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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): April 20, 1999
CADENCE DESIGN SYSTEMS, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-10606 77-0148231
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification Number)
2655 Seely Road, Building 5
San Jose, California 95134
(Address of Principal Executive Offices)(Zip Code)
Registrant's telephone number, including area code: (408) 943-1234
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Item 5. Other Events.
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On April 20, 1999, Cadence Design Systems, Inc. (the "Registrant")
announced its first quarter 1999 results.
In addition, on April 27, 1999, the Registrant announced the appointment of
H. Raymond Bingham to the position of President and Chief Executive Officer.
Mr. Bingham has served as the Registrant's Chief Financial Officer since 1993,
and replaces John R. Harding who resigned the position of President and CEO.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(c) Exhibits
Exhibit No. Description
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99.1 Press Release issued April 20, 1999.
99.2 Press Release issued April 27, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated as of May 3, 1999.
CADENCE DESIGN SYSTEMS, INC.
By: /s/ R.L. Smith McKeithen
---------------------------
R.L. Smith McKeithen
Senior Vice President and General Counsel
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EXHIBIT INDEX
Exhibit No. Document
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Exhibit 99.1 Press Release issued April 20, 1999
Exhibit 99.2 Press Release issued April 27, 1999.
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Exhibit 99.1
FOR IMMEDIATE RELEASE
For more information, contact:
Ray Bingham
Chief Financial Officer
Cadence Design Systems, Inc.
(408) 944-7503
[email protected]
CADENCE ANNOUNCES FIRST QUARTER 1999 RESULTS
Operational Initiatives Strengthen Company's Performance
SAN JOSE, Calif. -- April 20, 1999 -- Cadence Design Systems, Inc. (NYSE:
CDN) today announced that first quarter revenue increased 13% over the prior
year quarter to reach $305 million. Earnings per share (before unusual items
and goodwill amortization) of $0.31 was 23% higher than in the first quarter of
1998. Including the effects of unusual items and goodwill amortization, diluted
earnings per share was $0.22.
Cadence improved margins substantially in the first quarter in the
Company's design services business, leading to record margins in services
overall. Gross margins for services came in at 34%, ten percentage points higher
than the 24% posted in the first quarter of 1998. Cadence leveraged this
services margin improvement to achieve a first-quarter record 34% in operating
margin. Software product revenue for the first quarter of 1999 totaled $166
million, up 8% from the prior year quarter, while services revenue increased to
$71 million, up 35% over the same period. The Company was pleased with the
progress in improving services margins; however, services revenues remained
below their targets.
During the first quarter, Cadence recorded unusual charges of $14 million,
primarily due to the write-off of in-process research and development expenses
associated with the acquisition of Design Acceleration, Inc. (DAI), and the
completion of the restructuring program initiated in the fourth quarter of 1998.
Quarterly results included $12 million in goodwill amortization, including
amortization of assets acquired from DAI and other acquisitions concluded in
prior years.
The Company commented that revenue and earnings growth are anticipated to
be slower for the remainder of 1999, and that the growth rate for services
revenues will be constrained by the company's emphasis on accepting higher
margin engagements.
--more--
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Cadence Announces First Quarter 1999 Results Page 2
"I am pleased with the progress we've made in addressing our margin issues,
but there is more to be done with respect to our top line growth," said Jack
Harding, CEO and president at Cadence. "We are aggressively marketing a product
portfolio that underscores our total design capability for managing the
transition to 0.18 micron and systems on a chip. We will continue to focus on
our services margin goals, building backlog visibility, and exploiting future
growth opportunities that leverage our enormous depth and breadth of software
and electronics expertise."
According to Harding, the Company's new electronics infusion business is
expected to significantly expand the market opportunity for Cadence's
electronics consulting services. Cadence broke ground in this area during the
first quarter by launching the Electronics Infusion group, and by establishing a
strategic alliance with the Ingersoll-Rand Company, an industrial product
supplier. The Electronics Infusion group provides strategic consulting to
industrial and consumer companies who can benefit from incorporating more
electronics capabilities into their products and services.
In order to provide a consistent view of the operating results of the
Company, Cadence is now using a new EPS metric: Earnings Before Goodwill (EBG).
This figure has been adopted by many financial research services as the metric
reported for comparative purposes, and represents earnings per share, excluding
unusual items and goodwill amortization associated with purchase acquisitions.
For comparative purposes, except where noted, all references to earnings per
share (EPS) throughout this release are on a diluted basis, excluding the
effects of unusual items and goodwill amortization.
Except for the historical information contained herein, the matters
discussed in this news release are forward looking statements that involve risks
and uncertainties. Risks about the Company's business are detailed from time to
time in the Company's SEC reports, including the report on Form 10-K for the
year ended January 2, 1999.
--more--
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Cadence Announces First Quarter 1999 Results Page 3
About Cadence
Cadence is the largest supplier of software products, methodology services,
and design services used to accelerate and manage the design of semiconductors,
computer systems, networking and telecommunications equipment, consumer
electronics, and a variety of other electronics-based products. With more than
4,000 employees and 1998 annual sales of $1.2 billion, Cadence has sales
offices, design centers, and research facilities around the world. The Company
is headquartered in San Jose, Calif. and traded on the New York Stock Exchange
under the symbol CDN. More information about the company, its products and
services may be obtained from the World Wide Web at http://www.cadence.com.
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Cadence and the Cadence logo are registered trademarks of Cadence Design
Systems, Inc. All others are properties of their holders.
CADENCE DESIGN SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
APRIL 3, 1999 AND JANUARY 2, 1999
(IN 000'S)
April 3, January 2,
1999 1999
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(Unaudited)
Cash and Short-term Investments $ 216,908 $ 209,752
Receivables, Net 252,113 277,599
Prepaid Expenses and Other 98,902 92,359
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Total Current Assets 567,923 579,710
Property, Plant and Equipment, Net 278,453 262,675
Software Development Costs, Net 12,039 13,045
Acquired Intangibles, Net 289,796 282,489
Installment Contract Receivables 105,297 100,529
Other Assets 164,842 167,510
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Total Assets $1,418,350 $1,405,958
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Notes Payable and Current
Portion of Capital Leases $ 1,230 $ 1,273
Accounts Payable and Accrued
Liabilities 158,794 211,220
Income Taxes Payable 7,359 19,133
Deferred Revenue 102,677 96,286
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Total Current Liabilities 270,060 327,912
Long-term Debt and Capital Leases 86,083 136,380
Deferred Income Taxes 69,097 58,927
Minority Interest Liability 240 377
Other Long-term Liabilities 24,306 24,883
Stockholders' Equity 968,564 857,479
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Total Liabilities &
Stockholders' Equity $1,418,350 $1,405,958
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CADENCE DESIGN SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED APRIL 3, 1999 AND APRIL 4, 1998
(IN 000'S, EXCEPT PER SHARE AMOUNTS)
Quarters Ended
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April 3, April 4,
1999 1998
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(Unaudited) (Unaudited)
Revenue:
Product $166,095 $154,049
Services 70,560 52,302
Maintenance 68,579 63,872
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Total Revenue $305,234 $270,223
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Costs and Expenses:
Cost of Product 12,971 11,844
Cost of Services 46,492 39,601
Cost of Maintenance 10,700 10,343
Amortization of Acquired
Intangibles 12,457 546
Marketing and Sales 70,168 69,245
Research and Development 45,201 41,707
General and Administrative 16,484 16,521
Unusual Items 14,192 60,857
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Total Costs and Expenses $228,665 $250,664
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Income From Operations 76,569 19,559
Other Income (Expense), Net (605) 2,619
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Income Before Provision
for Income Taxes 75,964 22,178
Provision for Income Taxes 24,186 22,537
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Net Income (Loss) $ 51,778 $ (359)
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Basic Net Income (Loss)
Per Share $0.24 $ --
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Diluted Net Income (Loss)
Per Share $0.22 $ --
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Weighted Average Common
Shares Outstanding 217,092 210,014
Weighted Average Common
and Potential Common
Shares Outstanding --
Assuming Dilution 233,791 210,014
Supplemental Diluted Earnings
Per Share Before Unusual
Items and Amortization
of Acquired Intangibles $0.31 $0.25
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CADENCE DESIGN SYSTEMS, INC.
SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
EXCLUDING UNUSUAL ITEMS AND AMORTIZATION OF ACQUIRED INTANGIBLES
FOR THE QUARTERS ENDED APRIL 3, 1999 AND APRIL 4, 1998
(IN 000'S, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
SUPPLEMENTAL
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Quarters Ended
April 3, April 4,
1999 1998 % Change
-------- -------- --------
Revenue:
Product $166,095 $154,049 8%
Services 70,560 52,302 35%
Maintenance 68,579 63,872 7%
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Total Revenue 305,234 270,223 13%
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Costs and Expenses:
Cost of Product 12,971 11,844 10%
Cost of Services 46,492 39,601 17%
Cost of Maintenance 10,700 10,343 3%
Marketing and Sales 70,168 69,245 1%
Research and
Development 45,201 41,707 8%
General and
Administrative 16,484 16,521 0%
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Total Costs
and Expenses 202,016 189,261 7%
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Income From Operations 103,218 80,962 27%
Other Income
(Expense), Net (605) 2,619 -123%
-------- -------- ----
Income Before
Provision For
Income Taxes 102,613 83,581 23%
Provision for
Income Taxes 29,245 23,820 23%
-------- -------- ----
Net Income $ 73,368 $ 59,761 23%
-------- -------- ----
Diluted Net Income
Per Share $0.31 $0.25 24%
======== ======== ====
Weighted Average Common
And Potential Common
Shares Outstanding --
Assuming Dilution 233,791 234,997 -1%
======== ======== ====
<PAGE>
Exhibit 99.2
FOR IMMEDIATE RELEASE
For more information, contact:
Laurie Stanley
Cadence Design Systems, Inc.
(408) 428-5019
[email protected]
BINGHAM NAMED CADENCE CEO
EDA Industry Leader Organizes to Deliver Design Productivity and Design
Realization
SAN JOSE, Calif. -- April 27, 1999 -- Cadence Design Systems, Inc. (NYSE:
CDN) today announced the appointment of Ray Bingham to Chief Executive Officer.
Bingham has served as the Company's chief financial officer since 1993, and
replaces Jack Harding, who resigned the position of president and CEO.
In his role as CEO, Bingham has established an organizational structure
that underscores the Company's commitment to delivering the broadest portfolio
of design productivity products and world-class design realization services.
Bingham named Shane Robison as president of the Design Productivity Group, and
John Olsen as president of the Design Realization Group and Corporate
Development. Both Robison and Olsen report directly to Bingham. William Porter,
who is currently vice president, corporate controller and assistant secretary
for Cadence, was named acting chief financial officer, reporting directly to
Bingham.
"This new organization capitalizes on our seasoned management team to
aggressively build on Cadence's leadership position in EDA," said Ray Bingham,
CEO of Cadence. "Our entire company is focused on helping customers improve
their design efficiency and achieve their product realization goals. With the
most competitive offering of electronic design software and services available
anywhere, Cadence is best positioned to enable the global economy to exploit the
power and value of electronics."
New Organization Strengthens Technology Focus
The new Cadence organization will provide greater emphasis on Cadence's
core electronic design automation (EDA) products and services, and will maximize
growth opportunities for its design services and recently announced electronics
infusion group.
-- more --
<PAGE>
Bingham Named Cadence CEO Page 2
Ray Bingham will leverage his proven financial and management strengths to
lead the Company as CEO. In addition to Robison, Olsen and Porter, the corporate
marketing, legal, and human services organizations will report to Bingham.
Shane Robison formerly led Cadence worldwide research and development, and
EDA product marketing. In his new role as president of the Design Productivity
Group, Robison will be responsible for the development, marketing and sales of
Cadence's EDA products and services, and for closer integration of the Company's
electronic design software and methodology services.
John Olsen previously managed Cadence worldwide field operations. His
responsibilities as president of the Design Realization Group will be design
services, electronics infusion, and corporate development. In his corporate
development role, Olsen will drive strategic initiatives, including
acquisitions. He will also develop new business models such as electronic
commerce, which may involve the distribution of design productivity software
over the internet.
About Cadence
Cadence Design Systems, Inc. is the worldwide leader in electronic design
software and services. With more than 4,000 employees and 1998 annual sales of
$1.2 billion, Cadence has sales offices, design centers, and research facilities
around the world. The Company is headquartered in San Jose, Calif. and traded on
the New York Stock Exchange under the symbol CDN. More information about the
company, its products and services may be obtained from the World Wide Web at
http://www.cadence.com.
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-- end --
Except for the historical information contained herein, the matters discussed in
this news release are forward looking statements that involve risks and
uncertainties. Risks about the Company's business are detailed from time to time
in the Company's SEC reports, including the report on Form 10-K for the year
ended January 2, 1999. Cadence and the Cadence logo are registered trademarks of
Cadence Design Systems, Inc. All others are properties of their holders.
