During the fourth quarter of 2012, Cadence's non-GAAP net income also excluded the effect of an income tax benefit associated with Cadence's effective settlement of a State of California examination of Cadence's state income tax returns for the tax years 2001 through 2003. Cadence's management believes it is useful to exclude the income tax benefit associated with this settlement because Cadence does not expect settlements resulting in income tax benefits of the magnitude recorded in the fourth quarter of 2012 to occur frequently.
During the third quarter of 2012, Cadence's non-GAAP net income also excluded the effect of an income tax benefit associated with Cadence's acquisition of Sigrity, Inc. During the second quarter of 2011, Cadence's non-GAAP net income also excluded the effect of an income tax benefit associated with an acquisition Cadence completed during the second quarter of 2011. Cadence's management believes it is useful to exclude the tax benefits associated with these acquisitions because exclusion of such tax benefits permits consistent evaluations of Cadence's performance. Cadence does not expect an acquisition-related income tax benefit of the magnitude recorded in the third quarter of 2012 to be recorded frequently.
Cadence's management believes that non-GAAP net income provides useful supplemental information to Cadence's management and investors regarding the performance of the company's business operations and facilitates comparisons to the company's historical operating results. Cadence's management also uses this information internally for forecasting and budgeting. Non-GAAP financial measures should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with their most directly comparable GAAP financial results.
The following tables reconcile the specific items excluded from GAAP net income and GAAP net income per diluted share in the calculation of non-GAAP net income and non-GAAP net income per diluted share for the periods shown below:
Net Income Reconciliation Three Months Ended
------------------------------------
December 29, 2012 December 31, 2011
----------------- -----------------
(unaudited)
(in thousands)
Net income on a GAAP basis $ 313,874 $ 10,892
Amortization of acquired intangibles 7,649 6,681
Stock-based compensation expense 13,276 11,999
Non-qualified deferred compensation
expenses (credits) 1,216 (3,560)
Restructuring and other charges 64 83
Shareholder litigation costs -- 192
Executive and other employee
severance costs -- 2,931
Integration and acquisition-related
costs 2,187 353
Amortization of debt discount 5,354 6,432
Other income or expense related to
investments and non-qualified
deferred compensation plan assets* (4,081) 3,482
Income tax benefit of valuation
allowance release (219,601) --
Income tax benefit of State of
California settlement (36,564) --
Income tax effect of non-GAAP
adjustments (25,363) 6,260
----------------- -----------------
Net income on a non-GAAP basis $ 58,011 $ 45,745
================= =================
* Includes, as applicable, equity in losses or income from investments,
write-down of investments, gains or losses on sale of investments and
gains or losses on non-qualified deferred compensation plan assets
recorded in Other income (expense), net.
Net Income Reconciliation Years Ended
------------------------------------
December 29, 2012 December 31, 2011
----------------- -----------------
(unaudited)
(in thousands)
Net income on a GAAP basis $ 439,948 $ 72,229
Amortization of acquired intangibles 28,618 27,016
Stock-based compensation expense 47,561 43,588
Non-qualified deferred compensation
expenses (credits) 4,453 (383)
Restructuring and other charges 113 360
Shareholder litigation costs 46 1,545
Executive and other employee
severance costs -- 6,178
Integration and acquisition-related
costs 9,278 2,598
Amortization of debt discount 20,846 26,214
Other income or expense related to
investments and non-qualified
deferred compensation plan assets* (6,296) (15,682)
Income tax benefit of valuation
allowance release (219,601) --
Income tax benefit of State of
California settlement (36,564) --
Acquisition-related income tax
benefit (14,806) (5,021)
Income tax effect of non-GAAP
adjustments (56,857) (20,366)
----------------- -----------------
Net income on a non-GAAP basis $ 216,739 $ 138,276
================= =================
* Includes, as applicable, equity in losses or income from investments,
write-down of investments, gains or losses on sale of investments and
gains or losses on non-qualified deferred compensation plan assets
recorded in Other income (expense), net.
Diluted Net Income per Share
Reconciliation Three Months Ended
------------------------------------
December 29, 2012 December 31, 2011
----------------- -----------------
(unaudited)
(in thousands, except per share data)
Diluted net income per share on a GAAP
basis $ 1.10 $ 0.04
Amortization of acquired intangibles 0.03 0.03
Stock-based compensation expense 0.05 0.05
Non-qualified deferred compensation
expenses (credits) -- (0.01)
Restructuring and other charges -- --
Shareholder litigation costs -- --
Executive and other employee
severance costs -- 0.01
Integration and acquisition-related
costs 0.01 --
Amortization of debt discount 0.02 0.02
Other income or expense related to
investments and non-qualified
deferred compensation plan assets* (0.02) 0.01
Income tax benefit of valuation
allowance release (0.77) --
Income tax benefit of State of
California settlement (0.13) --
Income tax effect of non-GAAP
adjustments (0.09) 0.02
----------------- -----------------
Diluted net income per share on a non-
GAAP basis $ 0.20 $ 0.17
================= =================
Shares used in calculation of diluted
net income per share -- GAAP** 286,289 273,057
Shares used in calculation of diluted
net income per share -- non-GAAP** 286,289 273,057
* Includes, as applicable, equity in losses or income from investments,
write-down of investments, gains or losses on sale of investments and
gains or losses on non-qualified deferred compensation plan assets
recorded in Other income (expense), net.
** Shares used in the calculation of GAAP net income per share are expected
to be the same as shares used in the calculation of non-GAAP net income
per share, except when the company reports a GAAP net loss and non-GAAP
net income, or GAAP net income and a non-GAAP net loss.
Diluted Net Income per Share
Reconciliation Years Ended
------------------------------------
December 29, 2012 December 31, 2011
----------------- -----------------
(unaudited)
(in thousands, except per share data)
Diluted net income per share on a GAAP
basis $ 1.57 $ 0.27
Amortization of acquired intangibles 0.10 0.10
Stock-based compensation expense 0.17 0.16
Non-qualified deferred compensation
expenses (credits) 0.02 --
Restructuring and other charges -- --
Shareholder litigation costs -- 0.01
Executive and other employee
severance costs -- 0.02
Integration and acquisition-related
costs 0.03 0.01
Amortization of debt discount 0.07 0.10
Other income or expense related to
investments and non-qualified
deferred compensation plan assets* (0.02) (0.06)
Income tax benefit of valuation
allowance release (0.78) --
Income tax benefit of State of
California settlement (0.13) --
Acquisition-related income tax
benefit (0.05) (0.02)
Income tax effect of non-GAAP
adjustments (0.21) (0.08)
----------------- -----------------
Diluted net income per share on a non-
GAAP basis $ 0.77 $ 0.51
================= =================
Shares used in calculation of diluted
net income per share -- GAAP** 280,667 270,816
Shares used in calculation of diluted
net income per share -- non-GAAP** 280,667 270,816
* Includes, as applicable, equity in losses or income from investments,
write-down of investments, gains or losses on sale of investments and
gains or losses on non-qualified deferred compensation plan assets
recorded in Other income (expense), net.
** Shares used in the calculation of GAAP net income per share are expected
to be the same as shares used in the calculation of non-GAAP net income
per share, except when the company reports a GAAP net loss and non-GAAP
net income, or GAAP net income and a non-GAAP net loss.
