105,465 | |||
Less allowance for doubtful accounts | — | (85 | ) | ||||
Total receivables, net | $ | 98,510 | $ | 105,380 |
• | Level 1 – Quoted prices for identical instruments in active markets; |
• | Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and |
• | Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Fair Value Measurements as of June 29, 2013: | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
(In thousands) | |||||||||||||||
Assets | |||||||||||||||
Cash equivalents: | |||||||||||||||
Money market funds | $ | 403,153 | $ | 403,153 | $ | — | $ | — | |||||||
Corporate debt securities | 501 | — | 501 | — | |||||||||||
Short-term investments: | |||||||||||||||
Corporate debt securities | 34,205 | — | 34,205 | — | |||||||||||
Bank certificates of deposit | 26,215 | — | 26,215 | — | |||||||||||
United States Treasury securities | 25,856 | 25,856 | — | — | |||||||||||
United States government agency securities | 11,223 | 11,223 | — | — | |||||||||||
Commercial paper | 1,797 | — | 1,797 | — | |||||||||||
Marketable equity securities | 1,955 | 1,955 | — | — | |||||||||||
Trading securities held in Non-Qualified Deferred Compensation, or NQDC, trust | 21,472 | 21,472 | — | — | |||||||||||
2015 Notes Hedges | 335,131 | — | 335,131 | — | |||||||||||
Total Assets | $ | 861,508 | $ | 463,659 | $ | 397,849 | $ | — | |||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
(In thousands) | |||||||||||||||
Liabilities | |||||||||||||||
Acquisition-related contingent consideration | $ | 3,832 | $ | — | $ | — | $ | 3,832 | |||||||
2015 Notes Embedded Conversion Derivative | 335,131 | — | 335,131 | — | |||||||||||
Foreign currency exchange contracts | $ | 1,498 | $ | — | $ | 1,498 | $ | — | |||||||
Total Liabilities | $ | 340,461 | $ | — | $ | 336,629 | $ | 3,832 | |||||||
Fair Value Measurements as of December 29, 2012: | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
(In thousands) | |||||||||||||||
Assets | |||||||||||||||
Cash equivalents: | |||||||||||||||
Money market funds | $ | 566,334 | $ | 566,334 | $ | — | $ | — | |||||||
Short-term investments: | |||||||||||||||
Corporate debt securities | 31,359 | — | 31,359 | — | |||||||||||
Bank certificates of deposit | 27,826 | — | 27,826 | — | |||||||||||
United States Treasury securities | 23,239 | 23,239 | — | — | |||||||||||
United States government agency securities | 10,258 | 10,258 | — | — | |||||||||||
Commercial paper | 5,783 | — | 5,783 | — | |||||||||||
Marketable equity securities | 2,239 | 2,239 | — | — | |||||||||||
Trading securities held in NQDC trust | 24,329 | 24,329 | — | — | |||||||||||
2015 Notes Hedges | 303,154 | — | 303,154 | — | |||||||||||
Foreign currency exchange contracts | 1,737 | — | 1,737 | — | |||||||||||
Total Assets | $ | 996,258 | $ | 626,399 | $ | 369,859 | $ | — | |||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
(In thousands) | |||||||||||||||
Liabilities | |||||||||||||||
Acquisition-related contingent consideration | $ | 4,218 | $ | — | $ | — | $ | 4,218 | |||||||
2015 Notes Embedded Conversion Derivative | 303,154 | — | 303,154 | — | |||||||||||
Total Liabilities | $ | 307,372 | $ | — | $ | 303,154 | $ | 4,218 |
(In thousands) | |||
Balance as of December 29, 2012 | $ | 4,218 | |
Payments | (740 | ) | |
Adjustments | 354 | ||
Balance as of June 29, 2013 | $ | 3,832 |
As of | |||||||
June 29, 2013 | December 29, 2012 | ||||||
(In thousands) | |||||||
Cash and cash equivalents | $ | 577,233 | $ | 726,357 | |||
Short-term investments | 101,251 | 100,704 | |||||
Cash, cash equivalents and short-term investments | $ | 678,484 | $ | 827,061 |
As of | |||||||
June 29, 2013 | December 29, 2012 | ||||||
(In thousands) | |||||||
Cash and interest bearing deposits | $ | 173,579 | $ | 160,023 | |||
Money market funds | 403,153 | 566,334 | |||||
Corporate debt securities | 501 | — | |||||
Total cash and cash equivalents | $ | 577,233 | $ | 726,357 |
As of June 29, 2013 | |||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
(In thousands) | |||||||||||||||
Corporate debt securities | $ | 34,228 | $ | 25 | $ | (48 | ) | $ | 34,205 | ||||||
Bank certificates of deposit | 26,200 | 16 | (1 | ) | 26,215 | ||||||||||
United States Treasury securities | 25,846 | 22 | (12 | ) | 25,856 | ||||||||||
United States government agency securities | 11,218 | 9 | (4 | ) | 11,223 | ||||||||||
Commercial paper | 1,793 | 4 | — | 1,797 | |||||||||||
Marketable debt securities | 99,285 | 76 | (65 | ) | 99,296 | ||||||||||
Marketable equity securities | 1,817 | 138 | — | 1,955 | |||||||||||
Total short-term investments | $ | 101,102 | $ | 214 | $ | (65 | ) | $ | 101,251 |
As of December 29, 2012 | |||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
(In thousands) | |||||||||||||||
Corporate debt securities | $ | 31,313 | $ | 57 | $ | (11 | ) | $ | 31,359 | ||||||
Bank certificates of deposit | 27,805 | 21 | — | 27,826 | |||||||||||
United States Treasury securities | 23,213 | 26 | — | 23,239 | |||||||||||
United States government agency securities | 10,245 | 13 | — | 10,258 | |||||||||||
Commercial paper | 5,777 | 6 | — | 5,783 | |||||||||||
Marketable debt securities | 98,353 | 123 | (11 | ) | 98,465 | ||||||||||
Marketable equity securities | 1,817 | 422 | — | 2,239 | |||||||||||
Total short-term investments | $ | 100,170 | $ | 545 | $ | (11 | ) | $ | 100,704 |
Amortized Cost | Fair Value | ||||||
(In thousands) | |||||||
Due in less than one year | $ | 54,133 | $ | 54,160 | |||
Due in one to three years | 45,152 | 45,136 | |||||
Total marketable debt securities included in short-term investments | $ | 99,285 | $ | 99,296 |
As of | |||||||
June 29, 2013 | December 29, 2012 | ||||||
(In thousands) | |||||||
Cost method | $ | 3,038 | $ | 3,038 | |||
Equity method | 3,708 | 4,249 | |||||
Total non-marketable investments | $ | 6,746 | $ | 7,287 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
(In thousands) | (In thousands) | ||||||||||||||
Gains on sale of non-marketable investments | $ | — | $ | — | $ | 1,190 | $ | — |
Three Months Ended | Six Months Ended | ||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
(In thousands, except per share amounts) | |||||||||||||||
Net income | $ | 9,429 | $ | 36,386 | $ | 88,038 | $ | 67,490 | |||||||
Weighted average common shares used to calculate basic net income per share | 277,146 | 269,739 | 276,018 | 268,840 | |||||||||||
2023 Notes | 11 | 11 | 11 | 11 | |||||||||||
2015 Warrants | 10,871 | 637 | 10,770 | 1,580 | |||||||||||
Share-based awards | 6,415 | 4,931 | 6,475 | 6,095 | |||||||||||
Weighted average common shares used to calculate diluted net income per share | 294,443 | 275,318 | 293,274 | 276,526 | |||||||||||
Net income per share - basic | $ | 0.03 | $ | 0.13 | $ | 0.32 | $ | 0.25 | |||||||
Net income per share - diluted | $ | 0.03 | $ | 0.13 | $ | 0.30 | $ | 0.24 |
Three Months Ended | Six Months Ended | ||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||
(In thousands) | |||||||||||
2013 Warrants | 6,830 | 6,830 | 6,830 | 6,830 | |||||||
Options to purchase shares of common stock | 5,752 | 14,228 | 6,253 | 14,149 | |||||||
Non-vested shares of restricted stock | 18 | 203 | 9 | 118 | |||||||
Total potential common shares excluded | 12,600 | 21,261 | 13,092 | 21,097 |
As of | |||||||
June 29, 2013 | December 29, 2012 | ||||||
(In thousands) | |||||||
Foreign currency translation gain | $ | 30,786 | $ | 48,653 | |||
Changes in defined benefit plan liabilities | (4,846 | ) | (5,229 | ) | |||
Unrealized holding gains on available-for-sale securities | 143 | 526 | |||||
Total accumulated other comprehensive income | $ | 26,083 | $ | 43,950 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
(In thousands) | |||||||||||||||
Interest income | $ | 484 | $ | 308 | $ | 909 | $ | 645 | |||||||
Gains on sale of non-marketable equity investments | — | — | 1,190 | — | |||||||||||
Gains on securities in NQDC trust | 1,699 | 2,278 | 1,851 | 4,076 | |||||||||||
Gains on foreign exchange | 223 | 1,070 | 987 | 1,170 | |||||||||||
Other income (expense), net | (388 | ) | 13 | (744 | ) | 212 | |||||||||
Total other income, net | $ | 2,018 | $ | 3,669 | $ | 4,193 | $ | 6,103 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
(In thousands) | |||||||||||||||
Americas: | |||||||||||||||
United States | $ | 159,229 | $ | 142,925 | $ | 308,400 | $ | 273,380 | |||||||
Other Americas | 5,566 | 5,802 | 10,181 | 13,926 | |||||||||||
Total Americas | 164,795 | 148,727 | 318,581 | 287,306 | |||||||||||
Europe, Middle East and Africa | 77,757 | 64,996 | 156,677 | 124,705 | |||||||||||
Japan | 45,467 | 53,880 | 98,941 | 110,099 | |||||||||||
Asia | 74,462 | 58,873 | 142,548 | 120,196 | |||||||||||
Total | $ | 362,481 | $ | 326,476 | $ | 716,747 | $ | 642,306 |
As of | |||||||
June 29, 2013 | December 29, 2012 | ||||||
(In thousands) | |||||||
Americas: | |||||||
United States | $ | 211,521 | $ | 214,711 | |||
Other Americas | 309 | 185 | |||||
Total Americas | 211,830 | 214,896 | |||||
Europe, Middle East and Africa | 5,682 | 5,410 | |||||
Japan | 1,015 | 1,649 | |||||
Asia | 24,761 | 22,484 | |||||
Total | $ | 243,288 | $ | 244,439 |
• | Functional Verification, Hardware and IP; |
• | Custom IC Design; |
• | Digital IC Design; |
• | System Interconnect Design; and |
• | Design for Manufacturing, or DFM. |
• | An increase in our product and maintenance revenue, primarily because of increased business levels and increased revenue recognized from bookings in prior periods; |
• | An increase in employee-related costs, primarily consisting of incremental costs related to employees added from our fiscal 2013 and fiscal 2012 acquisitions and costs related to hiring additional employees; and |
• | An increase in variable compensation due to increased revenue, bookings and operating performance. |
Three Months Ended | Change | |||||||||||||
June 29, 2013 | June 30, 2012 | Amount | Percentage | |||||||||||
(In millions, except percentages) | ||||||||||||||
Product and maintenance | $ | 338.0 | $ | 297.5 | $ | 40.5 | 14 | % | ||||||
Services | 24.5 | 29.0 | (4.5 | ) | (15 | )% | ||||||||
Total revenue | $ | 362.5 | $ | 326.5 | $ | 36.0 | 11 | % |
Six Months Ended | Change | |||||||||||||
June 29, 2013 | June 30, 2012 | Amount | Percentage | |||||||||||
(In millions, except percentages) | ||||||||||||||
Product and maintenance | $ | 666.3 | $ | 583.8 | $ | 82.5 | 14 | % | ||||||
Services | 50.5 | 58.5 | (8.0 | ) | (14 | )% | ||||||||
Total revenue | $ | 716.8 | $ | 642.3 | $ | 74.5 | 12 | % |
Three Months Ended | ||||||||||||||
June 29, 2013 | March 30, 2013 | December 29, 2012 | September 29, 2012 | June 30, 2012 | ||||||||||
Functional Verification, Hardware and IP | 28 | % | 26 | % | 30 | % | 30 | % | 33 | % | ||||
Digital IC Design | 23 | % | 25 | % | 23 | % | 23 | % | 22 | % | ||||
Custom IC Design | 25 | % | 25 | % | 24 | % | 24 | % | 22 | % | ||||
System Interconnect Design | 11 | % | 10 | % | 9 | % | 9 | % | 8 | % | ||||
Design for Manufacturing | 6 | % | 7 | % | 6 | % | 6 | % | 6 | % | ||||
Services and other | 7 | % | 7 | % | 8 | % | 8 | % | 9 | % | ||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
Three Months Ended | Change | |||||||||||||
June 29, 2013 | June 30, 2012 | Amount | Percentage | |||||||||||
(In millions, except percentages) | ||||||||||||||
United States | $ | 159.2 | $ | 142.9 | $ | 16.3 | 11 | % | ||||||
Other Americas | 5.6 | 5.8 | (0.2 | ) | (3 | )% | ||||||||
Europe, Middle East and Africa | 77.8 | 65.0 | 12.8 | 20 | % | |||||||||
Japan | 45.5 | 53.9 | (8.4 | ) | (16 | )% | ||||||||
Asia | 74.5 | 58.9 | 15.6 | 26 | % | |||||||||
Total revenue | $ | 362.5 | $ | 326.5 | $ | 36.1 | 11 | % |
Six Months Ended | Change | |||||||||||||
June 29, 2013 | June 30, 2012 | Amount | Percentage | |||||||||||
(In millions, except percentages) | ||||||||||||||
United States | $ | 308.4 | $ | 273.4 | $ | 35.0 | 13 | % | ||||||
Other Americas | 10.2 | 13.9 | (3.7 | ) | (27 | )% | ||||||||
Europe, Middle East and Africa | 156.7 | 124.7 | 32.0 | 26 | % | |||||||||
Japan | 98.9 | 110.1 | (11.2 | ) | (10 | )% | ||||||||
Asia | 142.5 | 120.2 | 22.3 | 19 | % | |||||||||
Total revenue | $ | 716.7 | $ | 642.3 | $ | 74.4 | 12 | % |
Three Months Ended | Six Months Ended | ||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||
United States | 44 | % | 44 | % | 43 | % | 43 | % | |||
Other Americas | 1 | % | 2 | % | 1 | % | 2 | % | |||
Europe, Middle East and Africa | 21 | % | 20 | % | 22 | % | 19 | % | |||
Japan | 13 | % | 16 | % | 14 | % | 17 | % | |||
Asia | 21 | % | 18 | % | 20 | % | 19 | % | |||
Total | 100 | % | 100 | % | 100 | % | 100 | % |
Three Months Ended | Change | |||||||||||||
June 29, 2013 | June 30, 2012 | Amount | Percentage | |||||||||||
(In millions, except percentages) | ||||||||||||||
Product and maintenance | $ | 28.1 | $ | 32.4 | $ | (4.3 | ) | (13 | )% | |||||
Services | 15.1 | 17.1 | (2.0 | ) | (12 | )% |
Six Months Ended | Change | |||||||||||||
June 29, 2013 | June 30, 2012 | Amount | Percentage | |||||||||||
(In millions, except percentages) | ||||||||||||||
Product and maintenance | $ | 57.9 | $ | 59.6 | $ | (1.7 | ) | (3 | )% | |||||
Services | 33.5 | 36.4 | (2.9 | ) | (8 | )% |
Three Months Ended | Six Months Ended | ||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||
Product and maintenance | 8 | % | 11 | % | 9 | % | 10 | % | |||
Services | 62 | % | 59 | % | 66 | % | 62 | % |
Three Months Ended | Change | |||||||||||||
June 29, 2013 | June 30, 2012 | Amount | Percentage | |||||||||||
(In millions, except percentages) | ||||||||||||||
Product and maintenance-related costs | $ | 22.3 | 29.5 | $ | (7.2 | ) | (24 | )% | ||||||
Amortization of acquired intangibles | 5.8 | 2.9 | 2.9 | 100 | % | |||||||||
Total cost of product and maintenance | $ | 28.1 | $ | 32.4 | $ | (4.3 | ) | (13 | )% |
Six Months Ended | Change | |||||||||||||
June 29, 2013 | June 30, 2012 | Amount | Percentage | |||||||||||
(In millions, except percentages) | ||||||||||||||
Product and maintenance-related costs | $ | 48.3 | 53.8 | $ | (5.5 | ) | (10 | )% | ||||||
Amortization of acquired intangibles | 9.6 | 5.8 | 3.8 | 66 | % | |||||||||
Total cost of product and maintenance | $ | 57.9 | $ | 59.6 | $ | (1.7 | ) | (3 | )% |
Three Months Ended | Change | |||||||||||||
June 29, 2013 | June 30, 2012 | Amount | Percentage | |||||||||||
(In millions, except percentages) | ||||||||||||||
Marketing and sales | $ | 95.3 | $ | 80.4 | $ | 14.9 | 19 | % | ||||||
Research and development | 136.4 | 112.0 | 24.4 | 22 | % | |||||||||
General and administrative | 34.4 | 30.2 | 4.2 | 14 | % | |||||||||
Operating expenses | $ | 266.1 | $ | 222.6 | $ | 43.5 | 20 | % |
Six Months Ended | Change | |||||||||||||
June 29, 2013 | June 30, 2012 | Amount | Percentage | |||||||||||
(In millions, except percentages) | ||||||||||||||
Marketing and sales | $ | 185.7 | $ | 164.2 | $ | 21.5 | 13 | % | ||||||
Research and development | 260.5 | 220.6 | 39.9 | 18 | % | |||||||||
General and administrative | 64.3 | 58.0 | 6.3 | 11 | % | |||||||||
Operating expenses | $ | 510.5 | $ | 442.8 | $ | 67.7 | 15 | % |
Three Months Ended | Six Months Ended | ||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||
Marketing and sales | 26 | % | 25 | % | 26 | % | 26 | % | |||
Research and development | 38 | % | 34 | % | 36 | % | 34 | % | |||
General and administrative | 10 | % | 9 | % | 9 | % | 9 | % | |||
Operating expenses | 74 | % | 68 | % | 71 | % | 69 | % |
Change | |||||||
Three Months Ended | Six Months Ended | ||||||
(In millions) | |||||||
Salary, benefits and other employee-related costs | $ | 12.2 | $ | 18.4 | |||
Stock-based compensation | 1.2 | 1.7 | |||||
Other items | 1.5 | 1.4 | |||||
$ | 14.9 | $ | 21.5 |
Change | |||||||
Three Months Ended | Six Months Ended | ||||||
(In millions) | |||||||
Salary, benefits and other employee-related costs | $ | 19.0 | $ | 29.7 | |||
Stock-based compensation | 3.0 | 4.6 | |||||
Facilities and other infrastructure costs | 2.8 | 3.4 | |||||
Professional services | 1.1 | 3.1 | |||||
Other items | (1.5 | ) | (0.9 | ) | |||
$ | 24.4 | $ | 39.9 |
Change | |||||||
Three Months Ended | Six Months Ended | ||||||
(In millions) | |||||||
Professional services | 3.3 | 5.6 | |||||
Other items | 0.9 | 0.7 | |||||
$ | 4.2 | $ | 6.3 |
Three Months Ended | Change | |||||||||||||
June 29, 2013 | June 30, 2012 | Amount | Percentage | |||||||||||
(In millions, except percentages) | ||||||||||||||
Amortization of acquired intangibles | $ | 5.3 | $ | 3.6 | $ | 1.7 | 47 | % |
Six Months Ended | Change | |||||||||||||
June 29, 2013 | June 30, 2012 | Amount | Percentage | |||||||||||
(In millions, except percentages) | ||||||||||||||
Amortization of acquired intangibles | $ | 9.1 | $ | 7.4 | $ | 1.7 | 23 | % |
Three Months Ended | Six Months Ended | ||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
(In millions) | |||||||||||||||
Contractual interest expense: | |||||||||||||||
2013 Notes | 0.5 | 0.5 | 1.1 | 1.0 | |||||||||||
2015 Notes | 2.3 | 2.3 | 4.6 | 4.6 | |||||||||||
Revolving credit facility | 0.4 | — | 0.6 | — | |||||||||||
Amortization of debt discount: | |||||||||||||||
2013 Notes | 1.7 | 1.5 | 3.3 | 3.0 | |||||||||||
2015 Notes | 4.0 | 3.6 | 7.9 | 7.2 | |||||||||||
Amortization of deferred financing costs: | |||||||||||||||
2013 Notes | 0.1 | 0.1 | 0.2 | 0.2 | |||||||||||
2015 Notes | 0.5 | 0.5 | 1.1 | 1.0 | |||||||||||
Other | — | 0.1 | — | 0.1 | |||||||||||
Total interest expense | $ | 9.5 | $ | 8.6 | $ | 18.8 | $ | 17.1 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
(In millions, except percentages) | |||||||||||||||
Provision for income taxes | $ | 28.2 | $ | 9.3 | $ | 0.6 | $ | 17.5 | |||||||
Effective tax rate | 74.9 | % | 20.4 | % | 0.7 | % | 20.6 | % |
• | Federal, state and foreign tax on anticipated fiscal 2013 income; and |
• | Federal, state and foreign tax expense on anticipated fiscal 2013 income; and |
• | Tax expense related to integrating our acquisitions; |
• | Tax benefit of $33.7 million related to the release of an uncertain tax position from a previous business combination and the release of related interest and penalties; and |
• | Tax benefit for the retroactively enacted fiscal 2012 federal research tax credit of $5.9 million. |
As of | |||||||||||
June 29, 2013 | December 29, 2012 | Change | |||||||||
(In millions) | |||||||||||
Cash, cash equivalents and short-term investments | $ | 678.5 | $ | 827.1 | $ | (148.6 | ) | ||||
Net working capital | $ | (96.4 | ) | $ | 174.0 | $ | (270.4 | ) |
Change | |||
(In millions) | |||
Decrease in cash and cash equivalents | $ | (149.1 | ) |
Increase in borrowings under revolving credit facility | (100.0 | ) | |
Increase in accounts payable and accrued liabilities | (14.5 | ) | |
Increase in convertible notes | (11.2 | ) | |
Decrease in prepaid expenses and other | (6.4 | ) | |
Decrease in receivables, net | (5.2 | ) | |
Increase in inventories | 2.5 | ||
Decrease in current portion of deferred revenue | 13.0 | ||
Other individually insignificant items | 0.5 | ||
$ | (270.4 | ) |
Six Months Ended | Change | ||||||||||
June 29, 2013 | June 30, 2012 | (In millions) | |||||||||
Cash provided by operating activities | $ | 150.2 | $ | 128.2 | $ | 22.0 |
Change | |||
(In millions) | |||
Net income, net of non-cash related gains and losses | $ | 25.6 | |
Changes in operating assets and liabilities, net of effect of acquired businesses | (3.6 | ) | |
$ | 22.0 |
Six Months Ended | Change | |||||||
June 29, 2013 | June 30, 2012 | (In millions) | ||||||
Cash used for investing activities | (410.9 | ) | (68.5 | ) | (342.4 | ) |
Change | |||
(In millions) | |||
Cash paid in business combinations and asset acquisitions, net of cash acquired | $ | (391.1 | ) |
Purchases of available-for-sale securities | (14.6 | ) | |
Purchases of property, plant and equipment | (5.5 | ) | |
Proceeds from the sale of long-term investments | 6.1 | ||
Proceeds from the maturity of available-for-sale securities | 15.7 | ||
Proceeds from the sale of available-for-sale securities | 46.7 | ||
Other individually insignificant items | 0.3 | ||
$ | (342.4 | ) |
Six Months Ended | Change | |||||||
June 29, 2013 | June 30, 2012 | (In millions) | ||||||
Cash provided by financing activities | 122.7 | 4.3 | 118.4 |
Change | |||
(In millions) | |||
Proceeds from revolving credit facility | $ | 100.0 | |
Proceeds from the issuance of common stock | 17.2 | ||
Tax effect related to employee stock transactions allocated to equity | 3.2 | ||
Stock received for payment of employee taxes on vesting of restricted stock | (1.9 | ) | |
Other individually insignificant items | (0.1 | ) | |
$ | 118.4 |
Notional Principal | Weighted Average Contract Rate | |||||
(In millions) | ||||||
Forward Contracts: | ||||||
European Union euro | $ | 49.6 | 0.75 | |||
Indian rupee | 13.8 | 58.58 | ||||
Chinese renminbi | 12.2 | 6.18 | ||||
Canadian dollar | 10.9 | 1.02 | ||||
Israeli shekel | 9.5 | 3.64 | ||||
Japanese yen | 8.7 | 98.99 | ||||
Swedish krona | 7.0 | 6.58 | ||||
Other | 7.8 | N/A | ||||
Total | $ | 119.5 | ||||
Estimated fair value | $ | (1.5 | ) |
Shares | ||
(In millions) | ||
$11.00 | 0.9 | |
$12.00 | 4.7 | |
$13.00 | 7.9 | |
$14.00 | 10.7 | |
$15.00 | 13.0 | |
$16.00 | 15.1 | |
$17.00 | 17.0 | |
$18.00 | 18.6 | |
$19.00 | 20.1 | |
$20.00 | 21.4 |
• | Changes in the design and manufacturing of ICs, including migration to advanced process nodes and the introduction of three dimensional transistors, such as fin-based, multigate transistors, or FinFETs, present major challenges to the semiconductor industry, particularly in IC design, design automation, design of manufacturing equipment, and the manufacturing process itself. With migration to advanced process nodes, the industry must adapt to more complex physics and manufacturing challenges such as the need to draw features on silicon that are many times smaller than the wavelength of light used to draw the features via lithography. Models of each component’s electrical properties and behavior also become more complex as do requisite analysis, design, verification and manufacturing capabilities. Novel design tools and methodologies must be invented and enhanced quickly to remain competitive in the design of electronics in the smallest nanometer ranges. |
• | The challenges of advanced node design are leading some customers to work with more mature, less risky manufacturing processes that may reduce their need to upgrade or enhance their EDA products and design flows. |
• | The ability to design SoCs increases the complexity of managing a design that, at the lowest level, is represented by billions of shapes on fabrication masks. In addition, SoCs typically incorporate microprocessors and digital signal processors that are programmed with software, requiring simultaneous design of the IC and the related software embedded on the IC. |
• | With the availability of seemingly endless gate capacity, there is an increase in design reuse, or the combining of off-the-shelf design IP with custom logic to create ICs or SoCs. The unavailability of a broad range of high-quality design IP (including our own) that can be reliably incorporated into a customer’s design with our software products and services could lead to reduced demand for our products and services. |
• | Increased technological capability of the Field-Programmable Gate Array, or FPGA, which is a programmable logic chip, creates an alternative to IC implementation for some electronics companies. This could reduce demand for our IC implementation products and services. |
• | A growing number of low-cost engineering services businesses could reduce the need for some IC companies to invest in EDA products. |
• | Adoption of cloud computing technologies with accompanying new business models for an increasing number of software categories, including EDA. |
• | The failure to realize anticipated benefits such as cost savings and revenue enhancements; |
• | The failure to retain key employees of the acquired business; |
• | Difficulties in combining previously separate businesses into a single unit; |
• | The substantial diversion of management’s attention from day-to-day business when evaluating and negotiating these transactions and integrating an acquired business; |
• | The discovery, after completion of the acquisition, of unanticipated liabilities assumed from the acquired business or of assets acquired, such that we cannot realize the anticipated value of the acquisition; |
• | Difficulties related to integrating the products of an acquired business in, for example, distribution, engineering, licensing models and customer support areas; |
• | Unanticipated costs; |
• | Customer dissatisfaction with existing license agreements with us, possibly dissuading them from licensing or buying products acquired by us after the effective date of the license; and |
• | The failure to understand and compete effectively in markets where we have limited experience. |
• | Announcements of our quarterly operating results and revenue and earnings forecasts that fail to meet or are inconsistent with earlier projections or the expectations of our securities analysts or investors; |
• | Changes in our forecasted bookings, revenue or earnings estimates; |
• | Market conditions in the IC, electronics systems and semiconductor industries; |
• | Announcements of a restructuring plan; |
• | Changes in management; |
• | A gain or loss of a significant customer or market segment share; |
• | Material litigation; and |
• | Announcements of new products or acquisitions of new technologies by us, our competitors or our customers. |
• | The development by others of competitive EDA products or platforms and engineering services, possibly resulting in a shift of customer preferences away from our products and services and significantly decreased revenue; |
• | Decisions by electronics manufacturers to perform engineering services internally, rather than purchase these services from outside vendors due to budget constraints or excess engineering capacity; |
• | The challenges of developing (or acquiring externally developed) technology solutions, including hardware offerings, that are adequate and competitive in meeting the rapidly evolving requirements of next-generation design challenges; |
• | The significant number of current and potential competitors in the EDA industry and the low cost of entry; |
• | Intense competition to attract acquisition targets, possibly making it more difficult for us to acquire companies or technologies at an acceptable price, or at all; |
• | The combination of two or more of our EDA competitors or collaboration among many EDA companies to deliver more comprehensive offerings than they could individually; and |
• | Aggressive pricing competition by some of our competitors may cause us to lose our competitive position, which could result in lower revenues or profitability and could adversely impact our ability to realize the revenue and profitability forecasts for our software or hardware systems products. |
• | The adoption or expansion of government trade restrictions, including tariffs and other trade barriers; |
• | Limitations on repatriation of earnings; |
• | Limitations on the conversion of foreign currencies; |
• | Reduced protection of intellectual property rights in some countries; |
• | Performance of national economies; |
• | Longer collection periods for receivables and greater difficulty in collecting accounts receivable; |
• | Difficulties in managing foreign operations; |
• | Political and economic instability; |
• | Unexpected changes in regulatory requirements; |
• | Inability to continue to offer competitive compensation in certain growing regions; and |
• | United States’ and other governments’ licensing requirements for exports, which may lengthen the sales cycle or restrict or prohibit the sale or licensing of certain products. |
• | Pay damages (including the potential for treble damages), license fees or royalties (including royalties for past periods) to the party claiming infringement; |
• | Stop licensing products or providing services that use the challenged intellectual property; |
• | Obtain a license from the owner of the infringed intellectual property to sell or use the relevant technology, which license may not be available on reasonable terms, or at all; or |
• | Redesign the challenged technology, which could be time consuming and costly, or not be accomplished. |
• | The timing of customers’ competitive evaluation processes; or |
• | Customers’ budgetary constraints and budget cycles. |
• | Changes in tax laws or the interpretation of such tax laws, including potential United States and international tax reforms; |
• | Earnings being lower than anticipated in countries where we are taxed at lower rates as compared to the United States federal and state statutory tax rates; |
• | An increase in expenses not deductible for tax purposes, including certain stock-based compensation and impairment of goodwill; |
• | Changes in the valuation allowance against our deferred tax assets; |
• | Changes in judgment from the evaluation of new information that results in a recognition, derecognition or change in measurement of a tax position taken in a prior period; |
• | Increases to interest or penalty expenses classified in the financial statements as income taxes; |
• | New accounting standards or interpretations of such standards; |
• | A change in our decision to indefinitely reinvest foreign earnings outside the United States; or |
• | Results of tax examinations by the Internal Revenue Service, or IRS, and state and foreign tax authorities. |
• | Loss of customers; |
• | Loss of market share; |
• | Failure to attract new customers or achieve market acceptance; |
• | Diversion of development resources to resolve the problem; |
• | Loss of or delay in revenue; |
• | Increased service costs; and |
• | Liability for damages. |
• | Our certificate of incorporation allows our Board of Directors to issue, at any time and without stockholder approval, preferred stock with such terms as it may determine. No shares of preferred stock are currently outstanding. However, the rights of holders of any of our preferred stock that may be issued in the future may be superior to the rights of holders of our common stock. |
• | Section 203 of the Delaware General Corporation Law generally prohibits a Delaware corporation from engaging in any business combination with a person owning 15% or more of its voting stock, or who is affiliated with the corporation and owned 15% or more of its voting stock at any time within three years prior to the proposed business combination, for a period of three years from the date the person became a 15% owner, unless specified conditions are met. |
• | $350.0 million related to our 2.625% cash convertible senior notes due 2015, or the 2015 Notes; |
• | $144.5 million related to our 1.500% convertible senior notes due December 15, 2013, or the 2013 Notes; |
• | $100.0 million related to our five-year senior secured revolving credit facility; and |
• | $0.2 million related to our zero coupon zero yield senior convertible notes due 2023. |
• | Make it difficult for us to satisfy our payment obligations on our debt as described above; |
• | Make us more vulnerable in the event of a downturn in our business; |
• | Reduce funds available for use in our operations or for developments or acquisitions of new technologies; |
• | Make it difficult for us to incur additional debt or obtain any necessary financing in the future for working capital, capital expenditures, debt service, acquisitions or general corporate purposes; |
• | Impose additional operating or financial covenants on us; |
• | Limit our flexibility in planning for or reacting to changes in our business; or |
• | Place us at a possible competitive disadvantage relative to less leveraged competitors and competitors that have greater access to capital resources. |
Period | Total Number of Shares Purchased (1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan or Program | Maximum Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Plan or Program (1) (In millions) | ||||||||||
March 31, 2013 – May 4, 2013 | 13,025 | $ | 13.02 | — | $ | 814.4 | ||||||||
May 5, 2013 – June 1, 2013 | 149,906 | $ | 13.96 | — | $ | 814.4 | ||||||||
June 2, 2013 – June 29, 2013 | 23,313 | $ | 15.07 | — | $ | 814.4 | ||||||||
Total | 186,244 | $ | 14.03 | — |
(1) | Shares purchased that were not part of our publicly announced repurchase programs represent employee surrender of shares of restricted stock to satisfy employee income tax withholding obligations due upon vesting, and do not reduce the dollar value that may yet be purchased under our publicly announced repurchase programs. |
(a) | The following exhibits are filed herewith: |
Incorporated by Reference | ||||||||||||
Exhibit Number | Exhibit Title | Form | File No. | Exhibit No. | Filing Date | Provided Herewith | ||||||
10.01 | The Registrant's Amended and Restated Employee Stock Purchase Plan. | S-8 | 333-188449 | 99.01 | 5/8/2013 | |||||||
10.02 | Tensilica, Inc. 2007 Stock Incentive Plan. | S-8 | 333-188452 | 99.01 | 5/8/2013 | |||||||
31.01 | Certification of the Registrant’s Chief Executive Officer, Lip-Bu Tan, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. | X | ||||||||||
31.02 | Certification of the Registrant’s Chief Financial Officer, Geoffrey G. Ribar, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. | X | ||||||||||
32.01 | Certification of the Registrant’s Chief Executive Officer, Lip-Bu Tan, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||
32.02 | Certification of the Registrant’s Chief Financial Officer, Geoffrey G. Ribar, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||
101.INS | XBRL Instance Document. | X | ||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document. | X | ||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | X | ||||||||||
101.DEF | XBRL Definition Linkbase Document. | X | ||||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | X | ||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | X |
CADENCE DESIGN SYSTEMS, INC. (Registrant) | |||||
DATE: | July 25, 2013 | By: | /s/ Lip-Bu Tan | ||
Lip-Bu Tan | |||||
President, Chief Executive Officer and Director | |||||
DATE: | July 25, 2013 | By: | /s/ Geoffrey G. Ribar | ||
Geoffrey G. Ribar | |||||
Senior Vice President and Chief Financial Officer |
Incorporated by Reference | ||||||||||||
Exhibit Number | Exhibit Title | Form | File No. | Exhibit No. | Filing Date | Provided Herewith | ||||||
10.01 | The Registrant's Amended and Restated Employee Stock Purchase Plan. | S-8 | 333-188449 | 99.01 | 5/8/2013 | |||||||
10.02 | Tensilica, Inc. 2007 Stock Incentive Plan. | S-8 | 333-188452 | 99.01 | 5/8/2013 | |||||||
31.01 | Certification of the Registrant’s Chief Executive Officer, Lip-Bu Tan, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. | X | ||||||||||
31.02 | Certification of the Registrant’s Chief Financial Officer, Geoffrey G. Ribar, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. | X | ||||||||||
32.01 | Certification of the Registrant’s Chief Executive Officer, Lip-Bu Tan, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||
32.02 | Certification of the Registrant’s Chief Financial Officer, Geoffrey G. Ribar, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||||||||
101.INS | XBRL Instance Document. | X | ||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document. | X | ||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | X | ||||||||||
101.DEF | XBRL Definition Linkbase Document. | X | ||||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | X | ||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | X |
1. | I have reviewed this Quarterly Report on Form 10-Q of Cadence Design Systems, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ Lip-Bu Tan | ||
Lip-Bu Tan | |||
President and Chief Executive Officer | |||
(Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Cadence Design Systems, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ Geoffrey G. Ribar | ||
Geoffrey G. Ribar | |||
Senior Vice President and Chief Financial Officer | |||
(Principal Accounting and Financial Officer) |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Lip-Bu Tan | |||
Lip-Bu Tan | |||
President and Chief Executive Officer | |||
(Principal Executive Officer) | |||
Date: | July 25, 2013 |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Geoffrey G. Ribar | |||
Geoffrey G. Ribar | |||
Senior Vice President and Chief Financial Officer | |||
(Principal Accounting and Financial Officer) | |||
Date: | July 25, 2013 |
Contingencies
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6 Months Ended |
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Jun. 29, 2013
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Commitments and Contingencies Disclosure [Abstract] | |
CONTINGENCIES | CONTINGENCIES Legal Proceedings From time to time, Cadence is involved in various disputes and litigation that arise in the ordinary course of business. These include disputes and lawsuits related to intellectual property, indemnification obligations, mergers and acquisitions, licensing, contracts, distribution arrangements and employee relations matters. At least quarterly, Cadence reviews the status of each significant matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount or the range of loss can be estimated, Cadence accrues a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on Cadence’s judgments using the best information available at the time. As additional information becomes available, Cadence reassesses the potential liability related to pending claims and litigation matters and may revise estimates. Other Contingencies Cadence provides its customers with a warranty on sales of hardware products, generally for a 90-day period. Cadence did not incur any significant costs related to warranty obligations during the three and six months ended June 29, 2013 or June 30, 2012. Cadence’s product license and services agreements typically include a limited indemnification provision for claims from third parties relating to Cadence’s intellectual property. If the potential loss from any indemnification claim is considered probable and the amount or the range of loss can be estimated, Cadence accrues a liability for the estimated loss. The indemnification is generally limited to the amount paid by the customer. Cadence did not incur any significant losses from indemnification claims during the three and six months ended June 29, 2013 or June 30, 2012. |
Cash, Cash Equivalents and Investments (Details 1) (USD $)
In Thousands, unless otherwise specified |
Jun. 29, 2013
|
Dec. 29, 2012
|
Jun. 30, 2012
|
Dec. 31, 2011
|
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Classified as cash and cash equivalents | ||||
Cash and interest bearing deposits | $ 173,579 | $ 160,023 | ||
Money market funds | 403,153 | 566,334 | ||
Corporate debt securities | 501 | 0 | ||
Total cash and cash equivalents | $ 577,233 | $ 726,357 | $ 661,658 | $ 601,602 |
Condensed Consolidated Income Statements (Unaudited) (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
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Jun. 29, 2013
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Jun. 30, 2012
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Jun. 29, 2013
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Jun. 30, 2012
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Revenue: | ||||
Product and maintenance | $ 337,983 | $ 297,510 | $ 666,254 | $ 583,798 |
Service | 24,498 | 28,966 | 50,493 | 58,508 |
Total revenue | 362,481 | 326,476 | 716,747 | 642,306 |
Costs and Expenses: | ||||
Cost of product and maintenance | 28,095 | 32,406 | 57,942 | 59,618 |
Cost of service | 15,148 | 17,071 | 33,492 | 36,445 |
Marketing and sales | 95,277 | 80,418 | 185,679 | 164,213 |
Research and development | 136,395 | 112,031 | 260,479 | 220,625 |
General and administrative | 34,441 | 30,244 | 64,251 | 58,014 |
Amortization of acquired intangibles | 5,327 | 3,643 | 9,118 | 7,429 |
Restructuring and other charges (credits) | 2,656 | 43 | 2,508 | (8) |
Total costs and expenses | 317,339 | 275,856 | 613,469 | 546,336 |
Income from operations | 45,142 | 50,620 | 103,278 | 95,970 |
Interest expense | (9,528) | (8,566) | (18,790) | (17,103) |
Other income, net | 2,018 | 3,669 | 4,193 | 6,103 |
Income before provision for income taxes | 37,632 | 45,723 | 88,681 | 84,970 |
Provision for income taxes | 28,203 | 9,337 | 643 | 17,480 |
Net income | $ 9,429 | $ 36,386 | $ 88,038 | $ 67,490 |
Net income per share - basic (in usd per share) | $ 0.03 | $ 0.13 | $ 0.32 | $ 0.25 |
Net income per share - diluted (in usd per share) | $ 0.03 | $ 0.13 | $ 0.30 | $ 0.24 |
Weighted average common shares outstanding - basic (in shares) | 277,146 | 269,739 | 276,018 | 268,840 |
Weighted average common shares outstanding - diluted (in shares) | 294,443 | 275,318 | 293,274 | 276,526 |
Goodwill and Acquired Intangibles
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL AND ACQUIRED INTANGIBLES | GOODWILL AND ACQUIRED INTANGIBLES Goodwill The changes in the carrying amount of goodwill during the six months ended June 29, 2013 were as follows:
Acquired Intangibles, Net Acquired intangibles as of June 29, 2013 were as follows, excluding intangibles that were fully amortized as of December 29, 2012:
In-process technology as of June 29, 2013 consists of projects acquired during the six months ended June 29, 2013, and if completed, will contribute to Cadence's ability to offer additional IP solutions to its customers. These projects are expected to be complete in 12 to 24 months. Acquired intangibles as of December 29, 2012 were as follows, excluding intangibles that were fully amortized as of December 31, 2011:
Amortization expense from existing technology intangible assets and maintenance agreement intangible assets is included in cost of product and maintenance. Amortization of acquired intangibles for the three and six months ended June 29, 2013 and June 30, 2012 was as follows:
Estimated amortization expense for the following five fiscal years and thereafter is as follows:
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Income Taxes Income Taxes (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Unrecognized Tax Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrecognized tax benefits rollforward | The changes in Cadence's gross amount of unrecognized tax benefits during the six months ended June 29, 2013 are as follows:
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Interest and penalties recognized in the condensed consolidated income statements | The total amounts of interest and penalties recognized in the condensed consolidated income statements as provision (benefit) for income taxes for the three and six months ended June 29, 2013 and June 30, 2012 were as follows:
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Interest and penalties recognized in the condensed consolidated balance sheets | The total amounts of gross accrued interest and penalties recognized in the condensed consolidated balance sheets as of June 29, 2013 and December 29, 2012 were as follows:
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Cash, Cash Equivalents and Investments (Details 4) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 29, 2013
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Jun. 30, 2012
|
Jun. 29, 2013
|
Jun. 30, 2012
|
Dec. 29, 2012
|
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Carrying value of non-marketable investments | |||||
Cost Method Investments | $ 3,038 | $ 3,038 | $ 3,038 | ||
Equity method | 3,708 | 3,708 | 4,249 | ||
Total non-marketable investments | 6,746 | 6,746 | 7,287 | ||
Net realized gains on the sale of non-marketable investments | |||||
Gains on sale of non-marketable investments | $ 0 | $ 0 | $ 1,190 | $ 0 |
Other Income, Net
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER INCOME, NET | OTHER INCOME, NET Cadence’s other income, net for the three and six months ended June 29, 2013 and June 30, 2012 was as follows:
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Receivables and Allowances for Doubtful Accounts (Details Textual)
|
Jun. 29, 2013
Customer
|
Dec. 29, 2012
Customer
|
---|---|---|
Accounts Receivable and Allowances for Doubtful Accounts (Textual) [Abstract] | ||
Number of customers with receivables balance greater than ten percent of total balance | 0 | 0 |
Percent of receivables attributable to single customer | 10.00% | 10.00% |
Percentage of Company's total receivables, net attributable to the ten customers with largest balance | 46.00% | 47.00% |
Number of customers with largest balance of receivables | 10 | 10 |
Net Income Per Share (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 29, 2013
|
Jun. 30, 2012
|
Jun. 29, 2013
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Jun. 30, 2012
|
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Earnings Per Share, Basic and Diluted [Abstract] | ||||
Net income | $ 9,429 | $ 36,386 | $ 88,038 | $ 67,490 |
Weighted-average common shares used to calculate basic net income per share (in shares) | 277,146 | 269,739 | 276,018 | 268,840 |
2023 Notes | 11 | 11 | 11 | 11 |
2015 Warrants | 10,871 | 637 | 10,770 | 1,580 |
Share-based awards | 6,415 | 4,931 | 6,475 | 6,095 |
Weighted average common shares used to calculate diluted net income per share (in shares) | 294,443 | 275,318 | 293,274 | 276,526 |
Net income per share - basic (in usd per share) | $ 0.03 | $ 0.13 | $ 0.32 | $ 0.25 |
Net income per share - diluted (in usd per share) | $ 0.03 | $ 0.13 | $ 0.30 | $ 0.24 |
Acquisitions and Acquisition-Related Contingent Consideration Acquisitions and Acquisition-Related Contingent Consideration (Details) (USD $)
In Thousands, unless otherwise specified |
Apr. 22, 2013
Tensilica
|
Apr. 22, 2013
Tensilica existing technology
|
Apr. 22, 2013
Tensilica agreements and relationships
|
Apr. 22, 2013
Tensilica tradenames and trademarks
|
May 23, 2013
Cosmic
|
May 23, 2013
Cosmic existing technology
|
May 23, 2013
Cosmic agreements and relationships
|
May 23, 2013
Cosmic tradenames and trademarks
|
Jun. 29, 2013
Other 2013 acquisitions
|
Jun. 29, 2013
Other acquisitions agreements and relationships
|
Jun. 29, 2013
Other acquisitions existing technology
|
Jun. 29, 2013
Other acquisitions tradenames and trademarks
|
---|---|---|---|---|---|---|---|---|---|---|---|---|
Business Acquisition [Line Items] | ||||||||||||
Cash and cash equivalents | $ 26,331 | $ 1,724 | $ 149 | |||||||||
Trade receivables | 4,454 | 668 | 0 | |||||||||
Property, plant and equipment | 1,938 | 185 | 91 | |||||||||
Other assets | 46,832 | 1,681 | 0 | |||||||||
Acquired intangibles | 102,000 | 33,000 | 3,000 | 16,300 | 5,100 | 0 | 1,667 | 2,014 | 0 | |||
In-process technology | 5,300 | 4,200 | 1,200 | |||||||||
Goodwill | 176,461 | 41,911 | 9,587 | |||||||||
Total assets acquired | 399,316 | 71,769 | 14,708 | |||||||||
Deferred revenue | (8,100) | (129) | 0 | |||||||||
Other liabilities | (4,959) | (1,982) | (277) | |||||||||
Long-term deferred tax liabilities | (40,147) | (8,428) | 0 | |||||||||
Net assets acquired | $ 346,110 | $ 61,230 | $ 14,431 |
Cash, Cash Equivalents and Investments (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Cash, Cash Equivalents and Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of cash, cash equivalents and short-term investments | Cadence’s cash, cash equivalents and short-term investments at fair value as of June 29, 2013 and December 29, 2012 were as follows:
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||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of cash and cash equivalents | The following table summarizes Cadence’s cash and cash equivalents at fair value as of June 29, 2013 and December 29, 2012:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of short-term investments | The following tables summarize Cadence’s short-term investments as of June 29, 2013 and December 29, 2012:
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Contractual maturity of marketable debt investments | The amortized cost and estimated fair value of marketable debt securities included in short-term investments as of June 29, 2013, by contractual maturity, are shown in the table below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without penalties.
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Carrying value of non-marketable securities | Cadence’s non-marketable investments as of June 29, 2013 and December 29, 2012 were as follows:
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||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized gains on the sale of non-marketable investments | Net realized gains on the sale of non-marketable investments during the three and six months ended June 29, 2013 and June 30, 2012 were as follows:
|
Fair Value (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of financial assets and liabilities | On a quarterly basis, Cadence measures at fair value certain financial assets and liabilities. The fair value of financial assets and liabilities was determined using the following levels of inputs as of June 29, 2013 and December 29, 2012:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities included in level 3 representing fair value of contingent consideration associated with acquisitions | The following table summarizes the level 3 activity for the six months ended June 29, 2013:
|
Debt (Details 2) (Convertible Senior Notes Due 2013 [Member], USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 29, 2013
|
Jun. 30, 2012
|
Jun. 29, 2013
|
Jun. 30, 2012
|
|
Convertible Senior Notes Due 2013 [Member]
|
||||
Effective interest rate and components of interest expense of 2013 notes | ||||
Effective interest rate | 6.40% | 6.40% | 6.40% | 6.40% |
Contractual interest expense | $ 540 | $ 540 | $ 1,080 | $ 1,080 |
Amortization of debt discount | $ 1,657 | $ 1,547 | $ 3,307 | $ 3,086 |
Acquisitions and Acquisition-Related Contingent Consideration (Details Textual 1) (USD $)
|
6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Jun. 29, 2013
|
Dec. 29, 2012
|
Dec. 31, 2011
Two Thousand Eleven Acquisition [Member]
|
Jun. 29, 2013
Two Thousand Eleven Acquisition [Member]
|
|
Business Acquisition, Contingent Consideration [Line Items] | ||||
Maximum payments for contingent consideration arrangement | $ 5,000,000 | |||
Time of certain financial measures subsequent to consummation of the acquisition related to contingent consideration | 3 years | |||
Beginning date of acquisition related contingent consideration measurement period | subsequent to October 1, 2011 | |||
Acquisition related contingent consideration at initial fair value | 3,500,000 | |||
Acquisition-related contingent consideration | 3,832,000 | 4,218,000 | 3,700,000 | |
Maximum amount obligated to pay by Cadence | 14,400,000 | |||
Period over which consideration may be paid | 34 months | |||
Portion of amount of contingent consideration potential expense in future periods | $ 9,000,000 |
Segment Reporting (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of revenue by geography | The following table presents a summary of revenue by geography for the three and six months ended June 29, 2013 and June 30, 2012:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of long-lived assets by geography | The following table presents a summary of long-lived assets by geography as of June 29, 2013 and December 29, 2012:
|
Segment Reporting (Details 1) (USD $)
In Thousands, unless otherwise specified |
Jun. 29, 2013
|
Dec. 29, 2012
|
---|---|---|
Summary of long-lived assets by geography | ||
Total long-lived assets | $ 243,288 | $ 244,439 |
Americas: | ||
United States | 211,521 | 214,711 |
Total Americas | 211,830 | 214,896 |
Other Americas [Member]
|
||
Summary of long-lived assets by geography | ||
Long-Lived Assets in Individual Foreign Countries | 309 | 185 |
Europe, Middle East and Africa [Member]
|
||
Summary of long-lived assets by geography | ||
Long-Lived Assets in Individual Foreign Countries | 5,682 | 5,410 |
Japan [Member]
|
||
Summary of long-lived assets by geography | ||
Long-Lived Assets in Individual Foreign Countries | 1,015 | 1,649 |
Asia [Member]
|
||
Summary of long-lived assets by geography | ||
Long-Lived Assets in Individual Foreign Countries | $ 24,761 | $ 22,484 |
Goodwill and Acquired Intangibles (Details 2) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 29, 2013
|
Jun. 30, 2012
|
Jun. 29, 2013
|
Jun. 30, 2012
|
|
Amortization of acquired intangibles | ||||
Cost of product and maintenance | $ 5,760 | $ 2,891 | $ 9,567 | $ 5,790 |
Amortization of Intangible Assets | 5,327 | 3,643 | 9,118 | 7,429 |
Total amortization of acquired intangibles | $ 11,087 | $ 6,534 | $ 18,685 | $ 13,219 |
Receivables and Allowances for Doubtful Accounts (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 29, 2013
|
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current and long-term accounts receivable balances | Cadence’s current and long-term receivables balances as of June 29, 2013 and December 29, 2012 were as follows:
|
Debt
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Jun. 29, 2013
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEBT | DEBT Cadence’s outstanding debt as of June 29, 2013 and December 29, 2012 was as follows:
2015 Notes In June 2010, Cadence issued $350.0 million principal amount of 2.625% Cash Convertible Senior Notes Due 2015, or the 2015 Notes. At maturity, the holders of the 2015 Notes will be entitled to receive the principal amount of the 2015 Notes plus accrued interest. The 2015 Notes are convertible into cash prior to maturity upon the occurrence of certain conditions described in the table below. To the extent that the 2015 Notes are convertible prior to maturity and a holder of the 2015 Notes elects to convert its notes prior to maturity, that note holder will be entitled to receive cash equal to the principal amount of the notes plus any additional conversion value as described in the table below under the heading "Conversion feature." Cadence entered into hedge transactions, or the 2015 Notes Hedges, in connection with the issuance of the 2015 Notes. The purpose of the 2015 Notes Hedges was to limit Cadence’s exposure to the additional cash payments above the principal amount of the 2015 Notes that may be due to the holders. As a result of the 2015 Notes Hedges, Cadence’s maximum expected cash exposure upon conversion of the 2015 Notes is the $350.0 million principal balance of the notes. In June 2010, Cadence also sold warrants in separate transactions, or the 2015 Warrants. As a result of the 2015 Warrants, Cadence will experience dilution to its diluted earnings per share if its average closing stock price exceeds $10.78 for any fiscal quarter. To the extent that Cadence’s stock price exceeds $10.78 at expiration of the 2015 Warrants, Cadence will issue shares to net settle the 2015 Warrants. A summary of key terms of the 2015 Notes is as follows:
Impact of Early Conversion Conditions on Financial Statements The 2015 Notes are convertible into cash from June 30, 2013 through September 28, 2013 because Cadence’s closing stock price exceeded $9.81 for at least 20 days in the 30-day period prior to June 29, 2013. Accordingly, the net balance of the 2015 Notes of $316.7 million is classified as a current liability on Cadence’s condensed consolidated balance sheet as of June 29, 2013. The classification of the 2015 Notes as current or long-term on the condensed consolidated balance sheet is evaluated at each balance sheet date and may change from time to time depending on whether Cadence’s closing stock price has exceeded $9.81 during the periods specified in the table above under “Early conversion conditions.” In the event that none of the 2015 Notes Early Conversion Conditions have been met in a future fiscal quarter prior to the one-year period immediately preceding the maturity date, Cadence will classify its net liability under the 2015 Notes as a long-term liability on the condensed consolidated balance sheet as of the end of that fiscal quarter. If the note holders elect to convert their 2015 Notes prior to maturity, any unamortized discount and transaction fees will be expensed at the time of conversion. If the entire outstanding principal amount had been converted on June 29, 2013, Cadence would have recorded an expense of $37.9 million associated with the conversion, comprised of $33.3 million of unamortized debt discount and $4.6 million of unamortized transaction fees. As of June 29, 2013, the if-converted value of the 2015 Notes to the note holders of approximately $671.6 million exceeded the principal amount of $350.0 million. The fair value of the 2015 Notes was $684.2 million as of June 29, 2013 and $640.1 million as of December 29, 2012. The 2015 Notes currently trade at a premium to the if-converted value of the notes. As of June 29, 2013, none of the note holders had elected to convert their 2015 Notes. 2015 Notes Embedded Conversion Derivative The conversion feature of the 2015 Notes, or the 2015 Notes Embedded Conversion Derivative, requires bifurcation from the 2015 Notes and is accounted for as a derivative liability. The fair value of the 2015 Notes Embedded Conversion Derivative at the time of issuance of the 2015 Notes was $76.6 million and was recorded as original debt discount for purposes of accounting for the debt component of the 2015 Notes. This discount is amortized as interest expense using the effective interest method over the term of the 2015 Notes. The 2015 Notes Embedded Conversion Derivative is carried on the condensed consolidated balance sheet at its estimated fair value. The fair value was $335.1 million as of June 29, 2013 and $303.2 million as of December 29, 2012. 2015 Notes Hedges The 2015 Notes Hedges expire on June 1, 2015 and must be settled in cash. The aggregate cost of the 2015 Notes Hedges was $76.6 million. The 2015 Notes Hedges are accounted for as derivative assets and are carried on the condensed consolidated balance sheet at their estimated fair value. The 2015 Note Hedges fair value was $335.1 million as of June 29, 2013 and $303.2 million as of December 29, 2012. The 2015 Notes Embedded Conversion Derivative liability and the 2015 Notes Hedges asset are adjusted to fair value each reporting period and unrealized gains and losses are reflected in the condensed consolidated income statements. The 2015 Notes Embedded Conversion Derivative and the 2015 Notes Hedges are designed to have similar fair values. Accordingly, the changes in the fair values of these instruments offset during the three and six months ended June 29, 2013 and June 30, 2012 and did not have a net impact on the condensed consolidated income statements for the respective periods. The classification of the 2015 Notes Embedded Conversion Derivative liability and the 2015 Notes Hedges asset as current or long-term on the condensed consolidated balance sheet corresponds with the classification of the 2015 Notes, is evaluated at each balance sheet date and may change from time to time depending on whether the closing stock price Early Conversion Condition is met for a particular quarter. 2015 Warrants In June 2010, Cadence sold the 2015 Warrants in separate transactions for the purchase of up to approximately 46.4 million shares of Cadence’s common stock at a strike price of $10.78 per share, for total proceeds of $37.5 million, which was recorded as an increase in stockholders’ equity. The 2015 Warrants expire on various dates from September 2015 through December 2015 and must be settled in net shares of Cadence’s common stock. Therefore, upon expiration of the 2015 Warrants, Cadence will issue shares of common stock to the purchasers of the 2015 Warrants that represent the value by which the price of the common stock exceeds the strike price stipulated within the particular warrant agreement. The effective interest rate and components of interest expense of the 2015 Notes for the three and six months ended June 29, 2013 and June 30, 2012 were as follows:
2013 Notes and 2011 Notes In December 2006, Cadence issued $250.0 million principal amount of 1.500% Convertible Senior Notes Due December 15, 2013, or the 2013 Notes. At the same time, Cadence issued $250.0 million principal amount of 1.375% Convertible Senior Notes Due December 15, 2011, or the 2011 Notes. During 2010, Cadence repurchased a portion of the 2011 Notes and the 2013 Notes. The 2011 Notes matured on December 15, 2011, at which time Cadence paid the remaining balance on the 2011 Notes in full. As of June 29, 2013, the remaining principal maturity value of the 2013 Notes was $144.5 million. At maturity, the holders of the 2013 Notes will be entitled to receive the principal amount of the 2013 Notes plus accrued interest. The 2013 Notes are convertible into a combination of cash and shares of Cadence common stock upon the occurrence of certain conditions described in the table below. To the extent that the 2013 Notes are convertible prior to maturity and a holder of the 2013 Notes elects to convert its notes prior to maturity, that note holder will be entitled to receive cash for the principal amount of the notes plus shares for any additional conversion value as described in the table below under the heading “Conversion feature.” As of June 29, 2013, the 2013 Notes were not convertible. Cadence entered into hedge transactions, or the 2013 Notes Hedges and the 2011 Notes Hedges, in connection with the issuance of the 2013 Notes and the 2011 Notes. The 2011 Notes Hedges expired unexercised on December 15, 2011. Pursuant to the 2013 Notes Hedges, Cadence has the option to receive the amount of shares that may be owed to the 2013 Notes holders. The purpose of the 2013 Notes Hedges was to limit Cadence’s exposure to the dilution that may result from the issuance of shares upon conversion of the notes. In December 2006, Cadence also sold warrants in separate transactions, or the 2013 Warrants and the 2011 Warrants. As a result of the 2013 Warrants, Cadence will experience dilution to its diluted earnings per share to the extent its average closing stock price exceeds $31.50 for any fiscal quarter. If Cadence’s stock price is above $31.50 at the expiration of the 2013 Warrants, Cadence will issue shares to settle the 2013 Warrants. A summary of key terms of the 2013 Notes is as follows:
Impact of Early Conversion Conditions on Financial Statements As of June 29, 2013, none of the 2013 Notes Early Conversion Conditions had been met. The 2013 Notes mature on December 15, 2013 and the liability component of the 2013 Notes is classified as a current liability as of June 29, 2013. As of June 29, 2013, the if-converted value of the 2013 Notes to the note holders did not exceed the principal amount of the 2013 Notes. The total fair value of the 2013 Notes, including the equity component, was $145.0 million as of June 29, 2013 and was $144.1 million as of December 29, 2012. 2013 and 2011 Notes Hedges The 2011 Notes Hedges expired unexercised on December 15, 2011. The 2013 Notes Hedges expire on December 15, 2013, and must be settled in net shares of Cadence common stock. Therefore, upon expiration of the 2013 Notes Hedges, the counterparties will deliver shares of common stock to Cadence that represent the value, if any, by which the price of the common stock exceeds the price stipulated within the particular hedge agreement. The aggregate cost of the hedges entered into in connection with the 2011 Notes Hedges (which had similar conversion features as the 2013 Notes) and 2013 Notes Hedges was $119.8 million and was recorded as a reduction to stockholders’ equity. In connection with the purchase of a portion of the 2013 Notes and 2011 Notes during fiscal 2010, Cadence also sold a portion of the 2013 Notes Hedges and the 2011 Notes Hedges representing options to purchase approximately 9.7 million shares of Cadence’s common stock for proceeds of $0.4 million. The estimated fair value of the remaining 2013 Notes Hedges was $0.2 million as of June 29, 2013 and $0.7 million as of December 29, 2012. Subsequent changes in the fair value of the 2013 Notes Hedges will not be recognized in the condensed consolidated financial statements as long as the instruments remain classified as equity. 2013 and 2011 Warrants In December 2006, Cadence sold warrants in separate transactions, which consisted of the 2013 Warrants and the 2011 Warrants, for the purchase of up to 23.6 million shares of Cadence’s common stock at a strike price of $31.50 per share for proceeds of $39.4 million, which was recorded as an increase in stockholders’ equity. In connection with the purchase of some of the 2013 Notes and the 2011 Notes during fiscal 2010, Cadence also purchased some of the 2013 Warrants and the 2011 Warrants, reducing the number of shares of Cadence common stock subject to purchase rights by 9.7 million shares at a cost of $0.1 million. The 2011 Warrants expired on various dates from February 2012 through April 2012, reducing the number of shares of Cadence common stock subject to purchase rights by 7.1 million shares. The 2013 Warrants will expire on various dates from February 2014 through April 2014. The 2013 Warrants must be settled in net shares of Cadence’s common stock. Therefore, upon expiration, Cadence will issue shares of common stock to the purchasers of the warrants that represent the value, if any, by which the price of the common stock exceeds the strike price stipulated within the particular warrant agreement. The effective interest rate and components of interest expense of the 2013 Notes for the three and six months ended June 29, 2013, and of the 2013 Notes and 2011 Notes for the three and six months ended June 30, 2012 were as follows:
Zero Coupon Zero Yield Senior Convertible Notes Due 2023 In August 2003, Cadence issued $420.0 million principal amount of its Zero Coupon Zero Yield Senior Convertible Notes Due 2023, or the 2023 Notes. As of June 29, 2013 and December 29, 2012, the remaining balance and the total fair value of the 2023 Notes was $0.2 million. Revolving Credit Facility In December 2012, Cadence entered into a five-year senior secured revolving credit facility. The credit facility provides for borrowings up to $250.0 million, with the right to request increased capacity up to an additional $150.0 million upon the receipt of lender commitments, for total maximum borrowings of $400.0 million. Any outstanding loans drawn under the credit facility are due at maturity in December 2017. Outstanding amounts may be paid at any time prior to maturity. The facility is secured by certain accounts receivable and certain equity interests in Cadence’s subsidiaries. Interest accrues based on Cadence’s consolidated leverage ratio. Borrowings may be made at LIBOR plus a margin between 1.25% and 2.00% per annum or at the base rate plus a margin between 0.25% and 1.00% per annum, where in each case the margin is determined by reference to a specified leverage ratio. Interest is payable quarterly. A commitment fee ranging from 0.20% to 0.35% is assessed on the daily average undrawn portion of revolving commitments. The credit facility contains customary negative covenants that, among other things, restrict Cadence’s ability to incur additional indebtedness, grant liens and make certain investments, make acquisitions, dispose of certain assets and make certain restricted payments, including dividends. In addition, the credit facility contains financial covenants that require Cadence to maintain a leverage ratio not to exceed 3 to 1, and a minimum interest coverage ratio of 3 to 1. As of June 29, 2013 and December 29, 2012, Cadence had outstanding borrowings under the credit facility of $100.0 million and $0, respectively, and was in compliance with all financial covenants. |
Income Taxes Income Taxes
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Jun. 29, 2013
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | INCOME TAXES During the six months ended June 29, 2013, Cadence recognized a provision for income taxes of approximately $0.6 million primarily because of:
which were partially offset by:
Unrecognized Tax Benefits During the six months ended June 29, 2013, Cadence determined that the State of California Franchise Tax Board examination of the 2004 through 2006 tax years was effectively settled and, separately, released an unrecognized tax benefit recorded in a prior business combination. The changes in Cadence's gross amount of unrecognized tax benefits during the six months ended June 29, 2013 are as follows:
The total amounts of interest and penalties recognized in the condensed consolidated income statements as provision (benefit) for income taxes for the three and six months ended June 29, 2013 and June 30, 2012 were as follows:
The total amounts of gross accrued interest and penalties recognized in the condensed consolidated balance sheets as of June 29, 2013 and December 29, 2012 were as follows:
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Acquisitions and Acquisition-Related Contingent Consideration
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Jun. 29, 2013
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITIONS AND ACQUISITION-RELATED CONTINGENT CONSIDERATION | ACQUISITIONS AND ACQUISITION-RELATED CONTINGENT CONSIDERATION Acquisitions On April 22, 2013, Cadence acquired Tensilica, Inc., or Tensilica, a privately held provider of configurable dataplane processing units based in Santa Clara, California. The acquired technology enables Cadence to offer customizable design IP solutions to its customers for applications such as mobile wireless, network infrastructure, audio infotainment and home applications. Total cash consideration for Tensilica, after taking into account adjustments for certain costs and cash held by Tensilica at closing of $26.3 million, was $319.3 million. An additional $5.8 million has been placed in escrow and will be expensed as it is conditioned upon certain Tensilica shareholders remaining employees of Cadence over designated retention periods. Cadence also assumed certain unvested Tensilica options with a fair value of $15.3 million, of which $0.5 million was allocated to purchase consideration. The remaining $14.8 million of assumed options will be expensed over the remaining vesting periods of the awards. The Black-Scholes option-pricing model was used to determine the fair value of the assumed options at the acquisition date. The Black-Scholes option-pricing model incorporates various subjective assumptions including expected volatility, expected term and risk-free interest rates. Cadence will also make payments to certain employees that are conditioned upon continued employment and the achievement of certain performance metrics over a three-year period. On May 23, 2013, Cadence acquired Cosmic Circuits Private Limited, or Cosmic, a privately held provider of intellectual property used in system-on-chip design and verification based in Bangalore, India. The acquired technology enables Cadence to offer broader analog and mixed signal IP solutions to its customers. Total cash consideration for Cosmic, after taking into account cash held by Cosmic at closing of $1.7 million, was $59.5 million. Cadence will also make payments to certain employees that are conditioned upon continued employment and the achievement of certain performance metrics over a four-year period. Lip-Bu Tan, Cadence’s president, chief executive officer and director, was also a member of the board of directors of Cosmic. In addition, a trust for the benefit of the children of Mr. Tan owned approximately 8.5% of Cosmic, and Mr. Tan and his wife serve as co-trustees of the trust. Mr. Tan recused himself from the discussions and negotiations between and at Cadence and Cosmic throughout the duration of the transaction, including any discussions and negotiations related to the consideration provided to Cosmic. A financial advisor provided a fairness opinion to Cadence in connection with the transaction, and the Board of Directors of Cadence reviewed the transaction and concluded that it was in the best interests of Cadence to proceed with such transaction. During the six months ended June 29, 2013, Cadence completed another business combination and an asset acquisition for cash and allocated the total purchase consideration of $14.4 million to the assets acquired and liabilities assumed based on their respective fair values on the acquisition dates. The following table summarizes the fair value of assets acquired and liabilities assumed as part of the acquisitions completed during the six months ended June 29, 2013:
Acquired intangibles with definite lives are amortized on a straight-line basis over the remaining estimated economic life of the underlying products and technologies. The weighted average amortization period for definite-lived intangible assets acquired during the six months ended June 29, 2013 is approximately 8 years. In-process technology consists of projects that had not reached technological feasibility by the date of acquisition and are considered indefinite-lived intangible assets until the completion or abandonment of the project. Upon completion of the project, the assets are amortized over their estimated useful lives. If the project is abandoned rather than completed, the asset is written off. In-process technology is tested for impairment annually or more frequently if events or changes in circumstances indicate that the assets might be impaired. The goodwill generated from Cadence's acquisitions during the six months ended June 29, 2013 is primarily related to expected synergies from combining operations of the acquired companies with Cadence. Cadence expects that approximately $9.6 million of goodwill related to the acquisitions completed during the six months ended June 29, 2013 will be deductible for tax purposes. Results of operations and the estimated fair value of acquired assets and assumed liabilities are recorded in the condensed consolidated financial statements from the date of acquisition. The fair values of acquired intangible assets, including in-process technology, and assumed liabilities were determined using significant inputs that are not observable in the market. For an additional description of these fair value calculations, see Note 7 in the notes to condensed consolidated financial statements. The financial information in the table below summarizes the combined results of operations of Cadence and Tensilica, on a pro forma basis, as though the companies had been combined as of the beginning of fiscal 2012. Pro forma results of operations for the other acquisitions completed during the three and six months ended June 29, 2013 have not been presented because the effects of these acquisitions, individually and in the aggregate, would not have been material to Cadence's financial results. The pro forma financial information for Tensilica is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on December 31, 2011 or of results that may occur in the future.
Acquisition-related costs were $4.8 million and $8.2 million for the three and six months ended June 29, 2013, respectively, and $1.1 million and $1.1 million for the three and six months ended June 30, 2012, respectively. These costs consist of professional fees and administrative costs and were expensed as incurred in Cadence's condensed consolidated income statements. Acquisition-related Contingent Consideration One of the fiscal 2011 acquisitions includes contingent consideration payments based on certain future financial measures associated with the acquired technology. This contingent consideration arrangement requires payments of up to $5.0 million if these measures are met during the three-year period subsequent to October 1, 2011. The fair value of the contingent consideration arrangement recorded on the date of the acquisition was $3.5 million. The fair value of the remaining contingent consideration as of June 29, 2013 was $3.7 million. Cadence may be obligated to make cash payments in connection with its business combinations and asset acquisitions completed in prior fiscal years, subject to the satisfaction of certain financial measures. If performance is such that these payments are fully achieved, Cadence may be obligated to pay up to an aggregate of $14.4 million over the next 34 months. Of the $14.4 million, up to $9.0 million would be recorded as operating expenses in the condensed consolidated income statements. |
Goodwill and Acquired Intangibles (Details) (USD $)
In Thousands, unless otherwise specified |
6 Months Ended |
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Jun. 29, 2013
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Changes in the carrying amount of goodwill | |
Balance as of December 29, 2012 | $ 233,266 |
Goodwill resulting from acquisitions | 227,959 |
Effect of foreign currency translation | (3,669) |
Balance as of June 29, 2013 | $ 457,556 |
Net Income Per Share (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic and diluted net income per share | The calculations for basic and diluted net income per share for the three and six months ended June 29, 2013 and June 30, 2012 are as follows:
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Potential shares of Cadence's common stock excluded | The following table presents shares of Cadence’s common stock outstanding for the three and six months ended June 29, 2013, and June 30, 2012, that were excluded from the computation of diluted net income per share because the effect of including these shares in the computation of diluted net income per share would have been anti-dilutive:
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Debt (Details) (USD $)
In Thousands, unless otherwise specified |
Jun. 29, 2013
|
Dec. 29, 2012
|
---|---|---|
Debt Instrument [Line Items] | ||
Principal | $ 594,639 | $ 494,639 |
Unamortized debt discount | (36,460) | (47,628) |
Carrying value | 100,000 | 0 |
Carrying value | 558,179 | 447,011 |
Notes Due Twenty-Thirteen [Member]
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||
Debt Instrument [Line Items] | ||
Principal | 144,461 | 144,461 |
Unamortized debt discount | (3,140) | (6,447) |
Carrying value | 141,321 | 138,014 |
Convertible Senior Notes Due 2015 [Member]
|
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Debt Instrument [Line Items] | ||
Principal | 350,000 | 350,000 |
Unamortized debt discount | (33,320) | (41,181) |
Carrying value | 316,680 | 308,819 |
Zero Coupon Zero Yield Senior Convertible Notes Due Two Zero Two Three [Member]
|
||
Debt Instrument [Line Items] | ||
Principal | 178 | 178 |
Unamortized debt discount | 0 | 0 |
Carrying value | 178 | 178 |
Revolving Credit Facility [Member]
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Debt Instrument [Line Items] | ||
Principal | 100,000 | 0 |
Unamortized debt discount | 0 | 0 |
Carrying value | $ 100,000 | $ 0 |
Cash, Cash Equivalents and Investments (Details 3) (USD $)
In Thousands, unless otherwise specified |
Jun. 29, 2013
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Contractual maturity of marketable debt investments | |
Marketable Investments, Debt Maturities, Within One Year, Amortized Cost | $ 54,133 |
Marketable Investments, Debt Maturities, Year One Through Three, Amortized Cost | 45,152 |
Marketable investments, Debt Maturities, Amortized Cost, Total | 99,285 |
Marketable Investments, Debt Maturities, Within One Year, Fair Value | 54,160 |
Marketable Investments, Debt Maturities, Year One Through Three, Fair Value | 45,136 |
Marketable Investments, Debt Maturities, Fair Value, Total | $ 99,296 |