For a detailed discussion of these and other cautionary statements related to Cadence's business, please refer to Cadence's filings with the Securities and Exchange Commission. These include Cadence's most recent reports on Form 10-K and Form 10-Q, including Cadence's future filings.
GAAP to Non-GAAP Reconciliation
To supplement Cadence's financial results presented on a generally accepted accounting principles, or GAAP, basis, Cadence management uses non-GAAP measures that it believes are helpful in understanding Cadence's performance. One such measure is non-GAAP net income, which is a financial measure not calculated under GAAP, and is calculated by taking GAAP net income and excluding, as applicable, amortization and sale of intangible assets and debt discount related to our convertible notes, stock-based compensation expense, acquisition and integration-related costs including changes in fair value of contingent consideration and retention expenses for employees added from our 2013 and 2014 acquisitions, executive severance costs, investment gains or losses, income or expenses related to Cadence's non-qualified deferred compensation plan, restructuring and other significant items not directly related to Cadence's core business operations, and the income tax effect of non-GAAP pre-tax adjustments.
Cadence's management uses non-GAAP net income because it excludes items that are generally not directly related to the performance of the company's core business operations and therefore provides useful supplemental information to Cadence's management and investors regarding the performance of the company's business operations, facilitates comparisons to the company's historical operating results and enhances investors' ability to review Cadence's business from the same perspective as Cadence's management. Cadence's management also uses non-GAAP net income 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. Investors are encouraged to look at the GAAP results as the best measure of financial performance.
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 | ||||
|
|
|
March 29, 2014 |
|
March 30, 2013 | ||
|
|
|
(unaudited) | ||||
|
(in thousands) |
|
|
|
| ||
|
Net income on a GAAP basis |
|
$ |
33,070 |
|
$ |
78,609 |
|
Amortization of acquired intangibles |
|
12,786 |
|
7,598 | ||
|
Stock-based compensation expense |
|
18,864 |
|
13,810 | ||
|
Non-qualified deferred compensation expenses |
|
2,063 |
|
152 | ||
|
Restructuring and other charges (credits) |
|
396 |
|
(148) | ||
|
Integration and acquisition-related costs |
|
7,118 |
|
4,935 | ||
|
Amortization of debt discount |
|
4,209 |
|
5,536 | ||
|
Other income or expense related to investments and non-qualified deferred compensation plan assets* |
|
(3,609) |
|
(990) | ||
|
Income tax benefit due to a release of an uncertain tax position |
|
— |
|
(33,719) | ||
|
Income tax effect of non-GAAP adjustments |
|
(15,510) |
|
(15,146) | ||
|
Net income on a non-GAAP basis |
|
$ |
59,387 |
|
$ |
60,637 |
|
|
|
|
|
|
|
* |
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 or expense. |
|
Diluted Net Income per Share Reconciliation |
|
Three Months Ended | ||||
|
|
|
March 29, 2014 |
|
March 30, 2013 | ||
|
|
|
(unaudited) | ||||
|
(in thousands, except per share data) |
|
|
|
| ||
|
Diluted net income per share on a GAAP basis |
|
$ |
0.11 |
|
$ |
0.27 |
|
Amortization of acquired intangibles |
|
0.04 |
|
0.03 | ||
|
Stock-based compensation expense |
|
0.06 |
|
0.05 | ||
|
Non-qualified deferred compensation expenses |
|
0.01 |
|
— | ||
|
Restructuring and other charges (credits) |
|
— |
|
— | ||
|
Integration and acquisition-related costs |
|
0.02 |
|
0.02 | ||
|
Amortization of debt discount |
|
0.02 |
|
0.02 | ||
|
Other income or expense related to investments and non-qualified deferred compensation plan assets* |
|
(0.01) |
|
(0.01) | ||
|
Income tax benefit due to a release of an uncertain tax position |
|
— |
|
(0.12) | ||
|
Income tax effect of non-GAAP adjustments |
|
(0.05) |
|
(0.05) | ||
|
Diluted net income per share on a non-GAAP basis |
|
$ |
0.20 |
|
$ |
0.21 |
|
Shares used in calculation of diluted net income per share — GAAP** |
|
301,034 |
|
292,151 | ||
|
Shares used in calculation of diluted net income per share — non-GAAP** |
|
301,034 |
|
292,151 | ||
|
|
|
|
|
|
|
* |
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 or expense. |
|
|
|
|
** |
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. |
