Cadence Design Systems, Inc.

Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures

For the Three Months Ended September 27, 2014

(In thousands)

(Unaudited)

Three Months Ended

September 27, 2014

GAAP

Adjustments

Non-GAAP

Revenue:

Product and maintenance

$    374,110

$                          -

$    374,110

Services

26,386

-

26,386

Total revenue

400,496

-

400,496

Costs and expenses:

Cost of product and maintenance

36,954

(10,703)

 (A) 

26,251

Cost of services

17,125

(924)

 (A) 

16,201

Marketing and sales

100,387

(6,799)

 (A) 

93,588

Research and development

148,744

(15,418)

 (A) 

133,326

General and administrative

25,894

(3,894)

 (A) 

22,000

Amortization of acquired intangibles

6,316

(6,316)

 (A) 

-

Restructuring and other charges

11,027

(11,027)

-

Total costs and expenses

346,447

(55,081)

291,366

Income from operations

54,049

55,081

109,130

Interest expense

(7,523)

4,370

 (B) 

(3,153)

Other income (expense), net

(417)

1,944

(C)

1,527

Income before provision for income taxes

46,109

61,395

107,504

Provision for income taxes

8,574

19,377

(D)

27,951

Net income 

$      37,535

$                 42,018

$      79,553

Notes:

(A) For the three months ended September 27, 2014, adjustments to GAAP are as follows for the line items specified:

Amortization of
acquired intangibles

Stock-based
compensation
expense

Non-qualified
deferred
compensation
credits

Acquisition and
integration-related
costs

Special charges
(E)

Total
adjustments

Cost of product and maintenance

$                  10,071

$              633

$                (1)

$                           -

$                        -

$           10,703

Cost of services

-

926

(2)

-

-

924

Marketing and sales

-

5,930

(1)

870

-

6,799

Research and development

-

11,580

(95)

3,933

-

15,418

General and administrative

-

3,808

(5)

(368)

459

3,894

Amortization of acquired intangibles

6,316

-

-

-

-

6,316

Total

$                  16,387

$         22,877

$            (104)

$                   4,435

$                  459

$          44,054

(B) Amortization of debt discount related to convertible notes

(C) Other income or expense related to investments and non-qualified deferred compensation plan assets

(D) Income tax effect of non-GAAP adjustments 

(E) Comprised of costs related to a voluntary retirement program