Cadence Design Systems, Inc.

Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures

For the Three Months Ended January 3, 2015

(In thousands)

(Unaudited)

Three Months Ended

January 3, 2015

GAAP

Adjustments

Non-GAAP

Revenue:

Product and maintenance

$         393,223

$                -

$       393,223

Services

29,875

-

29,875

Total revenue

423,098

-

423,098

Costs and expenses:

Cost of product and maintenance

39,475

(11,297)

 (A) 

28,178

Cost of services

18,640

(950)

 (A) 

17,690

Marketing and sales

102,367

(5,924)

 (A) 

96,443

Research and development

155,124

(15,795)

 (A) 

139,329

General and administrative

26,939

(4,344)

 (A) 

22,595

Amortization of acquired intangibles

6,912

(6,912)

 (A) 

-

Restructuring and other charges (credits)

(1,145)

1,145

-

Total costs and expenses

348,312

(44,077)

304,235

Income from operations

74,786

44,077

118,863

Interest expense

(11,961)

4,782

 (B) 

(7,179)

Other income, net

3,879

(1,484)

(C)

2,395

Income before provision for income taxes

66,704

47,375

114,079

Provision for income taxes

1,674

27,987

(D)

29,661

Net income 

$           65,030

$        19,388

$         84,418

Notes: 

(A) For the three months ended January 3, 2015, adjustments to GAAP are as follows for the line items specified:

Amortization of
acquired
intangibles

Stock-based
compensation
expense

Non-qualified
deferred
compensation
expenses

Acquisition and
integration-
related costs

Total
adjustments

Cost of product and maintenance

$            10,647

$                644

$                 6

$                -

$        11,297

Cost of services

-

942

8

-

950

Marketing and sales

-

5,494

19

411

5,924

Research and development

-

12,225

216

3,354

15,795

General and administrative

-

3,669

160

515

4,344

Amortization of acquired intangibles

6,912

-

-

-

6,912

Total

$            17,559

$           22,974

$             409

$           4,280

$        45,222

(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