Table	of	Contents

# UNITED	STATES	SECURITIES	AND	EXCHANGE	COMMISSION

(Mark	One)

# ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES	EXCHANGE	ACT	OF	1934

# For	the	fiscal	year	ended	December	29,	2018

¨ TRANSITION	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES	EXCHANGE	ACT	OF	1934

cdnslogo17.jpg

# CADENCE	DESIGN	SYSTEMS,	INC.

(Exact	name	of	registrant	as	specified	in	its	charter)

Delaware

(State	or	Other	Jurisdiction	of Incorporation	or	Organization)

2655	Seely	Avenue,	Building	5,	San	Jose,	California

(Address	of	Principal	Executive	Offices)

(I.R.S.	Employer Identification	No.)

(Zip	Code)

(Registrant's	Telephone	Number,	including	Area	Code)

Securities	registered	pursuant	to	Section	12(b)	of	the	Act:

Title	of	Each	Class

Common	Stock,	$0.01	par	value	per	share

Names	of	Each	Exchange	on	which	Registered

# Nasdaq	Global	Select	Market

Securities	registered	pursuant	to	Section	12(g)	of	the	Act:

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.	Yes		x				No		¨

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.	Yes		¨				No		x

Indicate	by	check	mark	whether	the	registrant	(1)	has	filed	all	reports	required	to	be	filed	by	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934	during	the	preceding	12 months	(or	for	such	shorter	period	that	the	registrant	was	required	to	file	such	reports),	and	(2)	has	been	subject	to	such	filing	requirements	for	the	past	90	days.	Yes		x				No		¨

Indicate	by	check	mark	whether	the	registrant	has	submitted	electronically	every	Interactive	Data	File	required	to	be	submitted	pursuant	to	Rule	405	of	Regulation	S-T	(§ 232.405	of	this	chapter)	during	the	preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	submit	such	files).	Yes		x				No		¨

Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	(§	229.405	of	this	chapter)	is	not	contained	herein,	and	will	not	be	contained,	to the	best	of	registrant's	knowledge,	in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any	amendment	to	this	Form	10-K.	¨

Indicate	by	check	mark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	a	non-accelerated	filer,	a	smaller	reporting	company,	or	an	emerging	growth company.	See	the	definitions	of	"large	accelerated	filer,"	"accelerated	filer,"	"smaller	reporting	company,"	and	"emerging	growth	company"	in	Rule	12b-2	of	the	Exchange	Act.

Large	accelerated	filer

Non-accelerated	filer

Accelerated	filer

Smaller	reporting	company 	 o

Emerging	growth	company 	 o

If	an	emerging	growth	company,	indicate	by	check	mark	if	the	registrant	has	elected	not	to	use	the	extended	transition	period	for	complying	with	any	new	or	revised	financial accounting	standards	provided	pursuant	to	Section	13(a)	of	the	Exchange	Act.	¨

Indicate	by	check	mark	whether	the	registrant	is	a	shell	company	(as	defined	in	Rule	12b-2	of	the	Act).	Yes		¨				No		x

The	aggregate	market	value	of	the	voting	and	non-voting	common	equity	held	by	non-affiliates	computed	by	reference	to	the	price	at	which	the	common	equity	was	last	sold	as of	the	last	business	day	of	the	registrant's	most	recently	completed	second	fiscal	quarter	ended	June	30,	2018	was	approximately	$12,248,414,480.

# DOCUMENTS	INCORPORATED	BY	REFERENCE

Portions	of	the	definitive	proxy	statement	for	Cadence	Design	Systems,	Inc.'s	2019	Annual	Meeting	of	Stockholders	are	incorporated	by	reference	into	Part	III	hereof.

# ANNUAL	REPORT	ON	FORM	10-K

# PART	I.

| Item	1. | Business | 1 |
| :--- | :--- | :--- |
| Item\t1A. | Risk\tFactors | 8 |
| Item\t1B. | Unresolved\tStaff\tComments | 21 |
| Item\t2. | Properties | 21 |
| Item\t3. | Legal\tProceedings | 21 |
| Item\t4. | Mine\tSafety\tDisclosures | 21 |
| PART\tII. |  |  |
| Item\t5. | Market\tfor\tRegistrant's\tCommon\tEquity,\tRelated\tStockholder\tMatters\tand\tIssuer\tPurchases\tof\tEquity\tSecurities | 22 |
| Item\t6. | Selected\tFinancial\tData | 23 |
| Item\t7. | Management's\tDiscussion\tand\tAnalysis\tof\tFinancial\tCondition\tand\tResults\tof\tOperations | 24 |
| Item\t7A. | Quantitative\tand\tQualitative\tDisclosures\tAbout\tMarket\tRisk | 37 |
| Item\t8. | Financial\tStatements\tand\tSupplementary\tData | 38 |
| Item\t9. | Changes\tin\tand\tDisagreements\twith\tAccountants\ton\tAccounting\tand\tFinancial\tDisclosure | 39 |
| Item\t9A. | Controls\tand\tProcedures | 39 |
| Item\t9B. | Other\tInformation | 39 |
| PART\tIII. |  |  |
| Item\t10. | Directors,\tExecutive\tOfficers\tand\tCorporate\tGovernance | 40 |
| Item\t11. | Executive\tCompensation | 40 |
| Item\t12. | Security\tOwnership\tof\tCertain\tBeneficial\tOwners\tand\tManagement\tand\tRelated\tStockholder\tMatters | 40 |
| Item\t13. | Certain\tRelationships\tand\tRelated\tTransactions\tand\tDirector\tIndependence | 40 |
| Item\t14. | Principal\tAccountant\tFees\tand\tServices | 40 |
| PART\tIV. |  |  |
| Item\t15. | Exhibits\tand\tFinancial\tStatement\tSchedules | 41 |
| Item\t16. | Form\t10-K\tSummary | 82 |
|  | Signatures | 83 |

# Item	1.	Business

This	Annual	Report	on	Form	10-K	and	the	documents	incorporated	by	reference	in	this	Annual	Report	on	Form	10-K	contain	statements	that	are	not	historical	in nature,	are	predictive,	or	that	depend	upon	or	refer	to	future	events	or	conditions	or	contain	other	forward-looking	statements.	Statements	including,	but	not	limited	to, statements	regarding	the	extent	and	timing	of	future	revenues	and	expenses	and	customer	demand,	statements	regarding	the	deployment	of	our	products	and services,	statements	regarding	our	reliance	on	 third	parties	and	other	statements	using	words	such	as	"anticipates,"	"believes,"	"could,"	"estimates,"	"expects," "forecasts,"	"intends,"	"may,"	"plans,"	"projects,"	"should,"	"targets,"	"will"	and	"would,"	and	words	of	similar	import	and	the	negatives	thereof,	constitute	forward-looking statements.	These	statements	are	predictions	based	upon	our	current	expectations	about	future	events.	Actual	results	could	vary	materially	as	a	result	of	certain factors,	including	but	not	limited	to	those	expressed	in	these	statements.	Important	risks	and	uncertainties	that	could	cause	actual	results	to	differ	materially	from those	contained	in	the	forward-looking	statements	include,	but	are	not	limited	to,	those	identified	in	"Proprietary	Technology,"	"Competition,"	"Risk	Factors,"	"Critical Accounting	Estimates,"	"Results	of	Operations,"	"Quantitative	and	Qualitative	Disclosures	About	Market	Risk"	and	"Liquidity	and	Capital	Resources"	contained	in	this Annual	Report	on	Form	10-K	and	the	risks	discussed	in	our	other	Securities	and	Exchange	Commission	("SEC")	filings.

We	urge	you	to	consider	these	factors	carefully	in	evaluating	the	forward-looking	statements	contained	in	this	Annual	Report	on	Form	10-K.	All	subsequent written	or	oral	forward-looking	statements	attributable	to	our	company	or	persons	acting	on	our	behalf	are	expressly	qualified	in	their	entirety	by	these	cautionary statements.	The	forward-looking	statements	included	in	this	Annual	Report	on	Form	10-K	are	made	only	as	of	the	date	of	this	Annual	Report	on	Form	10-K.	We	do not	intend,	and	undertake	no	obligation,	to	update	these	forward-looking	statements.

# Overview

We	enable	our	customers	to	design	electronic	products.	Our	products	and	services	are	designed	to	give	our	customers	a	competitive	edge	in	their	development of	electronic	systems,	integrated	circuits	("ICs"),	electronic	devices	and	increasingly	sophisticated	manufactured	products.	Our	products	and	services	do	this	by optimizing	performance,	minimizing	power	consumption,	shortening	the	time	to	bring	our	customers'	products	to	market	and	reducing	their	design,	development	and manufacturing	costs.	Our	customers	create	and	sell	electronic	products	at	differing	levels	of	completeness.	Our	electronic	systems	customers	deliver	entire	devices, such	as	smartphones,	laptop	computers,	gaming	systems,	automobiles	and	autonomous	driving,	servers,	cloud	datacenter	infrastructure,	artificial	intelligence	("AI") systems,	 aerospace	 and	 defense,	 medical	 equipment	 and	 networking	 products.	These	 systems	 companies	 internally	 develop,	 or	 externally	 purchase,	 the	 sub- components	 for	 their	 products,	 including	 printed	 circuit	 boards	 ("PCBs"),	 which	 interconnect	 all	 the	 hardware	 components,	 ICs,	 which	 are	 often	 referred	 to	 as computer	chips,	and	software	at	various	levels	which	runs	on	the	hardware.	Our	semiconductor	customers	deliver	ICs,	which	include	subcategories	such	as	memory chips,	systems-on-chip	("SoCs"),	analog	chips,	processors	and	other	types	of	chips.

We	offer	software,	hardware,	services	and	reusable	IC	design	blocks,	which	are	commonly	referred	to	as	intellectual	property	("IP").	Systems	customers	use	our offerings	to	develop	and	integrate	software	that	is	key	to	the	functionality	of	their	products,	as	well	as	to	design	their	ICs	and	PCBs.	Our	semiconductor	customers	use our	offerings	to	design,	configure,	analyze	and	verify	ICs.	Additionally,	some	customers	license	our	IP,	which	accelerates	their	product	development	processes	by providing	pre-designed	and	verified	circuit	blocks	for	their	ICs.

Our	strategy,	which	we	call	System	Design	Enablement	("SDE"),	 is	 to	provide	 the	 technologies	necessary	 for	our	customers	 to	develop	a	complete	and functional	electronic	product.	Our	SDE	strategy	enables	us	to	address	the	growing	trends	of	electronic	systems	companies	developing	their	own	ICs	as	part	of	their end	product	systems,	as	well	as	semiconductor	companies	delivering	greater	portions	of	the	systems	into	which	their	IC	products	are	integrated.	The	development	of electronic	products,	or	their	sub-components,	is	complex	and	requires	many	engineers	using	our	solutions	with	specialized	knowledge	and	skill.	The	rate	of	technical innovation	in	electronics	is	swift,	long	driven	by	a	concept	known	as	Moore's	Law,	which	more	than	50	years	ago	predicted	that	the	complexity	of	ICs	would	double about	 every	 24	 months.	 In	 order	 to	 make	 our	 customers	 successful,	 our	 products	 must	 handle	 this	 exponential	 growth	 rate	 in	 complexity,	 without	 requiring	 a corresponding	 increase	 in	 our	 customers'	 costs.	 Historically,	 the	 industry	 that	 provided	 the	 tools	 used	 by	 IC	 engineers	 was	 referred	 to	 as	 Electronic	 Design Automation	("EDA").	Today,	our	offerings	include	and	extend	beyond	EDA	tools	to	include	SDE.

Our	SDE	solutions	facilitate	the	electronic	product	creation	process	at	four	levels.	First,	our	core	EDA	offerings	enable	engineers	to	complete	tasks	associated with	the	design,	analysis	and	verification	of	ICs.	Core	EDA	tools	and	services	are	specifically	designed	to	meet	the	requirements	of	engineers	who	develop	different types	of	ICs.	The	second	level	of	SDE	solutions	is	IP,	which	consists	of	design	IP	and	verification	IP	("VIP").	Design	IP	is	directly	integrated	into	the	IC	by	the customer	as	part	of	its	development	process.	VIP	consists	of	technologies	and	methodologies	useful	for	verifying	how	design	IP	is	integrated	into	the	IC,	but	VIP	does not	become	part	of	the	IC	product.	The	third	level	of	SDE	solutions	is	System	Interconnect,	and	includes	tools	and	services	used	for	the	design,	analysis	and verification	of	PCBs,	as	well	as	the	packages	that	encapsulate	the	ICs	for	electrical	and	physical	connection	to	the	PCB.	The	fourth	level	of	SDE	solutions	is	System Integration,	which	includes	the	engineering	tasks	associated	with	designing	and	analyzing	systems,	verifying	system	functionality,	combining	software	with	hardware, or	developing	new	software	for	an	IC	or	system	prior	to	its	manufacture.

# Business	Drivers

Our	products	and	services	enable	our	customers	to	design	complex	and	innovative	electronic	products,	so	demand	for	our	products	is	driven	by	our	customers' investment	in	new	designs	and	products.	The	most	promising	new	opportunities	for	us	involve	enabling	the	design	of	electronic	systems	for	machine	learning,	edge computing,	hyperscale	datacenter	infrastructure,	5G	networks,	augmented	reality,	virtual	reality,	internet-of-things,	aerospace	and	defense	and	autonomous	vehicle sub-systems.	Large	and	existing	electronics	categories,	such	as	datacenter	servers,	smartphones	and	networking	products	continue	to	provide	business	opportunities for	us	as	customers	initiate	new	design	projects.

Underlying	the	requirements	within	any	particular	vertical	market	sector	is	the	availability	of	rapidly	improving	IC	manufacturing	technology.	In	order	for	our customers	to	take	advantage	of	such	advancements,	certain	of	our	products	must	first	be	developed	to	exploit	these	new	manufacturing	capabilities.	This	dependency means	 that	we	must	 invest	significantly	 in	product	research	and	development	 to	keep	pace	with	 the	 latest	manufacturing	 technology.	The	demand	 for	new	 IC manufacturing	technology	directly	impacts	the	demand	for	our	newest	products.

Another	driver	for	our	business	is	the	differentiation,	capabilities	and	benefits	provided	to	our	customers	by	our	products.	With	the	rapid	pace	of	innovation comes	the	opportunity	for	our	products	to	address	key	challenges	associated	with	electronic	product	creation,	such	as	power	consumption,	performance	and	cost. Our	products	have	unique	attributes	that	our	customers	value.	In	general,	these	attributes	can	be	grouped	into	broader	categories	such	as	quality	of	results	(in	terms of	power	consumption,	performance	and	chip	area),	engineering	productivity,	tool	performance,	new	capabilities	or	methods	and	faster	time-to-market.	Our	business opportunities	are	significantly	enhanced	when	our	offerings	address	these	key	factors.	We	are	applying	machine	learning	techniques	within	our	products	to	enhance quality	of	results,	productivity,	performance	and	methodology.

# Products	and	Product	Strategy

Our	strategy	is	to	provide	our	customers	with	the	ability	to	address	the	broad	range	of	issues	that	arise	as	they	develop	electronic	products.	Our	SDE	solutions are	comprised	of	products	that	are	categorized	according	to	the	role	they	play	in	the	electronic	product	design	process.	We	combine	our	products	and	technologies into	categories	related	to	major	design	activities.	The	following	table	shows	the	relationship	between	our	product	categories	and	the	SDE	levels	to	which	they	relate.

|  |  | System	Design	Enablement	Levels | System	Design	Enablement	Levels |  |
| :--- | :--- | :--- | :--- | :--- |
|  | IC\tDevelopment | IP\tIntegration | System | System\tIntegration |
| Cadence\tProduct\tCategories | (Core\tEDA) |  | Interconnect |  |
| Functional\tVerification\t(including\thardware\tfor\temulation\tand\tprototyping) | ü | ü | N/A | ü |
| Digital\tIC\tDesign\tand\tSignoff | ü | ü | N/A | ü |
| Custom\tIC\tDesign\tand\tSimulation | ü | ü | N/A | N/A |
| System\tInterconnect\tand\tAnalysis\t(PCB\tand\tIC\tpackage) | ü | N/A | ü | N/A |
| IP\t(includes\tdesign\tIP\tand\tVIP) | ü | ü | ü | ü |

# Functional	Verification,	including	Emulation	and	Prototyping	Hardware

Functional	verification	products	are	used	by	our	customers	to	efficiently	and	effectively	verify	that	the	circuitry	or	the	software	they	have	designed	will	perform	as intended.	Verification	takes	place	before	implementing	or	manufacturing	the	circuitry,	significantly	reducing	the	risk	of	discovering	an	error	in	the	completed	product. Our	functional	verification	offering	consists	of	four	primary	verification	engines:

•JasperGold®	formal	verification

platform

These	engines	are	used	for	early	bug	detection,	verification	of	block-level	functionality,	verification	acceleration	and	emulation	of	system-level	functionality, system-level	power	exploration,	analysis	and	optimization	and	system-level	prototyping	for	hardware/software	co-verification.	Our	emulation	hardware	offering--the Palladium	Z1	enterprise	emulation	system--provides	high	throughput,	capacity,	datacenter	reliability	and	workgroup	productivity	to	enable	global	design	teams	to develop	advanced	hardware-software	systems.	The	Protium	S1,	a	prototyping	solution	based	on	Field-Programmable	Gate	Arrays	("FPGAs"),	leverages	a	common front	end	with	Palladium	Z1	in	order	to	move	designs	rapidly	from	emulation	to	the	prototyping	stage	for	early	software	development.

Also	included	in	our	functional	verification	offering	are	products	that	are	used	for	verification	planning	and	metric	tracking,	testbench	automation,	debugging	and software-driven	tests.	These	products	enable	our	customers	to	coordinate	verification	activities	across	multiple	teams	and	various	specialists	for	verification	planning and	closure.

# Digital	IC	Design	and	Signoff

Digital	IC	design	offerings	are	used	by	our	customers	to	create	logical	representations	of	a	digital	circuit	or	an	IC	that	can	be	verified	for	correctness	prior	to implementation	(please	refer	to	the	discussion	under	"Functional	Verification,	including	Emulation	and	Prototyping	Hardware"	above).	Once	the	logic	is	verified,	the design	representation	is	implemented,	or	converted	to	a	format	ready	for	silicon	manufacturing,	using	additional	software	tools	within	this	category.	The	manufacturing representation	is	also	analyzed	and	verified.	Our	digital	IC	offerings	include	three	major	categories:	logic	design,	physical	implementation	and	signoff.

Our	logic	design	offering	is	comprised	of	logic	synthesis,	test	and	equivalence	checking	capabilities	and	is	typically	used	by	customers	to	create	and	verify designs	in	conjunction	with	our	functional	verification	capabilities.	This	offering	provides	chip	planning,	design,	verification	and	test	technologies	and	services	to customers.	The	offering	includes	the	Genus™	synthesis	solution,	a	logic	synthesis	offering	that	provides	fast	throughput	while	also	offering	high	quality	results,	the Stratus™	high-level	synthesis	solution	for	system-level	synthesis,	and	the	Joules™	RTL	power	solution,	which	delivers	fast	power	analysis	while	preserving	near- signoff	accuracy.	We	also	offer	the	Modus™	design-for-test	software	solution,	which	reduces	SoC	test	time.

Our	physical	implementation	offering	comprises	tools	used	near	the	end	of	the	design	process,	including	place	and	route,	optimization	and	multi-patterning preparation.	The	Innovus™	implementation	system	is	a	physical	implementation	offering	that	delivers	fast	design	turnaround	time	while	also	delivering	improved power,	performance	and	area	characteristics.	This	offering	enables	customers	to	address	the	technology	challenges	of	the	latest	semiconductor	advanced	process nodes,	create	a	physical	representation	of	logic	models	and	prepare	a	design	for	signoff.

Our	signoff	offering	is	comprised	of	tools	used	to	signoff	the	design	as	ready	for	manufacture	by	a	semiconductor	foundry,	which	provides	certification	for	this step.	This	offering	includes	Tempus™	timing	analysis,	Voltus™	power	analysis,	Quantus™	QRC	extraction	solutions	and	Pegasus™	physical	verification	system.	Our design	for	manufacturing	products	are	also	included	in	our	signoff	offering	and	are	used	by	customers	to	address	manufacturing	and	yield	issues	as	early	in	the product	development	process	as	possible.

# Custom	IC	Design	and	Simulation

Custom	IC	design	and	simulation	offerings	are	used	by	our	customers	to	create	schematic	and	physical	representations	of	circuits	down	to	the	transistor	level	for analog,	mixed-signal,	custom	digital,	memory	and	radio	frequency	("RF")	designs.	These	representations	are	verified	using	simulation	tools	optimized	for	each	type	of design.	The	offering	includes	the	design	capture	environment,	simulation	and	IC	layout	capabilities	within	the	Virtuoso®	custom	design	platform.	Other	tools	in	the custom	IC	portfolio	are	used	to	prepare	the	designs	for	manufacturing.

Virtuoso	Advanced	Node	adds	functionality	to	the	base	Virtuoso	package	to	enable	the	use	of	three-dimensional	transistors	("FinFETs"),	multi-patterning	and other	technologies	required	for	advanced	designs.	Virtuoso	for	Electrically	Aware	Design	introduces	a	new	time-saving	paradigm	that	shortens	the	loop	between design	and	verification	by	verifying	designs	as	they	are	being	created.	Spectre®	XPS	is	a	Fast	SPICE	offering	that	speeds	verification	time	over	previously	existing solutions.	 Liberate™	 characterization	 solution	 generates	 electrical	 cell	 views	 for	 timing,	 power	 and	 signal	 integrity.	 Virtuoso	 System	 Design	 Platform	 enables engineers	to	design	and	verify	concurrently	across	the	chip,	package	and	board.	Finally,	Legato™	Memory	Solution	is	the	industry's	first	integrated	solution	for memory	design	and	verification,	and	Legato	Reliability	is	the	industry's	first	complete	analog	IC	design-for-reliability	solution.

# System	Interconnect	and	Analysis

Our	 System	 Interconnect	 and	Analysis	 offerings	 are	 used	 by	 our	 customers	 to	 develop	 PCBs	 and	 IC	 packages.	 The	 capabilities	 in	 the	Allegro®	 system interconnect	design	platform	include	PCB	authoring	and	implementation,	IC	package	and	System-in-Package	design	and	signal	and	power	integrity	analysis	and	PCB library	design	management	and	collaboration.	Certain	offerings	also	include	the	simulation	capability	within	the	Virtuoso	custom	design	platform.	Sigrity™	analysis tools	have	been	integrated	with	our	Allegro	platform,	enabling	a	comprehensive	front-to-back	flow	for	implementation	and	full	signal	and	power	integrity	analysis	for designs	featuring	high	speed	interface	protocols.	These	offerings	enable	engineers	who	are	responsible	for	the	capture,	layout	and	analysis	of	advanced	PCB	and	IC packages	to	design	high-performance	electronic	products	across	the	domains	of	ICs,	IC	packages	and	PCBs,	to	increase	functional	density	and	to	manage	design complexity	 while	 reducing	 cost	 and	 time-to-market.	 The	 need	 for	 compact,	 high-performance	 mobile,	 consumer	 and	 automotive	 design	 with	 advanced	 serial interconnect	is	driving	technology	evolution	for	our	PCB	offering.	For	mainstream	PCB	customers,	where	individual	or	small	team	productivity	is	a	focus,	we	provide the	OrCAD®	family	of	offerings	that	is	primarily	marketed	worldwide	through	a	network	of	resellers.

Our	design	IP	offerings	consist	of	pre-verified,	customizable	functional	blocks,	which	customers	integrate	into	their	ICs	to	accelerate	the	development	process and	to	reduce	the	risk	of	errors	in	the	design	process.	We	offer	many	types	of	design	IP,	including	Tensilica ®	configurable	digital	signal	processors	vertically	targeted subsystems	for	AI/machine	learning,	audio/voice,	baseband	and	vision/imaging	applications,	controllers	and	physical	interfaces	for	standard	protocols	and	analog	IP. We	have	significantly	expanded	our	design	IP	portfolio	in	recent	years	through	acquisitions	and	internal	development.	During	fiscal	2018,	we	launched	the	industry's first	 silicon-proven,	 long-reach	 112	 gigabit	 Serializer/Deserializer	 ("SerDes")	 communications	 IP	 at	 the	 7-nanometer	 process	 node	 and	 the	 Tensilica	 DNA	 100 processor,	a	deep	neural-network	accelerator	targeting	on-device	neural	network	inference	applications.

We	also	offer	a	broad	range	of	VIP	and	memory	models,	which	model	the	expected	behavior	of	many	industry	standard	protocols	when	used	with	verification solutions	and	are	complementary	to	our	design	IP	offerings.	VIP	and	accelerated	VIP,	which	is	used	in	emulation,	are	used	across	the	suite	of	functional	verification engines	to	verify	the	correct	interaction	with	dozens	of	design	IP	interface	protocols	such	as	DDR,	USB	and	PCI	Express.	Our	VIP	offerings	are	also	used	in	system- level	verification	to	model	correct	behavior	of	full	systems	interacting	with	their	environments.

# Product	Arrangements

We	primarily	license	our	software	using	time-based	licenses.	Our	time-based	license	arrangements	offer	customers	the	right	to	access	and	use	all	of	the products	delivered	at	the	outset	of	an	arrangement	and	updates	throughout	the	entire	term	of	the	arrangement,	which	is	generally	two	to	three	years,	with	no	rights	to return.	Our	updates	provide	for	continued	access	to	our	evolving	technology	as	our	customers'	designs	migrate	to	more	advanced	nodes.	In	addition,	certain	time- based	license	arrangements	include:

•the	right	for	the	customer	to	remix	among	the	products	delivered	at	the	outset	of	the	arrangement,	so	long	as	the	cumulative	contractual	value	of	all products	in	use	does	not	exceed	the	total	license	fee	determined	at	the	outset	of	the	arrangement;	and

•use	 of	 unspecified	 additional	 products	 that	 become	 commercially	 available	 during	 the	 term of the arrangement.

A	small	portion	of	our	software	is	licensed	under	perpetual	licenses,	which	does	not	include	the	right	to	use	new	technology.	Payment	terms	for	time-based licenses	generally	provide	for	payments	to	be	made	over	the	license	period	and	payment	terms	for	perpetual	licenses	generally	are	net	30	days.

During	fiscal	2018,	we	launched	the	Cadence	Cloud	portfolio,	the	first	broad	cloud	portfolio	for	the	development	of	electronic	systems	and	semiconductors.	The Cadence	Cloud	portfolio	consists	of	our	managed	and	customer-managed	environments	that	enable	electronic	product	developers	to	use	the	scalability	of	the	cloud	to securely	manage	the	exponential	increase	in	design	complexity.	Contractual	arrangements	with	customers	for	both	environments	are	time-based,	similar	to	the	on- premise	software	license	arrangements	described	above.	Cadence-managed	environment	arrangements	include	hardware	resources	accessible	via	cloud	offerings provided	by	Cadence.	Customer-managed	environment	arrangements	do	not	 include	cloud	hardware	offerings	because	customers	arrange	 for	 their	own	cloud hardware	and	purchase	a	special	license	from	Cadence	to	enable	cloud	scalability	of	their	on-premise	software.

Our	emulation	and	prototyping	hardware	products	are	either	sold	or	leased	to	our	customers.	Our	emulation	hardware	can	also	be	accessed	remotely	via	a Cadence-managed	cloud	arrangement.

We	generally	license	our	design	IP	under	nonexclusive	license	agreements	that	provide	usage	rights	for	specific	designs.	In	addition,	for	certain	of	our	IP license	agreements,	we	collect	royalties	as	our	customers	ship	their	product	that	includes	our	IP	to	their	customers.

For	a	further	description	of	our	license	agreements,	our	emulation	and	prototyping	hardware	sale	or	lease	agreements,	revenue	recognition	policies	and	results of	 operations,	 please	 refer	 to	 the	 discussion	 under	 "Critical	Accounting	 Estimates"	 under	 Part	 II,	 Item	 7,	 "Management's	 Discussion	 and	Analysis	 of	 Financial Condition	and	Results	of	Operations."

# Technical	Support	and	Maintenance

Customer	service	and	support	is	critical	to	the	adoption	and	successful	use	of	our	products.	We	provide	our	customers	with	technical	support	and	maintenance to	facilitate	their	use	of	our	software,	hardware	and	IP	solutions.

# Services

We	offer	a	number	of	services,	including	services	related	to	methodology,	education	and	hosted	design	solutions.	These	services	may	be	sold	separately	or	sold and	performed	in	conjunction	with	the	license,	sale	or	lease	of	our	products.	As	necessary,	certain	of	our	design	services	engineers	are	assigned	to	internal	research and	development	projects	associated	with	our	design	IP	business.

As	part	of	our	services	offerings,	we	design	advanced	ICs,	develop	custom	IP	and	address	industry	design	issues	that	may	not	be	solved	adequately	by	today's EDA	 technologies.	 This	 enables	 us	 to	 target	 and	 accelerate	 the	 development	 of	 new	 software	 technology	 and	 products	 to	 satisfy	 current	 and	 future	 design requirements.

We	offer	engineering	services	to	collaborate	with	our	customers	in	the	design	of	complex	ICs	and	the	implementation	of	key	design	capabilities,	including	low power	design,	IC	packaging	and	board	design,	functional	verification,	digital	implementation,	analog/mixed-signal	design	and	system-level	design.	The	customers	for these	services	primarily	consist	of	semiconductor	and	systems	companies	developing	products	for	the	consumer,	communications,	military,	aerospace	and	computing markets.	These	ICs	range	from	digital	SoCs	and	analog	and	RF	designs	to	complex	mixed-signal	ICs.

In	delivering	methodology	services,	we	leverage	our	experience	and	knowledge	of	design	techniques,	our	products,	leading	practices	and	different	design environments	to	improve	the	productivity	of	our	customers'	engineering	teams.	Depending	on	the	customers'	projects	and	needs,	we	work	with	customers	using outsourcing,	consultative	and	collaborative	offerings.

Our	education	services	offerings	can	be	customized	and	include	training	programs	that	are	conducted	via	the	internet	or	in	a	classroom	setting.	The	content	of these	offerings	ranges	from	the	latest	IC	design	techniques	to	methodologies	for	using	the	most	recent	features	of	our	EDA	products.	The	primary	focus	of	education services	is	to	accelerate	our	customers'	path	to	productivity	in	the	use	of	our	products.

# Third-Party	Programs	and	Initiatives

In	addition	to	our	products,	many	customers	use	design	tools	that	are	provided	by	other	EDA	companies,	as	well	as	design	IP	available	from	multiple	suppliers. We	support	the	use	of	third-party	design	products	and	design	IP	through	our	Connections®	program	and	through	our	participation	in	industry	groups	such	as	the Silicon	Integration	Initiative	and	Accellera	System	Initiative.	We	actively	contribute	to	the	development	and	deployment	of	industry	standards.

# Product	and	Maintenance	and	Services	Revenue

Revenue,	and	revenue	as	a	percentage	of	total	revenue,	from	our	product	and	maintenance	and	services	offerings	for	the	last	three	fiscal	years	were	as	follows:

| Product	and	maintenance | $1,998 | 93% | $1,814 | 93% | $1,684 | 93% |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Services | 140 | 7% | 129 | 7% | 132 | 7% |
| Total\trevenue | $2,138 |  | $1,943 |  | $1,816 |  |

Our	revenue	mix	is	such	that	approximately	90%	of	our	revenue	is	recognized	over	time,	and	the	remainder	of	the	revenue	is	recognized	at	a	point	in	time, typically	upon	delivery.

For	an	additional	description	of	our	product	and	maintenance	and	services	revenue,	see	the	discussion	under	"Results	of	Operations"	under	Part	II,	Item	7, "Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations."	For	our	fiscal	2018	results	of	operations	and	our	financial	position	as	of December	29,	2018,	see	Part	IV,	Item	15,	"Exhibits	and	Financial	Statement	Schedules."

# Remaining	Performance	Obligations	and	Backlog

On	the	first	day	of	fiscal	2018,	we	adopted	Accounting	Standards	Update	("ASU")	2014-09,	"Revenue	from	Contracts	with	Customers	(Topic	606),"	which requires	us	to	disclose	revenue	allocated	to	remaining	performance	obligations.		Revenue	allocated	to	remaining	performance	obligations	represents	the	transaction price	allocated	to	the	performance	obligations	that	are	unsatisfied	or	partially	unsatisfied	as	of	December	29,	2018,	which	includes	deferred	revenue	and	amounts	that will	be	invoiced	and	recognized	as	revenue	in	future	periods.	Contracted	but	unsatisfied	performance	obligations	were	approximately	$2.9	billion	as	of	December	29, 2018,	of	which	we	expect	to	recognize	approximately	60%	as	revenue	over	the	next	12	months	and	the	remainder	thereafter.

Revenue	allocated	to	remaining	performance	obligations	is	different	from	our	historical	backlog	in	that	it	includes	fully	executed	contracts	with	future	effective dates	and	excludes	committed	contracts	for	which	the	deliverables	are	not	fully	defined,	whereas	our	historical	backlog	excluded	fully	executed	contracts	with	future effective	dates	and	included	contracts	for	which	the	deliverables	were	not	fully	defined.	Our	standalone	backlog	was	$2.7	billion	as	of	December	30,	2017.

The	substantial	majority	of	our	remaining	performance	obligations	consists	of	customer	contracts	for	which	product	and	maintenance	revenue	is	recognized over	the	contract	life.	Historically,	we	have	not	experienced	significant	cancellations	of	our	contracts	with	customers.	For	engineering	services	contracts	in	backlog, completion	dates	are	occasionally	rescheduled,	delaying	revenue	recognition	under	those	contracts	beyond	the	original	anticipated	completion	date.

# Marketing	and	Sales

We	generally	market	our	products	and	provide	services	to	existing	and	prospective	customers	through	a	direct	sales	force	consisting	of	sales	people	and applications	engineers.	Applications	engineers	provide	technical	pre-sales	and	post-sales	support	for	our	products.	Due	to	the	complexity	of	many	of	our	products	and the	system	design	process,	the	sales	cycle	is	generally	long,	requiring	three	to	six	months	or	more.	During	the	sales	cycle,	our	direct	sales	force	generally	provides technical	presentations,	product	demonstrations	and	support	for	on-site	customer	evaluation	of	our	solutions.	We	also	promote	our	products	and	services	through advertising,	marketing	automation,	trade	shows,	public	relations	and	the	internet.	We	selectively	utilize	value-added	resellers	to	broaden	our	reach	and	reduce	cost	of sales.	Our	OrCAD	products	and	certain	Allegro	products	are	primarily	marketed	through	these	channels.	With	respect	to	international	sales,	we	generally	market	and support	our	products	and	services	through	our	subsidiaries.	We	also	use	a	third-party	distributor	to	license	our	products	and	services	to	certain	customers	in	Japan.

# Research	and	Development

Our	future	performance	depends	on	our	ability	to	innovate,	commercialize	newly	developed	solutions	and	enhance	and	maintain	our	current	products.	The primary	areas	of	our	research	and	development	align	with	our	product	categories	discussed	above.	We	must	continuously	re-engineer	our	products	to	solve	new	or increased	physics	challenges	that	arise	with	each	successive	process	node	and	address	the	increase	in	complexity	that	is	introduced	by	the	resulting	much	larger designs.	 We	 must	 also	 keep	 pace	 with	 our	 customers'	 technical	 developments,	 satisfy	 industry	 standards	 and	 meet	 our	 customers'	 increasingly	 demanding performance,	productivity,	quality	and	predictability	requirements.	Therefore,	we	expect	to	continue	to	invest	in	research	and	development.

# Hardware	Manufacturing	and	Software	Distribution

Our	emulation	and	prototyping	hardware,	including	all	individual	PCBs,	custom	ICs	and	FPGA-based	prototyping	products,	is	manufactured,	assembled	and tested	by	subcontractors	before	delivery	to	our	customers.	Software	and	documentation	are	primarily	distributed	to	customers	by	secure	electronic	delivery,	by	way	of the	cloud	or	on	DVD.

# Proprietary	Technology

Our	success	depends,	in	part,	upon	our	proprietary	technology.	We	generally	rely	on	patents,	copyrights,	trademarks	and	trade	secret	laws,	licenses	and restrictive	agreements	to	establish	and	protect	our	proprietary	rights	in	technology	and	products.	Many	of	our	products	include	software	or	other	intellectual	property licensed	from	third	parties.	We	may	have	to	seek	new	licenses	or	renew	existing	licenses	for	third-party	software	and	other	intellectual	property	in	the	future.	As	part of	performing	engineering	services	for	customers,	our	engineering	services	business	uses	certain	software	and	other	intellectual	property	licensed	from	third	parties, including	that	of	our	competitors.

# Competition

We	compete	most	frequently	with	Synopsys,	Inc.	and	Mentor	Graphics	Corporation,	which	was	acquired	by	Siemens	AG	in	2017,	and	with	numerous	other	EDA providers,	manufacturers	of	electronic	devices	that	have	developed,	acquired	or	have	the	capability	to	develop	their	own	EDA	products,	electronics	design	and consulting	companies,	and	other	IP	companies.	These	include	Altium	Limited,	Ansys,	Inc.,	CEVA,	Inc.,	Keysight	Technologies,	Inc.	and	Zuken	Ltd.

Certain	competitive	factors	in	the	engineering	services	business	differ	from	those	of	the	products	businesses.	While	we	compete	with	other	EDA	companies	in the	engineering	services	business,	our	principal	competitors	include	independent	engineering	service	businesses.	Many	of	these	companies	are	also	customers,	and therefore	use	our	product	offerings	in	the	delivery	of	their	services	or	products.

# Corporate	Information

We	were	organized	as	a	Delaware	corporation	in	June	1988.	Our	headquarters	is	located	at	2655	Seely	Avenue,	San	Jose,	California	95134.	Our	telephone number	 is	 (408)	 943-1234.	 We	 use	 our	 website	 at	www.cadence.com	 to	communicate	 important	 information	about	our	company,	 including	news	releases	and financial	information.	Our	website	permits	investors	to	subscribe	to	e-mail	notification	alerts	when	we	post	new	material	information	on	our	website.	We	also	make available	on	our	investor	relations	webpage,	free	of	charge,	copies	of	our	SEC	filings	and	submissions,	which	can	be	found	at	the	SEC's	website,	www.sec.gov,	as soon	as	reasonably	practicable	after	electronically	filing	or	furnishing	such	documents	with	the	SEC.	Stockholders	may	also	request	copies	of	these	documents	by writing	to	our	Corporate	Secretary	at	the	address	above.	Information	on	our	website	is	not	incorporated	by	reference	in	this	Annual	Report	on	Form	10-K	unless expressly	noted.

# Fiscal	Year	End

Our	fiscal	years	are	52-	or	53-week	periods	ending	on	the	Saturday	closest	to	December	31.	Fiscal	2018,	2017	and	2016	were	each	52-week	fiscal	years.	Our next	53-week	fiscal	year	will	be	fiscal	2020.

# Employees

As	of	December	29,	2018,	we	had	approximately	7,500	full-time	employees.

# EXECUTIVE	OFFICERS	OF	THE	REGISTRANT

The	following	table	provides	information	regarding	our	executive	officers	as	of	February	27,	2019:

Our	executive	officers	are	appointed	by	the	Board	of	Directors	and	serve	at	the	discretion	of	the	Board	of	Directors.

LIP-BU	TAN	has	served	as	Chief	Executive	Officer	of	Cadence	since	January	2009.	From	January	2009	to	November	2017,	Mr.	Tan	also	served	as	President	of Cadence.	Mr.	Tan	has	been	a	member	of	the	Cadence	Board	of	Directors	since	February	2004.	In	1987,	Mr.	Tan	founded	Walden	International,	an	international venture	capital	firm,	and	since	that	time	has	served	as	its	Chairman.	Mr.	Tan	serves	as	a	director	of	Aquantia	Corp.	and	Hewlett	Packard	Enterprise	Company.	Mr. Tan	has	a	B.S.	from	Nanyang	University	in	Singapore,	an	M.S.	in	nuclear	engineering	from	the	Massachusetts	Institute	of	Technology	and	an	M.B.A.	from	the University	of	San	Francisco.

JOHN	M.	WALL	has	served	as	Senior	Vice	President	and	Chief	Financial	Officer	of	Cadence	since	October	2017.	From	October	2000	to	September	2017,	Mr. Wall	held	several	positions	at	Cadence,	most	recently	as	Corporate	Vice	President	and	Corporate	Controller	from	April	2016	to	October	2017,	Vice	President,	Finance and	Operations,	Worldwide	Revenue	Accounting	and	Sales	Finance	from	2015	to	2016	and	Vice	President,	Finance	and	Operations,	EMEA	and	Worldwide	Revenue Accounting	from	2005	to	2015.	Mr.	Wall	has	an	NCBS	from	the	Institute	of	Technology,	Tralee	and	is	a	Fellow	of	the	Association	of	Chartered	Certified	Accountants.

ANIRUDH	DEVGAN	has	served	as	President	of	Cadence	since	November	2017.	From	May	2012	to	November	2017,	Dr.	Devgan	held	several	positions	at Cadence,	most	recently	as	Executive	Vice	President,	Research	and	Development	from	March	2017	to	November	2017	and	Senior	Vice	President,	Research	and Development	from	November	2013	to	March	2017.	Prior	to	joining	Cadence,	from	May	2005	to	March	2012,	Dr.	Devgan	served	as	Corporate	Vice	President	and General	Manager	of	the	Custom	Design	Business	Unit	at	Magma	Design	Automation,	Inc.,	an	electronic	design	automation	company.	Dr.	Devgan	has	a	B.Tech.	in electrical	engineering	from	the	Indian	Institute	of	Technology,	Delhi,	and	an	M.S.	and	Ph.D.	in	electrical	and	computer	engineering	from	Carnegie	Mellon	University.

THOMAS	P.	BECKLEY	has	served	as	Senior	Vice	President,	Research	and	Development	of	Cadence	since	September	2012.	From	April	2004	to	September 2012,	Mr.	Beckley	served	as	Corporate	Vice	President,	Research	and	Development	of	Cadence.	Prior	to	joining	Cadence,	Mr.	Beckley	served	as	President	and	Chief Executive	Officer	of	Neolinear,	Inc.,	a	developer	of	auto-interactive	and	automated	analog/RF	tools	and	solutions	for	mixed-signal	design	that	was	acquired	by Cadence	in	April	2004.	Mr.	Beckley	has	a	B.S.	in	mathematics	and	physics	from	Kalamazoo	College	and	an	M.B.A.	from	Vanderbilt	University.

JAMES	J.	COWIE	has	served	as	Senior	Vice	President	and	General	Counsel	of	Cadence	since	April	2008	and	Secretary	of	Cadence	since	May	2008.	From August	2000	to	March	2008,	Mr.	Cowie	held	several	positions	at	Cadence,	most	recently	as	Corporate	Vice	President	-	Business	Development,	Associate	General Counsel	and	Assistant	Secretary.	Mr.	Cowie	has	an	A.B.	in	economics	from	Duke	University	and	a	J.D.	from	Stanford	Law	School.

SURENDRA	BABU	MANDAVA	has	served	as	Senior	Vice	President,	Research	and	Development	of	Cadence	since	January	2017.	Prior	to	joining	Cadence,	Mr. Mandava	 served	 as	 Chief	 Executive	 Officer	 of	 Ineda	 Systems	 Inc.,	 a	 low-power	 System-on-Chip	 solutions	 company,	 from	 November	 2014	 to	 July	 2016,	 Vice President	of	Broadcom	Corporation,	a	provider	of	semiconductor	solutions,	from	November	2010	to	December	2012,	and	President	and	then	as	Chief	Executive Officer	of	Beceem	Communications	Inc.,	a	semiconductor	company,	from	December	2003	until	it	was	acquired	by	Broadcom	in	November	2010.	Mr.	Mandava	has	a B.Tech.	in	electronics	and	communication	engineering	from	the	Regional	Engineering	College,	Trichy,	and	a	M.Tech.	in	electrical	engineering	and	computer	science from	the	Indian	Institute	of	Technology,	Kanpur.

CHIN-CHI	TENG	has	served	as	Senior	Vice	President,	Research	and	Development	of	Cadence	since	September	2018.	From	January	2002	to	September	2018, Dr.	Teng	held	several	positions	at	Cadence,	most	recently	as	Corporate	Vice	President,	Research	and	Development	from	June	2015	to	September	2018,	and	Vice President,	Research	and	Development	from	March	2009	to	June	2015.	Dr.	Teng	has	a	B.S.	in	electrical	engineering	from	the	National	Taiwan	University	and	a	Ph.D. in	electrical	and	computer	engineering	from	the	University	of	Illinois,	Urbana-Champaign.

NEIL	ZAMAN	has	served	as	Senior	Vice	President,	Worldwide	Field	Operations	of	Cadence	since	September	2015.	From	October	1999	to	September	2015,	Mr. Zaman	held	several	positions	at	Cadence,	most	recently	as	Corporate	Vice	President,	North	America	Field	Operations.	Prior	to	joining	Cadence,	Mr.	Zaman	held positions	at	Phoenix	Technologies	Ltd.	and	IBM	Corporation.	Mr.	Zaman	has	a	B.S.	in	finance	from	California	State	University,	Hayward.

# Item	1A.	Risk	Factors

Our	operations	and	financial	results	are	subject	to	various	risks	and	uncertainties,	including	those	described	in	the	sections	below,	that	could	adversely	affect our	business,	financial	condition,	results	of	operations,	cash	flows,	and	the	trading	price	of	our	common	stock.

# Risks	Related	to	Our	Business

Any	 periods	 of	 uncertainty in the	 global	 economy	 and international trade relations,	 and	 any	 potential	 downturn in the	 semiconductor	 and electronics	industries,	may	negatively	impact	our	business	and	reduce	our	bookings	levels	and	revenue.

Purchases	 of	 our	 products	 and	 services	 are	 dependent	 upon	 the	 commencement	 of	 new	 design	 projects	 by	 IC	 manufacturers	 and	 electronics	 systems companies.	The	IC	and	electronics	systems	industries	are	cyclical	and	are	characterized	by	constant	and	rapid	technological	change,	rapid	product	obsolescence	and price	erosion,	evolving	standards,	short	product	life	cycles	and	wide	fluctuations	in	product	supply	and	demand.

The	IC	and	electronics	systems	industries	have	also	experienced	significant	downturns	in	connection	with,	or	in	anticipation	of,	maturing	product	cycles	of	both these	industries'	and	their	customers'	products.	While	spending	on	EDA	products	and	services	has	grown	in	recent	years,	the	current	outlook	for	the	semiconductor industry	is	uncertain	and	may	result	in	a	decrease	in	spending	on	EDA	products	and	services,	which	are	a	part	of	our	overall	SDE	offering.

While	 we	 cannot	 predict	 global	 economic	 conditions,	 uncertainty	 about	 future	 political	 and	 economic	 conditions,	 adverse	 changes	 to	 international	 trade relationships	between	countries	in	which	we	do	business	or	future	decline	in	corporate	or	consumer	spending	could	negatively	impact	our	customers'	businesses, reducing	the	number	of	new	chip	designs	and	their	overall	research	and	development	spending,	including	their	spending	on	our	products	and	services,	and	as	a	result decrease	demand	for	our	products	and	services.	Decreased	bookings	for	our	products	and	services,	customer	bankruptcies,	consolidation	among	our	customers,	or problems	or	delays	with	our	hardware	suppliers	or	with	the	supply	or	delivery	of	our	hardware	products	could	also	adversely	affect	our	ability	to	grow	our	business	or adversely	affect	our	future	revenues	and	financial	results.	Our	future	business	and	financial	results,	including	demand	for	our	products	and	services,	are	subject	to considerable	uncertainty	that	could	impact	our	stock	price.	If	economic	conditions	or	international	trade	relationships	between	countries	in	which	we	do	business deteriorate	in	the	future,	or,	in	particular,	if	semiconductor	or	electronics	systems	industry	revenues	do	not	grow,	the	ability	to	export	or	import	products	or	services	by the	semiconductor	or	electronics	systems	industry	is	adversely	restricted,	or	our	suppliers	of	our	hardware	components	and	products	are	subject	to	problems	or delays,	our	future	revenues	and	financial	results	could	be	adversely	affected.	Even	if	economic	conditions	improve	for	our	customers	after	a	period	of	decline,	the positive	impact	on	our	revenues	and	financial	results	may	be	deferred	due	to	cautious	customer	research	and	development	spending	and	our	mix	of	licenses	that yield	revenue	recognized	over	time.

# Customer	consolidation	could	affect	our	operating	results.

There	has	been	a	trend	toward	customer	consolidation	in	the	semiconductor	industry	through	business	combinations,	including	mergers,	asset	acquisitions	and strategic	partnerships.	As	this	trend	continues,	it	could	make	us	dependent	on	fewer	customers	who	may	be	able	to	exert	increased	pressure	on	our	prices	and	other contract	terms	and	could	increase	the	portion	of	our	total	sales	concentration	for	any	single	customer.	Customer	consolidation	activity	could	also	reduce	the	demand for	 our	 products	 and	 services	 if	 such	 customers	 streamline	 research	 and	 development	 or	 operations,	 reduce	 purchases	 or	 delay	 purchasing	 decisions.	These outcomes	could	negatively	impact	our	operating	results	and	financial	condition.

# Our failure to	 respond	 quickly to technological	 developments	 or	 customers' increasing technological	 requirements	 could	 make	 our	 products uncompetitive	and	obsolete.

The	industries	in	which	we	compete	experience	rapid	technology	developments,	rapid	changes	in	industry	standards	and	customer	requirements,	and	frequent introductions	and	improvements	of	new	products.	Currently,	the	industries	we	serve	are	experiencing	the	following	trends:

•changes	in	the	design	and	manufacturing	of	ICs,	including	migration	to	advanced	process	nodes	and	three-dimensional	transistors,	such	as	FinFETs, present	major	challenges	to	the	semiconductor	industry,	particularly	in	IC	design,	design	automation,	design	of	manufacturing	equipment,	and	the manufacturing	process	itself.	With	migration	to	advanced	process	nodes,	the	industry	must	adapt	to	more	complex	physics	and	manufacturing	challenges such	as	the	need	to	draw	features	on	silicon	that	are	many	times	smaller	than	the	wavelength	of	light	used	to	draw	the	features	via	lithography.	Models	of each	component's	electrical	properties	and	behavior	also	become	more	complex	as	do	requisite	analysis,	design,	verification	and	manufacturing capabilities.	Novel	design	tools	and	methodologies	must	be	invented	and	enhanced	quickly	to	remain	competitive	in	the	design	of	electronics	in	the smallest	nanometer	ranges;

•the	ability	to	design	SoCs	increases	the	complexity	of	managing	a	design	that,	at	the	lowest	level,	is	represented	by	billions	of	shapes	on	fabrication masks.	In	addition,	SoCs	typically	incorporate	microprocessors	and	digital	signal	processors	that	are	programmed	with	software,	requiring	simultaneous design	of	the	IC	and	the	related	software	embedded	on	the	IC;

•with	the	availability	of	seemingly	endless	gate	capacity,	there	is	an	increase	in	design	reuse,	or	the	combining	of	off-the-shelf	design	IP	with	custom	logic to	create	ICs	or	SoCs.	The	unavailability	of	a	broad	range	of	high-quality	design	IP	(including	our	own)	that	can	be	reliably	incorporated	into	a	customer's design	with	our	software	products	and	services	could	lead	to	reduced	demand	for	our	products	and	services;

•increased	technological	capability	of	the	FPGA,	which	is	a	programmable	logic	chip,	creates	an	alternative	to	IC	implementation	for	some	electronics companies.	This	could	reduce	demand	for	our	IC	implementation	products	and	services;

•a	growing	number	of	low-cost	engineering	services	businesses	could	reduce	the	need	for	some	IC	companies	to	invest	in	EDA	products;

•adoption	of	cloud	computing	technologies	with	accompanying	new	business	models	for	an	increasing	number	of	software

categories.

If	we	are	unable	to	respond	quickly	and	successfully	to	these	trends,	we	may	lose	our	competitive	position,	and	our	products	or	technologies	may	become obsolete.	To	compete	successfully,	we	must	develop,	acquire	or	license	new	products	and	improve	our	existing	products	and	processes	on	a	schedule	that	keeps pace	with	technological	developments	and	the	requirements	for	products	addressing	a	broad	spectrum	of	designers	and	designer	expertise	in	our	industries.	We	must provide	frequent	and	relevant	updates	to	our	software	products	in	order	to	provide	substantial	benefit	to	the	customer	throughout	the	license	periods	because	of	the rapid	changes	in	our	customers'	industries.	The	market	must	also	accept	our	new	and	improved	products.	Our	hardware	platforms	must	be	enhanced	periodically	to reduce	the	likelihood	that	a	competitor	surpasses	the	capabilities	we	offer.	Our	introduction	of	new	products	could	reduce	the	demand	and	revenue	of	our	older products	or	affect	their	pricing.	We	must	also	be	able	to	support	a	range	of	changing	computer	software,	hardware	platforms	and	customer	preferences.	A	rapid transition	by	our	customers	to	different	business	models	associated	with	cloud	computing	technologies	could	result	in	reduced	revenue.	We	cannot	guarantee	that	we will	be	successful	in	keeping	pace	with	all,	or	any,	of	the	customer	trends.

# Competitive	pressures	may	require	us	to	reduce	our	pricing,	which	could	have	an	adverse	effect	on	our	results	of	operations.

The	highly	competitive	markets	in	which	we	do	business	can	put	pressure	on	us	to	reduce	the	prices	of	our	software,	emulation	and	prototyping	hardware	and IP.	If	our	competitors	offer	significant	discounts	on	certain	products	in	an	effort	to	recapture	or	gain	market	share	or	to	sell	other	software	or	hardware	products,	we may	then	need	to	lower	our	prices	or	offer	other	favorable	terms	to	compete	successfully.	Any	such	changes	would	be	likely	to	reduce	our	profit	margins	and	could adversely	affect	our	operating	results.	Any	substantial	changes	to	our	prices	and	pricing	policies	could	cause	revenues	to	decline	or	be	delayed	as	our	sales	force implements	and	our	customers	adjust	to	the	new	pricing	policies.	Some	of	our	competitors	bundle	products	for	promotional	purposes	or	as	a	long-term	pricing	strategy or	provide	guarantees	of	prices	and	product	implementations.	These	practices	could,	over	time,	significantly	constrain	the	prices	that	we	can	charge	for	our	products. If	we	cannot	offset	price	reductions	with	a	corresponding	increase	in	the	number	of	sales	or	with	lower	spending,	then	the	reduced	revenues	resulting	from	lower prices	could	have	an	adverse	effect	on	our	results	of	operations.

Our	 System	 Design	 Enablement	 strategy	 requires	 the	 development	 or	 acquisition	 of	 products	 and	 expertise	 in	 new	 areas	 of	 technology.	 Our inability	to	develop	or	acquire	these	capabilities	could	 impede	our	ability	to	address	the	technical	requirements	 in	technology	segments	which	are expected	to	contribute	to	our	growth.

Our	SDE	strategy	is	meant	to	increase	our	business	among	electronic	systems	companies,	which	are	now	designing	their	own	ICs.	SDE	is	also	meant	to increase	our	business	among	semiconductor	companies,	which	are	increasing	their	contribution	to	the	end	products	into	which	their	ICs	are	incorporated.	Part	of	this strategy	 involves	 addressing	 the	 needs	 of	 new	 categories	 of	 electronic	 systems,	 including	 hyperscale	 computing	 and	 infrastructure,	 edge	 computing,	 machine learning,	augmented	reality,	virtual	reality,	internet-of-things	and	autonomous	vehicle	sub-systems,	where	increased	investment	is	expected	by	our	customers.	Each of	these	categories	requires	technologies	and	expertise	that	are	application-specific.	If	we	are	unable	to	develop	or	acquire	the	application-specific	technologies	and expertise	necessary	to	address	the	requirements	of	these	categories,	it	could	impede	our	ability	to	expand	our	business	in	these	categories	and	ultimately	affect	our future	growth.

# We	have	experienced	varied	operating	results,	and	our	operating	results	for	any	particular	fiscal	period	are	affected	by	the	timing	of	revenue recognition,	particularly	for	our	emulation	and	prototyping	hardware	and	IP	products.

Various	factors	affect	our	operating	results,	and	some	of	them	are	not	within	our	control.	Our	operating	results	for	any	period	are	affected	by	the	mix	of	products and	services	sold	in	a	given	period	and	the	timing	of	revenue	recognition,	particularly	for	our	emulation	and	prototyping	hardware	and	IP	products.	In	addition,	we have	recorded	net	losses	in	the	past	and	may	record	net	losses	in	the	future.	Also,	our	cash	flows	from	operating	activities	have	and	will	continue	to	fluctuate	due	to	a number	of	factors,	including	the	timing	of	our	billings,	collections,	disbursements	and	tax	payments.

A	substantial	portion	of	the	product	revenue	related	to	our	hardware	business	and	our	IP	offerings	is	recognized	upon	delivery,	and	our	forecasted	revenue results	are	based,	in	part,	on	our	expectations	of	hardware	and	IP	to	be	delivered	in	a	particular	quarter.	Therefore,	changes	in	hardware	and	IP	bookings	or deliveries	relative	to	expectations	will	have	a	more	immediate	impact	on	our	revenue	than	changes	in	software	or	services	bookings,	for	which	revenue	is	generally recognized	over	time.

In	recent	years,	we	made	significant	investments	to	expand	our	IP	offerings	through,	among	other	things,	research	and	development	and	acquisitions.	As	we continue	 to	expand	our	 IP	offerings,	a	portion	of	 the	revenue	related	 to	our	 IP	bookings	will	be	deferred	until	we	complete	and	deliver	 the	 licensed	 IP	 to	our customers.	As	a	result,	costs	related	to	the	research	and	development	of	the	IP	may	be	incurred	prior	to	the	recognition	of	the	related	revenue.

Revenue	related	to	our	hardware	and	IP	products	is	inherently	difficult	to	predict	because	sales	of	our	hardware	and	IP	products	depend	on	the	commencement of	new	projects	for	the	design	and	development	of	complex	ICs	and	systems	by	our	customers,	our	customers'	willingness	to	expend	capital	to	deploy	our	new	and existing	hardware	or	IP	products	in	those	projects	and	the	availability	of	our	new	and	existing	hardware	or	IP	products	for	delivery.	Therefore,	our	hardware	or	IP	sales may	be	delayed	or	may	decrease	if	our	customers	delay	or	cancel	projects	because	their	spending	is	constrained	or	if	there	are	problems	or	delays	with	the	supply	or delivery	of	our	hardware	or	IP	products	or	our	hardware	suppliers.	Moreover,	the	hardware	and	IP	markets	are	highly	competitive,	and	our	customers	may	choose	to purchase	a	competitor's	hardware	or	IP	product	based	on	cost,	performance	or	other	factors.	These	factors	may	result	in	lower	revenue,	which	would	have	an adverse	effect	on	our	business,	results	of	operations	or	cash	flows.

A	substantial	proportion	of	our	software	licenses	yield	revenue	recognized	over	time,	which	may	make	it	difficult	for	us	to	rapidly	increase	our	revenue	in	future fiscal	periods.

We	plan	our	operating	expenses	based	on	forecasted	revenue,	expected	business	needs	and	other	factors.	These	expenses	and	the	effect	of	long-term commitments	are	relatively	fixed	in	the	short	term.	Bookings	and	the	related	revenue	are	harder	to	forecast	in	a	difficult	economic	environment.	If	we	experience	a shortfall	in	bookings,	our	operating	results	could	differ	from	our	expectations	because	we	may	not	be	able	to	quickly	reduce	our	expenses	in	response	to	short-term business	changes.

The	methods,	estimates	and	judgments	that	we	use	in	applying	our	accounting	policies	have	a	significant	impact	on	our	results	of	operations	(see	"Critical Accounting	Estimates"	under	Part	II,	Item	7,	"Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations").	Such	methods,	estimates and	judgments	are,	by	their	nature,	subject	to	substantial	risks,	uncertainties	and	assumptions,	and	factors	may	arise	over	time	that	may	lead	us	to	change	our methods,	estimates	and	judgments.	Changes	in	those	methods,	estimates	and	judgments	could	significantly	affect	our	results	of	operations.

Historical	results	of	operations	should	not	be	viewed	as	reliable	indicators	of	our	future	performance.	If	our	revenue,	operating	results	or	business	outlook	for future	periods	fall	short	of	the	levels	expected	by	us,	securities	analysts	or	investors,	the	trading	price	of	our	common	stock	could	decline.

We	 have	 invested	 and	 expect	 to	 continue	 to	 invest	 in	 research	 and	 development	 efforts	 for	 new	 and	 existing	 products	 and	 technologies	 and technical	sales	support.	Such	investments	may	affect	our	operating	results,	and,	if	the	return	on	these	investments	is	lower	or	develops	more	slowly	than we	expect,	our	revenue	and	operating	results	may	suffer.

We	have	invested	and	expect	to	continue	to	invest	in	research	and	development	for	new	and	existing	products,	technologies	and	services	in	response	to	our customers'	increasing	technological	requirements.	Such	investments	may	be	in	related	areas,	such	as	technical	sales	support.	These	investments	may	involve significant	time,	risks	and	uncertainties,	including	the	risk	that	the	expenses	associated	with	these	investments	may	affect	our	margins	and	operating	results	and	that such	investments	may	not	generate	sufficient	revenues	to	offset	liabilities	assumed	and	expenses	associated	with	these	new	investments.	We	believe	that	we	must continue	to	invest	a	significant	amount	of	time	and	resources	in	our	research	and	development	efforts	and	technical	sales	support	to	maintain	and	improve	our competitive	position.	If	we	do	not	achieve	the	benefits	anticipated	from	these	investments,	if	the	achievement	of	these	benefits	is	delayed,	or	if	customers	reduce	or slow	the	need	to	upgrade	or	enhance	their	EDA	products	and	design	flows,	our	revenue	and	operating	results	may	be	adversely	affected.

# The	competition	in	our	industries	is	substantial,	and	we	may	not	be	able	to	continue	to	successfully	compete	in	our	industries.

The	industries	in	which	we	do	business,	including	software,	hardware,	IP	and	services	for	enabling	the	design	of	electronic	products,	are	highly	competitive	and require	us	to	identify	and	develop	or	acquire	innovative	and	cost-competitive	products,	integrate	them	into	platforms	and	market	them	in	a	timely	manner.	We	may	not be	able	to	compete	successfully	in	these	industries,	which	could	seriously	harm	our	business,	operating	results	or	financial	condition.	Factors	that	could	affect	our ability	to	compete	successfully	include:

•the	development	by	others	of	competitive	products	or	platforms	and	engineering	services,	possibly	resulting	in	a	shift	of	customer	preferences	away	from our	products	and	services	and	significantly	decreased	revenue;

•aggressive	pricing	competition	by	some	of	our	competitors	may	cause	us	to	lose	our	competitive	position,	which	could	result	in	lower	revenues	or profitability	and	could	adversely	impact	our	ability	to	realize	the	revenue	and	profitability	forecasts	for	our	software	or	emulation	and	prototyping	hardware systems	products;

•the	challenges	of	advanced	node	design	may	lead	some	customers	to	work	with	more	mature,	less	risky	manufacturing	processes	that	may	reduce	their need	to	upgrade	or	enhance	their	EDA	products	and	design	flows;

•the	challenges	of	developing	(or	acquiring	externally	developed)	technology	solutions	that	are	adequate	and	competitive	in	meeting	the	rapidly	evolving requirements	of	next-generation	design	challenges;

•intense	competition	to	attract	acquisition	targets,	possibly	making	it	more	difficult	for	us	to	acquire	companies	or	technologies	at	an	acceptable	price,	or	at all;

•new	entrants,	including	larger	electronic	systems	companies,	in	our

business;

•the	combination	of	our	competitors	or	collaboration	among	many	companies	to	deliver	more	comprehensive	offerings	than	they	could	individually;

•decisions	by	electronics	manufacturers	to	perform	engineering	services	or	IP	development	internally,	rather	than	purchase	these	services	from	outside vendors	due	to	budget	constraints	or	excess	engineering	capacity.

We	compete	most	frequently	with	Synopsys,	Inc.	and	Mentor	Graphics	Corporation,	which	was	acquired	by	Siemens	AG	in	2017,	and	also	with	numerous	other EDA	providers,	manufacturers	of	electronic	devices	that	have	developed,	acquired	or	have	the	capability	to	develop	their	own	EDA	products,	electronics	design	and consulting	companies,	and	other	IP	companies.	These	include	Altium	Limited,	Ansys,	Inc.,	CEVA,	Inc.,	Keysight	Technologies,	Inc.	and	Zuken	Ltd.

# We	have	acquired	and	expect	to	acquire	other	companies	and	businesses	and	may	not	realize	the	expected	benefits	of	these	acquisitions.

We	have	acquired	and	expect	to	acquire	other	companies	and	businesses	in	order	to	expand	our	product	offerings.	Our	future	revenue	growth	and	expansion	of our	business	 is	dependent	on	our	successful	 integration	of	our	acquisitions.	We	may	 incur	significant	costs	 in	connection	with	potential	 transactions,	 including acquisitions	that	are	not	consummated.	Potential	and	completed	acquisitions	involve	a	number	of	risks.	If	any	of	the	following	acquisition-related	risks	occur,	our business,	operating	results	or	financial	condition	could	be	adversely	impacted:

•the	failure	to	realize,	or	a	delay	in	realizing,	anticipated	benefits	such	as	cost	savings	and	revenue

enhancements;

•overlapping	customers	and	product	sets	that	impact	our	ability	to	maintain	revenue	at	historical

rates;

•the	failure	to	understand,	compete	and	operate	effectively	in	markets	where	we	have	limited experience;

•the	failure	to	integrate	and	manage	acquired	products	and	businesses effectively;

•the	failure	to	integrate	and	retain	key	employees	of	an	acquired	company	or

•difficulties	in	combining	previously	separate	companies	or	businesses	into	a	single

unit;

•the	substantial	diversion	of	management's	attention	from	day-to-day	business	when	evaluating	and	negotiating	these	transactions	and	integrating	an acquired	company	or	business;

•the	discovery,	after	completion	of	the	acquisition,	of	unanticipated	liabilities	assumed	from	an	acquired	company,	business	or	assets,	such	that	we	cannot realize	the	anticipated	value	of	the	acquisition;

•difficulties	related	to	integrating	the	products	of	an	acquired	company	or	business	in,	for	example,	distribution,	engineering,	licensing	models	or	customer support	areas;

•unanticipated	costs;

•unwillingness	of	customers	of	an	acquired	business	to	continue	licensing	or	buying	products	from	us	following	the

acquisition.

In	a	number	of	our	completed	acquisitions,	we	have	agreed	to	make	future	payments,	either	in	the	form	of	employee	retention	bonuses	or	contingent	purchase price	payments,	based	on	the	achievement	of	specified	milestones.	The	performance	goals	pursuant	to	which	these	future	payments	may	be	made	generally	relate	to the	achievement	by	the	acquired	company	or	business,	or	by	the	employees	who	joined	us	with	the	acquired	company	or	business,	of	certain	specified	bookings, revenue,	run	rate,	product	proliferation,	product	development	or	employee	retention	goals	during	a	specified	period	following	completion	of	the	applicable	acquisition. The	specific	performance	goal	levels	and	amounts	and	timing	of	employee	bonuses	or	contingent	purchase	price	payments	vary	with	each	acquisition.	We	may continue	to	use	contingent	payments	in	connection	with	acquisitions	in	the	future	and	while	we	expect	to	derive	value	from	an	acquisition	in	excess	of	such	contingent payment	obligations,	we	may	be	required	to	make	certain	contingent	payments	without	deriving	the	anticipated	value.

Future	acquisitions	may	involve	issuances	of	stock	as	full	or	partial	payment	of	the	purchase	price	for	the	acquired	company	or	business,	grants	of	restricted stock,	restricted	stock	units	or	stock	options	to	employees	of	the	acquired	companies	or	businesses	(which	may	be	dilutive	to	existing	stockholders),	expenditure	of substantial	cash	resources	or	the	incurrence	of	a	material	amount	of	debt.	These	arrangements	may	impact	our	liquidity,	financial	position	and	results	of	operations	or increase	dilution	of	our	stockholders'	equity	interests	in	the	company.

# We	make	and	expect	to	make	strategic	investments	and	may	not	realize	the	expected	benefits	of	these	investments.

We	have	made	and	expect	to	make	strategic	investments	in	which	we	have	a	minority	equity	interest	and	do	not	have	operational	control.	These	strategic investments	may	also	involve	collaboration	agreements	that	further	and	complement	our	strategy	and	marketing	efforts.	We	may	not	be	able	to	realize	the	expected benefits	of	these	investments,	and	the	related	collaborations	may	be	difficult	to	manage	without	sole	decision-making	authority	and	the	economic	or	business	interests in	these	collaborations	may	become	inconsistent	with	our	interests.	These	challenges	could	have	an	adverse	effect	on	our	business,	operating	results	or	financial condition.

The	accounting	applied	to	strategic	investments	depends	on	a	number	of	factors,	including,	but	not	limited	to,	our	percentage	of	ownership	and	the	level	of	our influence	over	the	entity.	Losses	experienced	by	these	strategic	investment	entities	or	associated	impairment	charges	could	adversely	impact	our	operating	results and	the	value	of	our	investment.	In	addition,	if	these	entities	fail	and	cease	operations,	we	may	lose	the	value	of	our	investment	and	shared	profits.

Failure	to	obtain	export	licenses	or	restrictions	on	trade	imposed	by	the	United	States	or	other	countries	could	harm	our	business	by	rendering	us unable	to	sell	or	ship	products	and	transfer	our	technology	outside	of	the	United	States.

We	must	comply	with	regulations	of	the	United	States	and	of	certain	other	countries	in	selling	or	shipping	our	products	and	transferring	our	technology	outside the	United	States	and	to	foreign	nationals.	Changes	in	these	regulations	or	restrictions	due	to	changes	in	trade	relationships	with	the	United	States,	including	new tariffs,	trade	protection	measures,	import	or	export	licensing	requirements,	sanctions,	trade	embargoes	and	other	trade	barriers,	could	harm	our	business,	operating results	or	financial	condition.

# The	effect	of	foreign	exchange	rate	fluctuations	may	adversely	impact	our	revenue,	expenses,	cash	flows	and	financial	condition.

We	have	significant	operations	outside	the	United	States.	Our	revenue	from	international	operations	as	a	percentage	of	total	revenue	was	approximately	57% during	 fiscal	 2018,	58%	during	 fiscal	2017,	and	54%	during	fiscal	2016.	We	expect	that	revenue	from	our	international	operations	will	continue	to	account	for	a significant	portion	of	our	 total	revenue.	We	also	 transact	business	 in	various	 foreign	currencies,	although	 the	majority	 of	 our	 revenue	 contracts	 worldwide	 are denominated	in	U.S.	dollars.	Volatility	of	currencies	in	countries	where	we	conduct	business,	most	notably	the	U.S.	dollar,	Chinese	renminbi,	Japanese	yen,	European Union	euro,	British	pound	and	Indian	rupee	have	had	and	may	in	the	future	have	an	effect	on	our	revenue	or	operating	results.

Fluctuations	in	the	rate	of	exchange	between	the	U.S.	dollar	and	the	currencies	of	other	countries	where	we	conduct	business	could	seriously	affect	our business,	operating	results	or	financial	condition.	For	example,	when	a	foreign	currency	declines	in	value	relative	to	the	U.S.	dollar,	it	takes	more	of	the	foreign currency	to	purchase	the	same	amount	of	U.S.	dollars	than	before	the	change.	If	we	price	our	products	and	services	in	the	foreign	currency,	we	receive	fewer	U.S. dollars	than	we	did	before	the	change.	If	we	price	our	products	and	services	in	U.S.	dollars,	the	decrease	in	value	of	the	local	currency	results	in	an	increase	in	the price	for	our	products	and	services	compared	to	those	products	of	our	competitors	that	are	priced	in	local	currency.	This	could	result	in	our	prices	being	uncompetitive in	markets	where	business	is	transacted	in	the	local	currency.	On	the	other	hand,	when	a	foreign	currency	increases	in	value	relative	to	the	U.S.	dollar,	it	takes	more U.S.	dollars	 to	purchase	 the	same	amount	of	 the	 foreign	currency.	As	we	use	 the	 foreign	currency	 to	 fund	payroll	costs	and	other	operating	expenses	 in	our international	operations,	this	results	in	an	increase	in	operating	expenses.	Approximately	30%	of	our	total	costs	and	expenses	are	transacted	in	foreign	currencies. Our	attempts	to	reduce	the	effect	of	foreign	currency	fluctuations	may	be	unsuccessful,	and	significant	exchange	rate	movements	may	adversely	impact	our	results	of operations	as	expressed	in	U.S.	dollars.

# Our	operating	results	could	be	adversely	affected	by	an	increase	in	our	effective	tax	rate	as	a	result	of	U.S.	and	foreign	tax	law	changes,	outcomes of	current	or	future	tax	examinations,	or	by	material	differences	between	our	forecasted	and	actual	effective	tax	rates.

Our	operations	are	subject	to	income	and	transaction	taxes	in	the	United	States	and	in	multiple	foreign	jurisdictions,	with	a	significant	amount	of	our	foreign earnings	generated	by	our	subsidiaries	organized	in	Ireland	and	Hungary.	Any	significant	change	in	our	future	effective	tax	rates	could	adversely	impact	our	results	of operations	for	future	periods.	Our	future	effective	tax	rates	could	be	adversely	affected	by	the	following:

•changes	in	tax	laws	or	the	interpretation	of	such	tax	laws	in	the	United	States,	Ireland,	Hungary,	the	United	Kingdom,	China,	the	Republic	of	Korea,	Japan, India	or	other	international	locations	where	we	have	operations;

•earnings	being	lower	than	anticipated	in	countries	where	we	are	taxed	at	lower	rates	as	compared	to	the	United	States	federal	and	state	statutory	tax rates;

•an	increase	in	expenses	not	deductible	for	tax

purposes;

•an	increase	in	corporate	minimum

•changes	in	tax	benefits	from	stock-based

compensation;

•changes	in	the	valuation	allowance	against	our	deferred	tax

assets;

•changes	in	judgment	from	the	evaluation	of	new	information	that	results	in	a	recognition,	derecognition	or	change	in	measurement	of	a	tax	position	taken in	a	prior	period;

•increases	to	interest	or	penalty	expenses	classified	in	the	financial	statements	as	income

taxes;

•new	accounting	standards	or	interpretations	of	such	standards;

•results	of	examinations	by	the	Internal	Revenue	Service	("IRS"),	state,	and	foreign	tax	or	other	governmental

authorities.

The	IRS	and	other	tax	authorities	regularly	examine	our	income	tax	returns	and	other	non-income	tax	returns,	such	as	payroll,	sales,	use,	value-added,	net worth	or	franchise,	property,	goods	and	services,	consumption,	import,	stamp,	and	excise	taxes,	in	both	the	United	States	and	foreign	jurisdictions.	The	calculation	of our	provision	for	income	taxes	and	our	accruals	for	other	taxes	requires	us	to	use	significant	judgment	and	involves	dealing	with	uncertainties	in	the	application	of complex	tax	laws	and	regulations.	In	determining	the	adequacy	of	our	provision	for	income	taxes,	we	regularly	assess	the	potential	settlement	outcomes	resulting	from income	tax	examinations.	However,	the	final	outcome	of	tax	examinations,	including	the	total	amount	payable	or	the	timing	of	any	such	payments	upon	resolution	of these	issues,	cannot	be	estimated	with	certainty.	In	addition,	we	cannot	be	certain	that	such	amount	will	not	be	materially	different	from	the	amount	that	is	reflected	in our	historical	income	tax	provisions	and	accruals	for	other	taxes.	Should	the	IRS	or	other	tax	authorities	assess	additional	taxes,	penalties	or	interest	as	a	result	of	a current	or	a	future	examination,	we	may	be	required	to	record	charges	to	operations	in	future	periods	that	could	have	a	material	impact	on	our	results	of	operations, financial	position	or	cash	flows	in	the	applicable	period	or	periods.

Forecasts	of	our	annual	effective	tax	rate	are	complex	and	subject	to	uncertainty	because	our	income	tax	position	for	each	year	combines	the	effects	of estimating	our	annual	income	or	loss,	the	mix	of	profits	and	losses	earned	by	us	and	our	subsidiaries	in	tax	jurisdictions	with	a	broad	range	of	income	tax	rates,	as well	as	benefits	from	available	deferred	tax	assets,	the	impact	of	various	accounting	rules,	our	interpretations	of	changes	in	tax	laws	and	results	of	tax	audits. Forecasts	of	our	annual	effective	tax	rate	do	not	include	the	anticipation	of	future	tax	law	changes.	In	addition,	we	account	for	certain	tax	benefits	from	stock-based compensation	in	the	period	the	stock	compensation	vests	or	is	settled,	which	may	cause	increased	variability	in	our	quarterly	effective	tax	rates.	If	there	were	a material	difference	between	forecasted	and	actual	tax	rates,	it	could	have	a	material	impact	on	our	results	of	operations.

# Tax	laws,	regulations,	and	compliance	practices	are	evolving	and	may	have	a	material	adverse	effect	on	our	results	of	operations,	cash	flows	and financial	position.

The	U.S.	Tax	Cuts	and	Jobs	Act	(the	"Tax	Act")	was	enacted	in	December	2017,	and	significantly	affected	U.S.	tax	law	by	changing	how	the	U.S.	imposes income	tax	on	multinational	corporations.	The	U.S.	Department	of	Treasury	has	broad	authority	to	issue	regulations	and	interpretative	guidance	that	may	significantly impact	how	we	will	apply	the	law	and	impact	our	results	of	operations.	As	additional	interpretative	guidance	is	issued	by	the	applicable	authorities,	we	may	need	to revise	our	provision	(benefit)	for	income	taxes	in	future	periods.	These	revisions	could	materially	affect	our	results	of	operations,	cash	flow	and	financial	position.	For further	 discussion	 regarding	 our	 income	 taxes,	 please	 refer	 to	 Part	 II,	 Item	 7,	 "Management's	 Discussion	 and	Analysis	 of	 Financial	 Condition	 and	 Results	 of Operations"	under	the	heading	"Income	Taxes"	and	Note	6	in	the	notes	to	consolidated	financial	statements.

Tax	laws,	regulations,	and	administrative	practices	in	various	jurisdictions	are	evolving	and	may	be	subject	to	significant	changes	due	to	economic,	political,	and other	conditions.	There	are	many	transactions	that	occur	during	the	ordinary	course	of	business	for	which	the	ultimate	tax	determination	is	uncertain,	and	significant judgment	 is	 required	 in	 evaluating	 and	 estimating	 our	 provision	 and	 accruals	 for	 these	 taxes.	 Governments	 are	 increasingly	 focused	 on	 ways	 to	 increase	 tax revenues,	particularly	from	multinational	corporations,	which	may	lead	to	an	increase	in	audit	activity	and	harsher	positions	taken	by	tax	authorities.	We	are	currently subject	to	tax	audits	in	various	jurisdictions	and	these	jurisdictions	may	assess	additional	tax	liabilities	against	us.

The	Organisation	for	Economic	Co-operation	and	Development	("OECD"),	an	international	association	of	36	countries,	including	the	United	States,	released	the final	reports	from	its	Base	Erosion	and	Profit	Shifting	("BEPS")	Action	Plans,	which	aim	to	standardize	and	modernize	global	tax	policies.	The	BEPS	Action	Plans propose	revisions	to	numerous	tax	rules,	including	country-by-country	reporting,	permanent	establishment,	hybrid	entities	and	instruments,	transfer	pricing,	and	tax treaties.	The	 BEPS	Action	 Plans	 have	 been	 or	 are	 being	 enacted	 by	 countries	 where	 we	 have	 operations.	The	 European	 Commission	 ("EC")	 has	 conducted investigations	in	multiple	countries	focusing	on	whether	local	country	tax	rulings	provide	preferential	tax	treatment	that	violates	European	Union	state	aid	rules	and concluded	that	certain	countries,	including	Ireland,	have	provided	illegal	state	aid	in	certain	cases.	The	EC	and	OECD	have	also	been	evaluating	new	rules	on	the taxation	 of	 the	 digital	 economy	 companies.	In	addition,	Taiwan,	 Italy,	 the	United	Kingdom,	France,	 India	and	Hungary	have	recently	 introduced	new	rulings	or proposals	to	tax	digital	transactions.	These	developments	in	tax	laws	and	regulations,	and	compliance	with	these	rules,	could	have	a	material	adverse	effect	on	our operating	results,	financial	position	and	cash	flows.

# Our	stock	price	has	been	subject	to	fluctuations	and	may	continue	to	be	subject	to	fluctuations.

The	market	price	of	our	common	stock	has	experienced	fluctuations	and	may	fluctuate	or	decline	in	the	future,	and	as	a	result	you	could	lose	the	value	of	your investment.	The	market	price	of	our	common	stock	may	be	affected	by	a	number	of	factors,	including:

•quarterly	or	annual	operating	or	financial	results	or	forecasts	that	fail	to	meet	or	are	inconsistent	with	earlier	projections	or	the	expectations	of	our	securities analysts	or	investors;

•changes	in	our	forecasted	bookings,	revenue,	earnings	or	operating	cash	flow estimates;

•an	increase	in	our	debt	or	other

liabilities;

•market	conditions	in	the	electronics	systems	and	semiconductor

industries;

•announcements	of	a	restructuring	plan;

•changes	in

management;

•repurchases	of	shares	of	our	common	stock	or	changes	to	plans	to	repurchase	shares	of	our	common stock;

•a	gain	or	loss	of	a	significant	customer	or	market	segment

share;

•litigation;

•announcements	of	a	merger,	acquisition	or	other	corporate	transaction;

•announcements	of	new	products	or	acquisitions	of	new	technologies	by	us,	our	competitors	or	our

customers.

In	addition,	equity	markets	in	general,	and	the	equities	of	technology	companies	in	particular,	have	experienced	and	may	experience	in	the	future,	extreme	price and	volume	fluctuations	due	to,	among	other	factors,	the	actions	of	market	participants	or	other	actions	outside	of	our	control.	Such	price	and	volume	fluctuations	may adversely	affect	the	market	price	of	our	common	stock	for	reasons	unrelated	to	our	business	or	operating	results.

# Our	future	revenue	is	dependent	in	part	upon	our	installed	customer	base	continuing	to	license	or	buy	products	and	purchase	services.

Our	installed	customer	base	has	traditionally	generated	additional	new	license,	service	and	maintenance	revenues.	In	future	periods,	customers	may	not necessarily	license	or	buy	additional	products	or	contract	for	additional	services	or	maintenance.	Our	customers,	many	of	which	are	large	semiconductor	and	systems companies,	often	have	significant	bargaining	power	in	negotiations	with	us.	Customer	consolidation	can	reduce	the	total	level	of	purchases	of	our	software,	hardware, IP	and	services,	and	in	some	cases,	increase	customers'	bargaining	power	in	negotiations	with	their	suppliers,	including	us.

# We	could	suffer	serious	harm	to	our	business	because	of	the	infringement	of	our	intellectual	property	rights	by	third	parties	or	because	of	our infringement	of	the	intellectual	property	rights	of	third	parties.

There	are	numerous	patents	relating	to	our	business	and	ecosystem.	New	patents	are	being	issued	at	a	rapid	rate	and	are	owned	by	EDA	companies	as	well as	entities	and	individuals	outside	the	EDA	industry,	including	parties	whose	income	is	primarily	derived	from	infringement-related	licensing	and	litigation.	It	is	not always	practicable	to	determine	in	advance	whether	a	product	or	any	of	its	components	infringes	the	patent	rights	of	others.	As	a	result,	from	time	to	time,	we	may	be compelled	to	respond	to	or	prosecute	intellectual	property	infringement	claims	to	protect	our	rights	or	defend	a	customer's	rights.

Intellectual	 property	 infringement	 claims,	 including	 contractual	 defense	 reimbursement	 obligations	 related	 to	 third-party	 claims	 against	 our	 customers, regardless	of	merit,	could	consume	valuable	management	time,	result	in	costly	litigation	or	cause	product	shipment	delays,	all	of	which	could	seriously	harm	our business,	operating	results	or	financial	condition.	The	risk	of	infringement	and	related	indemnification	claims	associated	with	design	IP	products	that	are	incorporated into	a	customer	product	broadly	used	by	consumers	may	be	higher	than	the	risk	associated	with	our	software	products.	In	settling	these	claims,	we	may	be	required to	enter	into	royalty	or	licensing	agreements	with	the	third	parties	claiming	infringement.	These	royalty	or	licensing	agreements,	if	available,	may	not	have	terms favorable	to	us.	Being	compelled	to	enter	into	a	license	agreement	with	unfavorable	terms	could	seriously	harm	our	business,	operating	results	or	financial	condition.

Any	potential	intellectual	property	litigation	could	compel	us	to	do	one	or	more	of	the	following:

•pay	damages	(including	the	potential	for	treble	damages),	license	fees	or	royalties	(including	royalties	for	past	periods)	to	the	party	claiming infringement;

•stop	licensing	products	or	providing	services	that	use	the	challenged	intellectual

property;

•obtain	a	license	from	the	owner	of	the	infringed	intellectual	property	to	sell	or	use	the	relevant	technology,	which	license	may	not	be	available	on reasonable	terms,	or	at	all;	or

•redesign	the	challenged	technology,	which	could	be	time	consuming	and	costly,	or

impossible.

If	we	were	compelled	to	take	any	of	these	actions,	our	business	or	operating	results	may	suffer.

# If	our	security	measures	are	breached,	and	an	unauthorized	party	obtains	access	to	customer	data,	financial	data	or	assets	or	our	proprietary business	information,	our	information	systems	may	be	perceived	as	being	unsecure,	and	our	business	and	reputation	could	be	harmed.

Our	products	and	services	involve	storage,	including	cloud-based	storage,	and	transmission	of	our	proprietary	information	and	that	of	our	customers.	We	have offices	throughout	the	world,	including	key	research	and	development	facilities	outside	of	the	United	States.	Our	operations	are	dependent	upon	the	connectivity	of our	operations	throughout	the	world.	Despite	our	security	measures,	our	information	technology	and	infrastructure	may	be	vulnerable	to	cyber	attacks	by	unauthorized third	parties	(which	may	include	nation-states	and	individuals	sponsored	by	them)	or	breaches	due	to	employee	error,	malfeasance	or	other	disruptions,	which	could result	in	unauthorized	disclosure	of	sensitive	information	and	could	significantly	interfere	with	our	business	operations.	Third	parties	may	attempt	to	gain	unauthorized access	through	a	variety	of	methods	(such	as	the	use	of	viruses,	malware,	ransomware,	phishing,	denial	of	service	attacks	and	other	cyber	attacks)	and	corrupt	the processes	of	the	products	and	services	that	we	provide.	We	may	also	be	a	target	of	malicious	attacks	in	an	attempt	to	gain	access	to	our	network,	including	our Cadence	Cloud	portfolio	which	includes	both	our	managed	and	customer-managed	environments,	or	data	centers	or	those	of	our	customers	or	end	users;	steal proprietary	information	related	to	our	business,	products,	services	or	infrastructure;	steal	financial	data	or	assets	or	interrupt	our	systems	and	services	or	those	of	our customers	or	others.	Breaches	of	our	security	measures	could	expose	us	to	a	risk	of	loss	or	misuse	of	this	information,	loss	of	financial	assets,	litigation	and	potential liability.	Because	 techniques	used	 to	obtain	unauthorized	access	or	 to	sabotage	 information	systems	change	 frequently	and	generally	are	not	recognized	until launched	against	a	target,	we	may	be	unable	to	anticipate	these	techniques	or	to	implement	adequate	preventive	measures.	In	addition,	if	we	select	a	vendor	that uses	cloud	storage	of	information	as	part	of	their	service	or	product	offerings	or	are	selected	as	a	vendor	for	our	Cadence	Cloud	portfolio,	despite	our	attempts	to validate	the	security	of	such	services,	our	proprietary	information	may	be	misappropriated	by	third	parties.	In	the	event	of	an	actual	or	perceived	breach	of	our security,	or	the	security	of	one	of	our	vendors,	the	market	perception	of	the	effectiveness	of	our	security	measures	could	be	harmed,	legal	or	regulatory	actions	could be	initiated	against	us	and	we	could	suffer	damage	to	our	reputation	or	our	business,	or	lose	existing	customers	and	our	ability	to	obtain	new	customers,	or	suffer harm	to	our	financial	condition.

# Risks	associated	with	our	international	operations	could	adversely	impact	our	financial	condition.

A	 significant	 amount	 of	 our	 revenue	 is	 derived	 from	 our	 international	 operations,	 and	 we	 have	 offices	 throughout the	 world, including	 key	 research	 and development	facilities	outside	of	the	United	States.	Our	international	operations	may	be	subject	to	a	number	of	risks,	including:

•shifts	in	political,	trade	or	other	policies	or	other	governmental	dynamics	resulting	from	the	results	of	certain	elections	or	votes,	such	as	changes	in	policies pursued	by	the	United	States,	China	or	the	Republic	of	Korea,	or	changes	associated	with	and	the	United	Kingdom's	withdrawal	from	the	European	Union; •the	adoption	or	expansion	of	government	trade	restrictions,	including	tariffs,	export	or	import	regulations,	sanctions	or	other	trade barriers;

•limitations	on	repatriation	of

earnings;

•longer	collection	periods	for	receivables	and	greater	difficulty	in	collecting	accounts receivable;

•difficulties	in	managing	foreign

operations;

•political	and	economic

•unexpected	changes	in	regulatory

•inability	to	continue	to	offer	competitive	compensation	in	certain	growing regions;

•differing	employment	practices	and	labor

issues;

•United	States'	and	other	governments'	licensing	requirements	for	exports,	which	may	lengthen	the	sales	cycle	or	restrict	or	prohibit	the	sale	or	licensing	of certain	products;	and

•variations	in	costs	or	expenses	associated	with	our	international	operations,	including	as	a	result	of	changes	in	foreign	tax	laws	or	devaluation	of	the	U.S. dollar	relative	to	other	foreign	currencies.

Some	of	our	international	research	and	development	and	other	facilities	are	in	parts	of	the	world	where	there	may	be	a	greater	risk	of	business	interruption	as	a result	of	political	instability,	terrorist	acts	or	military	conflicts	than	businesses	located	domestically.	Furthermore,	this	potential	harm	is	exacerbated	because	damage to	or	disruptions	at	our	international	research	and	development	facilities	could	have	a	more	significant	adverse	effect	on	our	ability	to	develop	new	or	improve	existing products	than	other	businesses	that	may	only	have	sales	offices	or	other	less	critical	operations	abroad.	We	are	not	insured	for	losses	or	interruptions	caused	by	acts of	 war.	 Furthermore,	 our	 operations	 are	 dependent	 upon	 the	 connectivity	 of	 our	 operations	 throughout	 the	 world.	Activities	 that	 interfere	 with	 our	 international connectivity	or	operations,	such	as	cyber	hacking,	the	introduction	of	a	virus	into	our	computer	systems,	natural	disasters,	civil	unrest	or	terrorism,	could	significantly interfere	with	our	business	operations.

In	addition,	internal	controls,	policies	and	procedures	and	employee	training	and	compliance	programs	that	we	have	implemented	to	deter	prohibited	practices may	 not	 prevent	 our	 employees,	 contractors	 or	 agents	 from	 violating	 or	 circumventing	 our	 policies	 and	 the	 laws	 and	 regulations	 applicable	 to	 our	 worldwide operations.

# We	depend	upon	our	management	team	and	key	employees,	and	our	failure	to	attract,	train,	motivate	and	retain	management	and	key	employees may	make	us	less	competitive	and	therefore	harm	our	results	of	operations.

Our	business	depends	upon	the	continued	services,	efforts	and	abilities	of	our	senior	management	and	other	key	employees.	Competition	for	highly	skilled executive	officers	and	employees	can	be	intense,	particularly	in	geographic	areas	recognized	as	high	technology	centers	such	as	the	Silicon	Valley	area,	where	our principal	offices	are	located,	and	in	other	locations	where	we	maintain	facilities.	In	addition,	competition	for	qualified	personnel,	including	software	engineers,	in	the EDA,	commercial	electronics	engineering	services	and	IP	industries	has	intensified.	Further,	increased	uncertainty	regarding	social,	political	and	immigration	policies in	the	United	States	and	abroad	may	make	it	difficult	to	recruit	employees	with	adequate	experience.	We	may	also	experience	increased	compensation	costs	that	are not	offset	by	either	improved	productivity	or	higher	sales.	We	may	not	be	successful	in	recruiting	new	personnel	and	in	retaining	and	motivating	existing	personnel. From	time	to	time,	there	may	be	changes	in	our	management	team	resulting	from	the	hiring	and	departure	of	executive	officers,	and	as	a	result,	we	may	experience disruption	to	our	business	that	may	harm	our	operating	results	and	our	relationships	with	our	employees,	customers	and	suppliers	may	be	adversely	affected.

To	attract,	retain	and	motivate	 individuals	with	 the	requisite	expertise,	we	may	be	required	 to	grant	 large	numbers	of	stock	options	or	other	stock-based incentive	awards,	which	may	be	dilutive	to	existing	stockholders	and	increase	compensation	expense,	and	pay	significant	base	salaries	and	cash	bonuses,	which could	harm	our	operating	results.	The	high	cost	of	training	new	employees,	not	fully	utilizing	these	employees,	or	losing	trained	employees	to	competing	employers could	also	reduce	our	operating	margins	and	harm	our	business	or	operating	results.

In	addition,	applicable	rules	and	regulations	require	stockholder	approval	for	new	equity	compensation	plans	and	significant	amendments	to	existing	equity compensation	plans	(including	increases	in	shares	available	for	issuance	under	such	plans).	These	rules	and	regulations	could	make	it	more	difficult	for	us	to	grant equity	compensation	to	employees	in	the	future.	To	the	extent	that	these	regulations	make	it	more	difficult	or	expensive	to	grant	equity	compensation	to	employees, we	may	incur	increased	compensation	costs	or	find	it	difficult	to	attract,	retain	and	motivate	employees,	which	could	materially	and	adversely	affect	our	business.

We	rely	on	our	proprietary	technology,	as	well	as	software	and	other	intellectual	property	rights	licensed	to	us	by	third	parties,	and	we	cannot assure	you	that	the	precautions	taken	to	protect	our	rights	will	be	adequate	or	that	we	will	continue	to	be	able	to	adequately	secure	such	intellectual property	rights	from	third	parties.

Our	success	depends,	in	part,	upon	our	proprietary	technology.	We	generally	rely	on	patents,	copyrights,	trademarks,	trade	secrets,	licenses	and	restrictive agreements	to	establish	and	protect	our	proprietary	rights	in	technology	and	products.	Despite	the	precautions	we	may	take	to	protect	our	intellectual	property,	third parties	have	tried	in	the	past,	and	may	try	in	the	future,	to	challenge,	invalidate	or	circumvent	these	safeguards.	Our	patents	and	other	intellectual	property	rights	may not	provide	us	with	sufficient	competitive	advantages.	Patents	may	not	be	issued	on	any	of	our	pending	applications	and	our	issued	patents	may	not	be	sufficiently broad	to	protect	our	technology.	Furthermore,	the	laws	of	foreign	countries	may	not	protect	our	proprietary	rights	in	those	countries	to	the	same	extent	as	applicable law	protects	these	rights	in	the	United	States.	The	protection	of	our	intellectual	property	may	require	the	expenditure	of	significant	financial	and	managerial	resources. Moreover,	 the	 steps	 we	 take	 to	 protect	 our	 intellectual	 property	 may	 not	 adequately	 protect	 our	 rights,	 or	 deter	 or	 prevent	 third	 parties	 from	 infringing	 or misappropriating	our	proprietary	rights.

Many	of	our	products	include	software	or	other	intellectual	property	licensed	from	third	parties.	We	may	have	to	seek	new	or	renew	existing	licenses	for	such software	and	other	intellectual	property	in	the	future.	Our	engineering	services	business	holds	licenses	to	certain	software	and	other	intellectual	property	owned	by third	parties,	including	that	of	our	competitors.	Our	failure	to	obtain	software,	other	intellectual	property	licenses	or	other	intellectual	property	rights	that	are	necessary or	helpful	for	our	business	on	favorable	terms,	or	our	need	to	engage	in	litigation	over	these	licenses	or	rights,	could	seriously	harm	our	business,	operating	results	or financial	condition.

We	have	substantial	cash	requirements	in	the	United	States,	but	a	significant	portion	of	our	cash	is	held	and	generated	outside	of	the	United	States, and	if	our	cash	available	in	the	United	States	and	the	cash	available	under	our	revolving	credit	facility	are	insufficient	to	meet	our	operating	expenses	and debt	repayment	obligations	in	the	United	States,	then	we	may	be	required	to	raise	cash	in	ways	that	could	negatively	affect	our	financial	condition,	results of	operations	and	the	market	price	of	our	common	stock.

We	have	significant	operations	outside	the	United	States.	As	of	December	29,	2018,	approximately	75%	of	our	cash	and	cash	equivalents	balance	was	held	by subsidiaries	outside	the	United	States,	with	the	remainder	of	the	balance	held	by	us	or	our	subsidiaries	in	the	United	States.	We	believe	that	the	combination	of	our U.S.	cash,	cash	equivalents,	future	U.S.	operating	cash	flows,	cash	available	under	our	revolving	credit	facility	and	other	cash	that	may	be	accessible	to	us	on attractive	terms	are	sufficient	to	meet	our	ongoing	U.S.	operating	expenses	and	debt	repayment	obligations.	Although	the	Tax	Act	may	have	reduced	the	tax	impact of	repatriation	of	foreign	earnings,	there	are	still	administrative	processes	associated	with	repatriation	of	foreign	earnings	that	could	affect	the	timing	of	returning	cash to	the	U.S.	from	non-U.S.	jurisdictions.	Accordingly,	if	our	U.S.	cash	were	insufficient	to	meet	our	future	funding	obligations	in	the	United	States,	we	could	be	required to	seek	funding	sources	on	less	attractive	terms,	which	could	negatively	impact	our	results	of	operations,	financial	position	and	the	market	price	of	our	common	stock.

# Litigation	could	adversely	affect	our	financial	condition	or	operations.

We	currently	are,	and	in	the	future	may	be,	involved	in	various	disputes	and	litigation	that	arise	in	the	ordinary	course	of	business.	These	include	disputes	and lawsuits	related	to	intellectual	property,	including	customer	indemnification,	mergers	and	acquisitions,	licensing,	contracts,	distribution	arrangements	and	employee relations	matters.	For	information	regarding	the	litigation	matters	in	which	we	are	currently	engaged,	please	refer	to	the	discussion	under	Part	I,	Item	3,	"Legal Proceedings"	and	Note	17	in	the	notes	to	consolidated	financial	statements.	We	cannot	provide	any	assurances	that	the	final	outcome	of	these	lawsuits	or	any	other proceedings	that	may	arise	in	the	future	will	not	have	a	material	adverse	effect	on	our	business,	reputation,	operating	results,	financial	condition	or	cash	flows. Litigation	can	be	time	consuming	and	expensive	and	could	divert	management's	time	and	attention	from	our	business,	which	could	have	a	material	adverse	effect	on our	revenues	and	operating	results.

# Errors	or	defects	in	our	products	and	services	could	expose	us	to	liability	and	harm	our	business.

Our	customers	use	our	products	and	services	in	designing	and	developing	products	that	involve	a	high	degree	of	technological	complexity,	each	of	which	has	its own	specifications.	Because	of	the	complexity	of	the	systems	and	products	with	which	we	work,	some	of	our	products	and	designs	can	be	adequately	tested	only when	put	to	full	use	in	the	marketplace.	As	a	result,	our	customers	or	their	end	users	may	discover	errors	or	defects	in	our	software	or	the	systems	we	design,	or	the products	or	systems	incorporating	our	design	and	intellectual	property	may	not	operate	as	expected.	Errors	or	defects	could	result	in:

•loss	of	customers;

•loss	of	market

•damage	to	our

•increased	service	costs;

•liability	for	damages.

# Our	operating	results	and	revenue	could	be	adversely	affected	by	customer	payment	delays,	customer	bankruptcies	and	defaults	or	modifications	of licenses.

Occasionally,	 our	 customers	 file	 for	 bankruptcy	 or	 face	 other	 challenging	 financial	 or	 operating	 conditions.	 If	 our	 customers	 experience	 adversity	 in	 their business,	they	may	delay	or	default	on	their	payment	obligations	to	us,	request	to	modify	contract	terms,	or	modify	or	cancel	plans	to	license	our	products.	For instance,	if	our	customers	are	not	successful	in	generating	sufficient	cash	or	are	precluded	from	securing	financing,	they	may	not	be	able	to	pay,	or	may	delay payment	of,	accounts	receivable	that	are	owed	to	us,	although	these	obligations	are	generally	not	cancelable.	Our	customers'	inability	to	fulfill	payment	obligations,	in turn,	may	adversely	affect	our	revenue,	operating	expenses	and	cash	flow.	Additionally,	our	customers	have,	in	the	past,	sought,	and	may,	in	the	future,	seek,	to renegotiate	pre-existing	contractual	commitments.	Payment	defaults	by	our	customers	or	significant	reductions	in	existing	contractual	commitments	could	have	a material	adverse	effect	on	our	financial	condition	and	operating	results.

# The	long	sales	cycle	of	our	products	and	services	may	cause	our	operating	results	to	fluctuate	unexpectedly.

Generally,	we	have	a	long	sales	cycle	that	can	extend	up	to	six	months	or	longer.	The	complexity	and	expense	associated	with	our	products	and	services generally	 require	 a	 lengthy	 customer	 education,	 evaluation	 and	 approval	 process.	 Consequently,	 we	 may	 incur	 substantial	 expenses	 and	 devote	 significant management	effort	and	expense	to	develop	potential	relationships	that	do	not	result	in	agreements	or	revenue	and	may	prevent	us	from	pursuing	other	opportunities.

In	addition,	sales	of	our	products	and	services	have	been	and	may	in	the	future	be	delayed	if	customers	delay	approval	or	commencement	of	projects	because of:

•the	timing	of	customers'	competitive	evaluation	processes;	or

•customers'	budgetary	constraints	and	budget

cycles.

Long	sales	cycles	for	hardware	products	subject	us	to	a	number	of	significant	risks	over	which	we	have	limited	control,	including	insufficient,	excess	or	obsolete inventory,	variations	in	inventory	valuation	and	fluctuations	in	quarterly	operating	results.

# Our	reported	financial	results	may	be	adversely	affected	by	changes	in	United	States	generally	accepted	accounting	principles,	and	we	may	incur significant	costs	to	adjust	our	accounting	systems	and	processes	to	comply	with	significant	changes.

United	States	generally	accepted	accounting	principles	("U.S.	GAAP")	are	subject	to	interpretation	by	the	Financial	Accounting	Standards	Board	("FASB"),	the SEC	and	various	bodies	formed	to	promulgate	and	interpret	appropriate	accounting	principles.	We	are	also	subject	to	evolving	rules	and	regulations	of	the	countries	in which	we	do	business.	Changes	to	accounting	standards	or	interpretations	thereof	may	result	in	different	accounting	principles	under	U.S.	GAAP	that	could	have	a significant	effect	on	our	reported	financial	results.

In	addition,	we	have	in	the	past	and	may	in	the	future	need	to	significantly	change	our	customer	contracts,	accounting	systems	and	processes	when	we	adopt future	or	proposed	changes	in	accounting	principles.	The	cost	and	effect	of	these	changes	may	negatively	impact	our	results	of	operations	during	the	periods	of transition.

# Our	restructuring	plans	incur	substantial	costs	and	may	not	result	in	the	benefits	we	have	anticipated,	possibly	having	a	negative	effect	on	our future	operating	results.

In	recent	fiscal	years,	we	have	initiated	restructuring	plans	in	an	effort	to	reallocate	or	decrease	costs	by	reducing	our	workforce	and	by	consolidating	facilities. We	incur	substantial	costs	to	implement	restructuring	plans,	and	our	restructuring	activities	may	subject	us	to	reputational	risks	and	litigation	risks	and	expenses.	Our past	restructuring	plans	do	not	provide	any	assurance	that	we	will	realize	anticipated	cost	savings	and	other	benefits	or	that	additional	restructuring	plans	will	not	be required	or	implemented	in	the	future.	In	addition,	our	restructuring	plans	may	have	other	consequences,	such	as	attrition	beyond	our	planned	reduction	in	workforce, a	negative	effect	on	employee	morale	and	productivity	or	our	ability	to	attract	highly	skilled	employees.	Our	competitors	may	also	use	our	restructuring	plans	to	seek to	gain	a	competitive	advantage	over	us.	As	a	result,	our	restructuring	plans	may	affect	our	revenue	and	other	operating	results	in	the	future.

# We	 depend	 on	 sole	 suppliers	 for	 certain	 hardware	 components	 and	 contract	 manufacturers for	 production	 of	 our	 emulation	 and	 prototyping hardware	products,	making	us	vulnerable	to	supply	disruption	and	price	fluctuation.

We	depend	on	sole	suppliers	for	certain	hardware	components	and	contract	manufacturers	for	production	of	our	emulation	and	prototyping	hardware	products. Our	reliance	on	sole	suppliers	and	contract	manufacturers	could	result	in	product	delivery	problems	and	delays	and	reduced	control	over	product	pricing	and	quality. Though	we	prefer	to	have	multiple	sources	to	procure	certain	key	components,	in	some	cases	it	is	not	practical	or	feasible	to	do	so.	We	may	suffer	a	disruption	in	the supply	of	certain	hardware	components	if	we	are	unable	to	purchase	sufficient	components	on	a	timely	basis	or	at	all	for	any	reason.	Any	supply	or	manufacturing disruption,	 including	 delay	 in	 delivery	 of	 components	 by	 our	 suppliers	 or	 products	 by	 our	 manufacturers,	 or	 the	 bankruptcy	 or	 shutdown	 of	 our	 suppliers	 or manufacturers,	could	delay	our	production	process	and	prevent	us	from	delivering	completed	hardware	products	to	customers	or	from	supplying	new	evaluation	units to	customers,	which	could	have	a	negative	impact	on	our	revenue	and	operating	results.

# If	we	become	subject	to	unfair	hiring	claims,	we	could	be	prevented	from	hiring	needed	employees,	incur	liability	for	damages	and	incur	substantial costs	in	defending	ourselves.

When	companies	in	our	industry	lose	employees	to	competitors,	they	frequently	claim	that	these	competitors	have	engaged	in	unfair	hiring	practices	or	that	the employment	of	these	persons	would	involve	the	disclosure	or	use	of	trade	secrets.	These	claims	could	prevent	us	from	hiring	employees	or	cause	us	to	incur	liability for	damages.	We	could	also	incur	substantial	costs	in	defending	ourselves	or	our	employees	against	these	claims,	regardless	of	their	merits.	Defending	ourselves from	these	claims	could	also	divert	the	attention	of	our	management	away	from	our	operations.

# Anti-takeover	defenses	in	our	certificate	of	incorporation	and	bylaws	and	certain	provisions	under	Delaware	law	could	prevent	an	acquisition	of	our company	or	limit	the	price	that	investors	might	be	willing	to	pay	for	our	common	stock.

Our	certificate	of	incorporation	and	bylaws	and	certain	provisions	of	the	Delaware	General	Corporation	Law	that	apply	to	us	could	make	it	difficult	for	another company	to	acquire	control	of	our	company.	For	example:

•Our	certificate	of	incorporation	allows	our	Board	of	Directors	to	issue,	at	any	time	and	without	stockholder	approval,	preferred	stock	with	such	terms	as	it may	determine.	No	shares	of	preferred	stock	are	currently	outstanding.	However,	the	rights	of	holders	of	any	of	our	preferred	stock	that	may	be	issued	in the	future	may	be	superior	to	the	rights	of	holders	of	our	common	stock.

•Section	203	of	the	Delaware	General	Corporation	Law	generally	prohibits	a	Delaware	corporation	from	engaging	in	any	business	combination	with	a person	owning	15%	or	more	of	its	voting	stock,	or	who	is	affiliated	with	the	corporation	and	owned	15%	or	more	of	its	voting	stock	at	any	time	within	three years	prior	to	the	proposed	business	combination,	for	a	period	of	three	years	from	the	date	the	person	became	a	15%	owner,	unless	specified	conditions are	met.

All	or	any	one	of	these	factors	could	limit	the	price	that	certain	investors	would	be	willing	to	pay	for	shares	of	our	common	stock	and	could	allow	our	Board	of Directors	to	resist,	delay	or	prevent	an	acquisition	of	our	company,	even	if	a	proposed	transaction	were	favored	by	a	majority	of	our	independent	stockholders.

# The	investment	of	our	cash	is	subject	to	risks	that	may	cause	losses	and	affect	the	liquidity	of	these	investments.

Our	marketable	investments	include	various	money	market	funds	and	may	include	other	investments	as	well.	Weakened	financial	markets	have	at	times adversely	impacted	the	general	credit,	liquidity,	market	prices	and	interest	rates	for	these	and	other	types	of	investments.	Additionally,	changes	in	monetary	policy	by the	Federal	Open	Market	Committee	or	other	relevant	regulators	and	concerns	about	the	rising	U.S.	government	debt	level	may	cause	a	decrease	in	the	purchasing power	of	the	U.S.	dollar	and	adversely	affect	our	investment	portfolio.	The	financial	market	and	monetary	risks	associated	with	our	investment	portfolio	may	have	a material	adverse	effect	on	our	financial	condition,	liquidity,	results	of	operations	or	cash	flows.

# We	are	subject	to	evolving	corporate	governance	and	public	disclosure	expectations	and	regulations	that	impact	compliance	costs	and	risks	of noncompliance.

We	are	subject	to	changing	rules	and	regulations	promulgated	by	a	number	of	governmental	and	self-regulatory	organizations,	including	the	SEC,	Nasdaq,	and the	FASB,	as	well	as	evolving	investor	expectations	around	corporate	governance,	executive	compensation	and	environmental	and	social	practices	and	disclosures. These	rules	and	regulations	continue	to	evolve	in	scope	and	complexity,	and	many	new	requirements	have	been	created	in	response	to	laws	enacted	by	the	U.S.	and foreign	governments,	making	compliance	more	difficult	and	uncertain.	The	increase	in	costs	to	comply	with	such	evolving	expectations,	rules	and	regulations,	as	well as	any	risk	of	noncompliance,	could	adversely	impact	us.

# Conflict	minerals	regulations	may	cause	us	to	continue	to	incur	additional	expenses	and	may	adversely	impact	our	ability	to	conduct	our	business.

In	August	2012,	the	SEC	adopted	new	rules	establishing	disclosure	and	reporting	requirements	regarding	the	use	of	certain	minerals	referred	to	as	"conflict minerals"	in	products.	These	rules	require	us	to	determine,	disclose	and	report	whether	or	not	such	minerals	in	our	products	originate	from	the	Democratic	Republic	of the	Congo	or	adjoining	countries.	We	have	incurred,	and	expect	to	continue	to	incur,	costs	to	comply	with	these	rules,	including	costs	associated	with	conducting	due diligence	on	our	supply	chain	and	fulfilling	our	reporting	requirements,	and	we	may	incur	costs	related	to	changes	to	our	products,	processes	or	sources	of	supply.	In addition,	these	rules	could	affect	the	availability	of	certain	minerals	used	in	the	manufacture	of	our	emulation	and	prototyping	hardware	products	and	IP	boards	(the "Covered	Products"),	and	thus	impact	our	ability	to	source,	at	competitive	prices,	certain	materials	that	are	used	in	the	Covered	Products.	Finally,	our	customers	may prefer	to	purchase	products	from	vendors	who	claim	that	all	minerals	in	their	products	are	conflict-free,	and	our	revenues	may	be	harmed	or	we	may	face	reputational challenges	if	we	are	unable	to	verify	that	our	Covered	Products	are	conflict-free.

# Our	business	is	subject	to	the	risk	of	earthquakes	and	other	natural	disasters.

Our	corporate	headquarters,	including	certain	of	our	research	and	development	operations	and	certain	of	our	distribution	facilities,	is	located	in	the	Silicon	Valley area	of	Northern	California,	a	region	known	to	experience	seismic	activity.	If	significant	seismic	activity	were	to	occur,	our	operations	may	be	interrupted,	which	could adversely	impact	our	business	and	results	of	operations.

Our	other	offices	in	the	United	States	and	in	other	countries	around	the	world	may	be	adversely	impacted	by	natural	disasters.	If	a	natural	disaster	occurs	at	or near	any	of	our	offices,	our	operations	may	be	interrupted,	which	could	adversely	impact	our	business	and	results	of	operations.	If	a	natural	disaster	impacts	a significant	number	of	our	customers,	our	business	and	results	of	operations	could	be	adversely	impacted.

# Risks	Related	to	Our	Securities	and	Indebtedness

# Our	debt	obligations	expose	us	to	risks	that	could	adversely	affect	our	business,	operating	results	or	financial	condition,	and	could	prevent	us	from fulfilling	our	obligations	under	such	indebtedness.

As	of	December	29,	2018,	we	had	total	outstanding	indebtedness	of	$445.3	million.	We	also	had	the	ability	to	borrow	an	additional	$250.0	million	under	our revolving	credit	facility,	with	the	right	to	request	increased	capacity	up	to	an	additional	$250.0	million	upon	the	receipt	of	lender	commitments,	for	total	maximum borrowings	 of	$600.0	million	under	our	revolving	credit	facility.	Subject	to	the	limits	contained	in	the	credit	agreement	governing	our	revolving	credit	facility,	the indenture	that	governs	the	4.375%	Senior	Notes	due	2024	(the	"2024	Notes")	and	our	other	debt	instruments,	we	may	be	able	to	incur	substantial	additional	debt from	time	to	time	to	finance	working	capital,	capital	expenditures,	investments	or	acquisitions,	share	repurchases	or	for	other	purposes.	If	we	do	so,	the	risks	related	to our	high	level	of	debt	could	intensify.	Specifically,	our	high	level	of	debt	could	have	important	consequences,	including	the	following:

•making	it	more	difficult	for	us	to	satisfy	our	obligations	to	service	our	debt	as	described

above;

•limiting	our	ability	to	obtain	additional	financing	to	fund	future	working	capital,	capital

expenditures,

acquisitions	or	other	general	corporate	requirements;

•requiring	a	substantial	portion	of	our	cash	flows	to	be	dedicated	to	debt	service	payments	instead	of

other

purposes,	thereby	reducing	the	amount	of	cash	flows	available	for	working	capital,	capital	expenditures,

acquisitions	and	other	general	corporate	purposes;

•utilizing	large	portions	of	our	U.S.	cash	to	service	our	debt	obligations	because	those	payments	are	made	in	the	United	States,	which	may	require	us	to repatriate	cash	from	outside	the	United	States;

•increasing	our	vulnerability	to	general	adverse	economic	and	industry

conditions;

•exposing	us	to	the	risk	of	increased	interest	rates	as	certain	of	our	borrowings,	including	borrowings

under

our	revolving	credit	facility,	are	at	variable	rates	of	interest;

•limiting	our	flexibility	in	planning	for	and	reacting	to	changes	in	the	industry	in	which	we

compete;

•placing	us	at	a	disadvantage	compared	to	other,	less	leveraged	competitors	and	competitors	that	have	greater	access	to	capital resources;

•limiting	our	interest	deductions	for	US	income	tax	purposes;

•increasing	our	cost	of

borrowing.

# At	the	option	of	the	holders	of	our	outstanding	notes,	we	may,	under	certain	circumstances,	be	required	to	repurchase	such	notes.

Under	the	terms	of	our	2024	Notes,	we	may	be	required	to	repurchase	for	cash	such	notes	prior	to	their	maturity	in	connection	with	the	occurrence	of	certain significant	corporate	events.	Specifically,	we	are	required	to	offer	to	repurchase	such	notes	upon	a	"change	of	control	triggering	event"	(as	defined	in	the	indenture related	to	such	notes),	such	as	a	change	of	control	accompanied	by	certain	downgrades	in	the	credit	ratings	of	such	notes.	The	repayment	obligations	under	such notes	may	have	the	effect	of	discouraging,	delaying	or	preventing	a	takeover	of	our	company.	If	we	were	required	to	pay	the	2024	Notes	prior	to	their	scheduled maturity,	it	could	have	a	significant	negative	impact	on	our	cash	and	liquidity	and	could	impact	our	ability	to	invest	financial	resources	in	other	strategic	initiatives.

# The	terms	of	the	agreement	governing	our	revolving	credit	facility	and	the indenture	governing	our	2024	Notes	restrict	our	current	and	future operations,	particularly	our	ability	to	respond	to	changes	or	to	take	certain	actions.

The	agreement	governing	our	revolving	credit	facility	contains	a	number	of	restrictive	covenants	that	impose	significant	operating	and	financial	restrictions	on	us and	may	limit	our	ability	to	engage	in	acts	that	may	be	in	our	long-term	best	interest,	including	restrictions	on	our	ability	to:

•pay	dividends	or	make	other	distributions	or	repurchase	or	redeem	capital

stock;

•prepay,	redeem	or	repurchase	certain	debt;

•issue	certain	preferred	stock	or	similar	equity	securities;

•enter	into	agreements	restricting	our	subsidiaries'	ability	to	pay	dividends;

•consolidate,	merge	or	sell	all	or	substantially	all	of	our

In	addition,	the	restrictive	covenants	in	the	agreement	governing	our	revolving	credit	facility	require	us	to	maintain	specified	financial	ratios	and	satisfy	other financial	condition	tests.	Our	ability	to	meet	those	financial	ratios	and	tests	can	be	affected	by	events	beyond	our	control,	and	we	may	be	unable	to	meet	them.

A	breach	of	the	covenants	or	restrictions	under	the	agreement	governing	our	revolving	credit	facility	could	result	in	an	event	of	default	under	the	applicable indebtedness.	Such	a	default	may	allow	the	creditors	to	accelerate	the	related	debt	and	may	result	in	the	acceleration	of	any	other	debt	to	which	a	cross-acceleration or	cross-default	provision	applies.	In	addition,	an	event	of	default	under	the	credit	agreement	governing	our	revolving	credit	facility	would	permit	the	lenders	under	our revolving	credit	facility	to	terminate	all	commitments	to	extend	further	credit	under	that	facility.	In	the	event	our	lenders	or	note	holders	accelerate	the	repayment	of our	borrowings,	we	and	our	subsidiaries	may	not	have	sufficient	assets	to	repay	that	indebtedness.	As	a	result	of	these	restrictions,	we	may	be:

•limited	in	how	we	conduct	our

•unable	to	raise	additional	debt	or	equity	financing	to	operate	during	general	economic	or	business	downturns;

•unable	to	compete	effectively	or	to	take	advantage	of	new	business

opportunities.

The	indenture	governing	our	2024	Notes	also	contains	certain	restrictive	covenants	that	impose	operating	and	financial	restrictions	on	us	and	may	limit	our ability	to	engage	in	acts	that	may	be	in	our	long-term	best	interest,	including	restrictions	on	our	ability	to	incur	liens	and	to	enter	into	sale	and	leaseback	transactions.

These	restrictions	may	affect	our	ability	to	grow	in	accordance	with	our	strategy.	In	addition,	our	financial	results,	our	substantial	indebtedness	and	our	credit ratings	could	adversely	affect	the	availability	and	terms	of	our	financing.

# We	may	not	be	able	to	generate	sufficient	cash	to	service	all	of	our	indebtedness	and	may	be	forced	to	take	other	actions	to	satisfy	our	obligations under	our	indebtedness,	which	may	not	be	successful.

Our	ability	to	make	scheduled	payments	on	or	refinance	our	debt	obligations	depends	on	our	financial	condition	and	operating	performance,	which	are	subject to	prevailing	economic	and	competitive	conditions	and	to	certain	financial,	business,	legislative,	regulatory	and	other	factors	beyond	our	control.	We	may	be	unable	to maintain	a	level	of	cash	flows	from	operating	activities	sufficient	to	permit	us	to	pay	the	principal,	premium,	if	any,	and	interest	on	our	indebtedness.

If	our	cash	flows	and	capital	resources	are	insufficient	to	fund	our	debt	service	obligations,	we	could	face	substantial	liquidity	problems	and	could	be	forced	to reduce	or	delay	investments	and	capital	expenditures	or	to	dispose	of	material	assets	or	operations,	seek	additional	debt	or	equity	capital	or	restructure	or	refinance our	indebtedness.	We	may	not	be	able	to	effect	any	such	alternative	measures,	if	necessary,	on	commercially	reasonable	terms	or	at	all	and,	even	if	successful,	those alternative	actions	may	not	allow	us	to	meet	our	scheduled	debt	service	obligations.	The	agreement	governing	our	revolving	credit	facility	restricts	our	ability	to dispose	of	assets	and	use	the	proceeds	from	those	dispositions	and	may	also	restrict	our	ability	to	raise	debt	or	equity	capital	to	be	used	to	repay	other	indebtedness when	it	becomes	due.	We	may	not	be	able	to	consummate	those	dispositions	or	to	obtain	proceeds	in	an	amount	sufficient	to	meet	any	debt	service	obligations	then due.

In	 addition,	 we	 conduct	 a	 substantial	 portion	 of	 our	 operations	 through	 our	 subsidiaries,	 none	 of	 which	 are	 currently	 guarantors	 of	 our	 indebtedness. Accordingly,	repayment	of	our	indebtedness	is	dependent	on	the	generation	of	cash	flow	by	our	subsidiaries	and	their	ability	to	make	such	cash	available	to	us,	by dividend,	debt	repayment	or	otherwise.	Unless	they	become	guarantors	of	our	indebtedness,	our	subsidiaries	do	not	have	any	obligation	to	pay	amounts	due	on	our indebtedness	or	to	make	funds	available	for	that	purpose.	Our	subsidiaries	may	not	be	able	to,	or	may	not	be	permitted	to,	make	distributions	to	enable	us	to	make payments	in	respect	of	our	indebtedness.	Each	subsidiary	is	a	distinct	legal	entity,	and,	under	certain	circumstances,	legal	and	contractual	restrictions	may	limit	our ability	 to	obtain	cash	 from	our	subsidiaries.	While	 the	agreement	governing	our	revolving	credit	 facility	 limits	 the	ability	of	our	subsidiaries	 to	 incur	consensual restrictions	on	their	ability	to	pay	dividends	or	make	other	intercompany	payments	to	us,	these	limitations	are	subject	to	qualifications	and	exceptions.	In	the	event	that we	do	not	receive	distributions	from	our	subsidiaries,	we	may	be	unable	to	make	required	principal	and	interest	payments	on	our	indebtedness.

Our	inability	to	generate	sufficient	cash	flows	to	satisfy	our	debt	obligations,	or	to	refinance	our	indebtedness	on	commercially	reasonable	terms	or	at	all,	would materially	and	adversely	affect	our	financial	position	and	results	of	operations	and	our	ability	to	satisfy	our	debt	obligations.

If	we	cannot	make	scheduled	payments	on	our	debt,	we	will	be	in	default	and	holders	of	our	debt	could	declare	all	outstanding	principal	and	interest	to	be	due and	payable,	the	lenders	under	our	revolving	credit	facility	could	terminate	their	commitments	to	loan	money	and	we	could	be	forced	into	bankruptcy	or	liquidation.	In addition,	a	material	default	on	our	indebtedness	could	suspend	our	eligibility	to	register	securities	using	certain	registration	statement	forms	under	SEC	guidelines	that permit	incorporation	by	reference	of	substantial	information	regarding	us,	potentially	hindering	our	ability	to	raise	capital	through	the	issuance	of	our	securities	and increasing	our	costs	of	registration.

# Despite	our	current	level	of	indebtedness,	we	and	our	subsidiaries	may	incur	substantially	more	debt.	This	could	further	exacerbate	the	risks	to	our financial	condition	described	above.

We	and	our	subsidiaries	may	incur	significant	additional	indebtedness	in	the	future.	Although	the	agreement	governing	our	revolving	credit	facility	contains restrictions	on	the	incurrence	of	additional	indebtedness,	these	restrictions	are	subject	to	a	number	of	qualifications	and	exceptions,	and	the	additional	indebtedness incurred	in	compliance	with	these	restrictions	could	be	substantial.	If	we	incur	any	additional	indebtedness	that	ranks	equally	with	the	2024	Notes,	then	subject	to	any collateral	arrangements	we	may	enter	into,	the	holders	of	that	debt	will	be	entitled	to	share	ratably	in	any	proceeds	distributed	in	connection	with	any	insolvency, liquidation,	reorganization,	dissolution	or	other	winding	up	of	our	company.

# Our	variable	rate	indebtedness	subjects	us	to	interest	rate	risk,	which	could	cause	our	debt	service	obligations	to	increase	significantly.

Borrowings	under	our	revolving	credit	facility	are	at	variable	rates	of	interest	and	expose	us	to	interest	rate	risk.	If	interest	rates	were	to	increase,	our	debt service	obligations	on	our	variable	rate	indebtedness	would	increase	even	though	the	amount	borrowed	remained	the	same,	and	our	net	income	and	cash	flows, including	cash	available	for	servicing	our	indebtedness,	would	correspondingly	decrease.	Assuming	all	loans	were	fully	drawn,	we	were	to	fully	exercise	our	right	to increase	borrowing	capacity	under	our	revolving	credit	facility,	each	quarter	point	change	in	interest	rates	would	result	in	a	$1.5	million	change	in	annual	interest expense	on	our	indebtedness	under	our	revolving	credit	facility.	In	the	future,	we	may	enter	into	interest	rate	swaps	that	involve	the	exchange	of	floating	for	fixed	rate interest	payments	in	order	to	reduce	interest	rate	volatility.	However,	we	may	not	maintain	interest	rate	swaps	with	respect	to	all	of	our	variable	rate	indebtedness,	and any	swaps	we	enter	into	may	not	fully	mitigate	our	interest	rate	risk.

# Various	 factors	 could	 increase	 our	 future	 borrowing	 costs	 or	 reduce	 our	 access to	 capital, including	 a lowering	 or	 withdrawal	 of the	 ratings assigned	to	our	2024	Notes	by	credit	rating	agencies.

We	may	in	the	future	seek	additional	financing	for	a	variety	of	reasons,	and	our	future	borrowing	costs	and	access	to	capital	could	be	affected	by	factors including	the	condition	of	the	debt	and	equity	markets,	the	condition	of	the	economy	generally,	prevailing	interest	rates,	our	level	of	indebtedness	and	our	business and	financial	condition.	In	addition,	the	2024	Notes	currently	have	an	investment	grade	credit	rating,	and	any	credit	rating	assigned	could	be	lowered	or	withdrawn entirely	by	a	credit	rating	agency	if,	in	that	credit	rating	agency's	judgment,	future	circumstances	relating	to	the	basis	of	the	credit	rating,	such	as	adverse	changes,	so warrant.	Consequently,	real	or	anticipated	changes	in	our	credit	ratings	will	generally	affect	the	market	value	of	the	2024	Notes.	Any	future	lowering	of	the	credit ratings	of	the	2024	Notes	likely	would	make	it	more	difficult	or	more	expensive	for	us	to	obtain	additional	debt	financing.

# Item	1B.	Unresolved	Staff	Comments

None.

# Item	2.	Properties

We	own	land	and	buildings	at	our	headquarters	located	in	San	Jose,	California.	We	also	own	buildings	in	India.	As	of	December	29,	2018,	the	total	square footage	of	our	owned	buildings	was	approximately	1,010,000.

We	lease	additional	facilities	in	the	United	States	and	various	other	countries.	We	may	sublease	certain	of	these	facilities	where	space	is	not	fully	utilized.

We	believe	that	these	facilities	are	adequate	for	our	current	needs	and	that	suitable	additional	or	substitute	space	will	be	available	as	needed	to	accommodate any	expansion	of	our	operations.

# Item	3.	Legal	Proceedings

From	time	to	time,	we	are	involved	in	various	disputes	and	litigation	that	arise	in	the	ordinary	course	of	business.	These	include	disputes	and	lawsuits	related	to intellectual	property,	indemnification	obligations,	mergers	and	acquisitions,	licensing,	contracts,	distribution	arrangements	and	employee	relations	matters.	At	least quarterly,	we	review	the	status	of	each	significant	matter	and	assess	its	potential	financial	exposure.	If	the	potential	loss	from	any	claim	or	legal	proceeding	is considered	probable	and	the	amount	or	the	range	of	loss	can	be	estimated,	we	accrue	a	liability	for	the	estimated	loss.	Legal	proceedings	are	subject	to	uncertainties, and	the	outcomes	are	difficult	to	predict.	Because	of	such	uncertainties,	accruals	are	based	on	our	judgments	using	the	best	information	available	at	the	time.	As additional	information	becomes	available,	we	reassess	the	potential	liability	related	to	pending	claims	and	litigation	matters	and	may	revise	estimates.

# Item	4.	Mine	Safety	Disclosures

Not	applicable.

# PART	II.

# Item	5.	Market	for	Registrant's	Common	Equity,	Related	Stockholder	Matters	and	Issuer	Purchases	of	Equity	Securities

Our	common	stock	is	traded	on	the	Nasdaq	Global	Select	Market	under	the	symbol	CDNS.	As	of	February	2,	2019,	we	had	523	registered	stockholders	and approximately	56,000	beneficial	owners	of	our	common	stock.

# Stockholder	Return	Performance	Graph

The	 following	 graph	 compares	 the	 cumulative	 5-year	 total	 stockholder	 return	 on	 our	 common	 stock	 relative	 to	 the	 cumulative	 total	 return	 of	 the	 Nasdaq Composite	Index,	the	S&P	500	Index	and	the	S&P	500	Information	Technology	Index.	The	graph	assumes	that	the	value	of	the	investment	in	our	common	stock	and in	each	index	on	December	28,	2013	(including	reinvestment	of	dividends)	was	$100	and	tracks	it	each	year	thereafter	on	the	last	day	of	our	fiscal	year	through December	29,	2018	and,	for	each	index,	on	the	last	day	of	the	calendar	year.

# stockholderperformancegraph.jpg

|  | 12/28/2013 | 1/3/2015 | 1/2/2016 | 12/31/2016 | 12/30/2017 | 12/29/2018 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Cadence\tDesign\tSystems,\tInc. | $100.00 | $135.18 | $149.39 | $181.05 | $300.22 | $311.13 |
| Nasdaq\tComposite | 100.00 | 112.60 | 113.64 | 133.19 | 172.11 | 165.84 |
| S&P\t500 | 100.00 | 110.28 | 109.54 | 129.05 | 157.22 | 150.33 |
| S&P\t500\tInformation\tTechnology | 100.00 | 115.49 | 121.08 | 144.85 | 201.10 | 200.52 |

The	stock	price	performance	included	in	this	graph	is	not	necessarily	indicative	of	future	stock	price	performance.

# Issuer	Purchases	of	Equity	Securities

In	January	2017,	our	Board	of	Directors	authorized	the	repurchase	of	shares	of	our	common	stock	with	a	value	of	up	to	$525	million	in	the	aggregate.	As	of December	29,	2018,	$175	million	remained	available	under	this	authorization.	In	February	2019,	our	Board	of	Directors	authorized	the	additional	repurchase	of	shares of	our	common	stock	with	a	value	of	up	to	$500.0	million	in	the	aggregate.	The	actual	timing	and	amount	of	repurchases	are	subject	to	business	and	market conditions,	corporate	and	regulatory	requirements,	stock	price,	acquisition	opportunities	and	other	factors.

The	 following	 table	 presents	 repurchases	 made	 under	 our	 current	 authorization	 and	 shares	 surrendered	 by	 employees to	 satisfy income tax	 withholding obligations	during	the	three	months	ended	December	29,	2018:

| Period | Total	Number<br>of	Shares<br>Purchased	(1) | Average<br>Price	Paid<br>Per	Share	(2) | Total	Number	of<br>Shares	Purchased<br>as	Part	of<br>Publicly	Announced<br>Plan	or	Program | Maximum	Dollar<br>Value	of	Shares<br>Authorized	for<br>Repurchase	Under<br>Publicly	Announced<br>Plan	or	Program	(1)<br>(In	millions) |
| :--- | :--- | :--- | :--- | :--- |
| September\t30,\t2018\t–\tNovember\t3,\t2018 | 543,900 | $42.64 | 495,543 | $254 |
| November\t4,\t2018\t–\tDecember\t1,\t2018 | 650,048 | $44.49 | 623,692 | $226 |
| December\t2,\t2018\t–\tDecember\t29,\t2018 | 1,327,657 | $42.61 | 1,203,690 | $175 |
| Total | 2,521,605 | $43.10 | 2,322,925 |  |

(1)	Shares	purchased	that	were	not	part	of	our	publicly	announced	repurchase	programs	represent	employee	surrender	of	shares	of	restricted	stock	to	satisfy	employee	income tax	withholding	obligations	due	upon	vesting,	and	do	not	reduce	the	dollar	value	that	may	yet	be	purchased	under	our	publicly	announced	repurchase	programs.

(2)	The	 weighted average price paid per share of common stock does not include the cost of commissions.

# Item	6.	Selected	Financial	Data-Unaudited

The	following	selected	consolidated	financial	data	should	be	read	in	conjunction	with	our	consolidated	financial	statements	and	the	notes	thereto	and	the information	contained	in	Item	7,	"Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations."	Historical	results	are	not	necessarily indicative	of	 future	results.	The	notes	below	 the	 table	are	provided	 for	comparability	purposes	due	 to	adoptions	of	accounting	pronouncements	or	 to	describe significant	transactions	that	may	not	occur	frequently.

|  | 2018 | 2017 | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | (In\tmillions,\texcept\tper\tshare\tamounts) | (In\tmillions,\texcept\tper\tshare\tamounts) | (In\tmillions,\texcept\tper\tshare\tamounts) |  |
| Revenue\t(1) | $2,138.0 | $1,943.0 | $1,816.1 | $1,702.1 | $1,580.9 |
| Income\tfrom\toperations\t(1) | 396.2 | 324.0 | 244.9 | 285.4 | 206.6 |
| Net\tincome\t(1)\t(2) | 345.8 | 204.1 | 203.1 | 252.4 | 158.9 |
| Net\tincome\tper\tshare-diluted\t(1)\t(2) | 1.23 | 0.73 | 0.70 | 0.81 | 0.52 |
| Total\tassets | 2,468.7 | 2,418.7 | 2,096.9 | 2,345.5 | 3,209.6 |
| Debt\t(3) | 445.3 | 729.4 | 693.5 | 343.3 | 691.2 |
| Stockholders'\tequity\t(4)\t(5) | 1,288.4 | 989.2 | 741.8 | 1,376.1 | 1,333.6 |

(1)	On	the	first	day	of	fiscal	2018,	we	adopted	ASU	2014-09,	"Revenue	from	Contracts	with	Customers	(Topic	606),"	which	provided	a	new	basis	of	accounting	for	our	revenue arrangements	during	fiscal	2018.	Because	of	the	adoption,	results	of	operations	for	fiscal	2018	are	not	comparable	to	the	results	of	operations	for	the	other	fiscal	years presented	in	the	table	above.	For	additional	information	regarding	the	adoption	of	this	and	other	accounting	standards	at	the	beginning	of	fiscal	2018,	see	Note	2	in	the	notes to	consolidated	financial	statements	under	the	heading	"Recently	Adopted	Accounting	Standards."

(2) During	fiscal	2017,	we	recorded	a	provisional	income	tax	expense	of	$96.8	million	related	to	the	income	tax	effects	of	the	Tax	Act,	which	included	$67.2	million	related	to	the one-time	transition	tax	on	the	mandatory	deemed	repatriation	of	foreign	earnings.	In	accordance	with	SAB	118,	we	updated	the	one-time	transition	tax	estimate	to	$65.8 million	during	fiscal	2018.	We	finalized	our	other	fiscal	2017	provisional	estimates	without	change	during	fiscal	2018.

(3) During	fiscal	2018,	we	prepaid	the	outstanding	principal	balance	and	accrued	interest	on	our	$300.0	million	2019	Term	Loan.

(4) During	fiscal	2016,	we	repurchased	shares	of	our	common	stock	for	a	total	cost	of	$960.3	million.

(5) We	have	never	declared	or	paid	any	cash	dividends	on	our	common	stock.

# Item	7.	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations

The	following	discussion	should	be	read	in	conjunction	with	the	consolidated	financial	statements	and	notes	thereto	included	elsewhere	in	this	Annual	Report	on Form	10-K	and	with	Part	I,	Item	1A,	"Risk	Factors."	Please	refer	to	the	cautionary	language	at	the	beginning	of	Part	I	of	this	Annual	Report	on	Form	10-K	regarding forward-looking	statements.

# Business	Overview

We	enable	our	customers	to	design	electronic	products.	Our	products	and	services	are	designed	to	give	our	customers	a	competitive	edge	in	their	development of	electronic	systems,	ICs,	electronic	devices	and	increasingly	sophisticated	manufactured	products.	Our	products	and	services	do	this	by	optimizing	performance, minimizing	power	consumption,	shortening	the	time	to	bring	our	customers'	products	to	market	and	reducing	their	design,	development	and	manufacturing	costs.	We offer	software,	hardware,	services	and	reusable	IC	design	blocks,	which	are	commonly	referred	to	as	IP.

Our	strategy,	which	we	call	SDE,	is	to	provide	the	technologies	necessary	for	our	customers	to	develop	a	complete	and	functional	electronic	product.	Our	SDE strategy	enables	us	to	address	the	growing	trends	of	electronic	systems	companies	developing	their	own	ICs	as	part	of	their	end	product	systems,	as	well	as semiconductor	companies	delivering	greater	portions	of	the	systems	into	which	their	IC	products	are	integrated.	Our	products	and	services	enable	our	customers	to design	complex	and	innovative	electronic	products,	so	demand	for	our	products	is	driven	by	our	customers'	investment	in	new	designs	and	products.	Historically,	the industry	that	provided	the	tools	used	by	IC	engineers	was	referred	to	as	EDA.	Today,	our	offerings	include	and	extend	beyond	EDA	tools	to	include	SDE.

We	combine	our	products	and	technologies	into	categories	related	to	major	design	activities:

•Digital IC Design and

Signoff;

•Custom IC Design and

Simulation;

•System	Interconnect	and	Analysis;	and

For	additional	information	about	our	products,	see	the	discussion	in	Item	1,	"Business,"	under	the	heading	"Products	and	Product	Strategy."

We	have	identified	certain	items	that	management	uses	as	performance	indicators	to	manage	our	business,	including	revenue,	certain	elements	of	operating expenses	 and	 cash	 flow	 from	 operations,	 and	 we	 describe	 these	 items	 further	 below	 under	 the	 headings	 "Results	 of	 Operations"	 and	 "Liquidity	 and	 Capital Resources."

# Results	of	Operations

Financial	results	for	fiscal	2018,	as	compared	to	fiscal	2017	and	2016,	reflect	the	following:

•the	effects	of	adopting	ASU	2014-09,	"Revenue	from	Contracts	with	Customers	(Topic	606),"	which	provided	a	new	basis	of	accounting	for	our	revenue arrangements	during	fiscal	2018;

•increased	product	and	maintenance	revenue	resulting	from	overall	growth	in	our	software,	hardware	and	IP	business,	particularly	in	the	United	States	and Asia;	and

•continued investment in research	 and	 development	 activities focused	 on creating	 and	 enhancing	 our products.

The	adoption	of	Topic	606	limits	the	comparability	of	revenue	and	certain	expenses,	including	sales	commissions,	presented	in	the	results	of	operations	for fiscal	2018,	when	compared	to	the	fiscal	2017	and	fiscal	2016.	For	additional	information	regarding	the	adoption	of	this	and	other	accounting	standards	at	the beginning	of	fiscal	2018,	see	Note	2	in	the	notes	to	consolidated	financial	statements	under	the	heading	"Recently	Adopted	Accounting	Standards."

Our	fiscal	years	are	52-	or	53-week	periods	ending	on	the	Saturday	closest	to	December	31.	Fiscal	2018,	2017	and	2016	were	each	52-week	fiscal	years.

# Revenue

We	 primarily	 generate	 revenue	 from	 licensing	 our	 software	 and	 IP,	 selling	 or	 leasing	 our	 emulation	 and	 prototyping	 hardware	 technology,	 providing maintenance	for	our	software,	hardware	and	IP,	providing	engineering	services	and	earning	royalties	generated	from	the	use	of	our	IP.	The	timing	of	our	revenue	is significantly	affected	by	the	mix	of	software,	hardware	and	IP	products	generating	revenue	in	any	given	period	and	whether	the	revenue	is	recognized	over	time	or	at a	point	in	time,	upon	completion	of	delivery.

Approximately	90%	of	our	revenue	 is	recognized	over	 time,	and	 the	remainder	of	 the	resulting	revenue	 is	recognized	at	 the	point	 in	 time	 that	control	 is transferred	to	the	customer.	Revenue	recognized	over	time	includes	revenue	from	our	software	arrangements,	services,	royalties	from	certain	IP	arrangements, maintenance	on	IP	licenses	and	hardware,	and	operating	leases	of	hardware.	Revenue	recognized	at	a	point	in	time	is	primarily	generated	by	our	sales	of	emulation and	prototyping	hardware	and	IP	licenses.	Our	ability	to	maintain	this	mix	in	any	single	fiscal	period	may	be	impacted	primarily	by	delivery	of	hardware	and	IP products	to	our	customers.

During	fiscal	2018,	we	recognized	revenue	based	on	ASU	2014-09,	"Revenue	from	Contracts	with	Customers	(Topic	606),"	whereas	during	fiscal	2017	and fiscal	2016,	we	recognized	revenue	based	on	"Revenue	Recognition	(Topic	605)."	Therefore,	the	periods	are	not	directly	comparable.	For	additional	information	on the	impact	of	the	new	accounting	standard	on	our	revenue,	see	Note	2	in	the	notes	to	consolidated	financial	statements	under	the	heading	"Recently	Adopted Accounting	Standards."

# Revenue	by	Year

The	following	table	shows	our	revenue	for	fiscal	2018,	2017	and	2016	and	the	change	in	revenue	between	years:

|  |  |  |  |  | Change |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2018 | 2017 | 2016 | 2018\tvs.\t2017 | 2018\tvs.\t2017 | 2017\tvs.\t2016 | 2017\tvs.\t2016 |
|  |  |  | (In\tmillions,\texcept\tpercentages) | (In\tmillions,\texcept\tpercentages) |  |  |  |
| Product\tand\tmaintenance | $1,997.9 | $1,814.0 | $1,683.8 | $183.9 | 10% | $130.2 | 8\t% |
| Services | 140.1 | 129.0 | 132.3 | 11.1 | 9% | (3.3) | (2)% |
| Total\trevenue | $2,138.0 | $1,943.0 | $1,816.1 | $195.0 | 10% | $126.9 | 7\t% |

Product	and	maintenance	revenue	increased	during	fiscal	2018,	as	compared	to	fiscal	2017,	primarily	because	of	increased	investments	by	our	customers	in new,	complex	designs	for	their	products	resulting	in	revenue	growth	in	each	of	our	five	product	categories.	Product	and	maintenance	revenue	may	fluctuate	from period	to	period	and	by	geography	based	on	demand	for	our	hardware	and	IP	offerings.	Product	and	maintenance	revenue	increased	during	fiscal	2017,	as	compared to	fiscal	2016,	primarily	because	of	growth	in	our	software	and	IP	businesses,	partially	offset	by	lower	revenue	from	emulation	and	prototyping	hardware.

Services	revenue	may	fluctuate	from	period	to	period	based	on	the	timing	of	fulfillment	of	our	services	and	IP	performance	obligations.

# Revenue	by	Product	Group

The	following	table	shows	the	percentage	of	product	and	related	maintenance	revenue	contributed	by	each	of	our	five	product	groups	and	services	during	fiscal 2018,	2017	and	2016:

|  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| Functional\tVerification,\tincluding\thardware\tfor\temulation\tand\tprototyping | 24% | 22% | 25% |
| Digital\tIC\tDesign\tand\tSignoff | 29% | 29% | 29% |
| Custom\tIC\tDesign\tand\tSimulation | 26% | 27% | 25% |
| System\tInterconnect\tand\tAnalysis | 9% | 10% | 10% |
| IP | 12% | 12% | 11% |
| Total | 100% | 100% | 100% |

Revenue	by	product	group	fluctuates	from	period	to	period	based	on	demand	for	our	products	and	services	and	our	available	resources	to	deliver	and	support them.	Certain	of	our	licensing	arrangements	allow	customers	the	ability	to	remix	among	software	products.	Additionally,	we	have	arrangements	with	customers	that include	a	combination	of	our	products,	with	the	actual	product	selection	and	number	of	licensed	users	to	be	determined	at	a	later	date.	For	these	arrangements,	we estimate	the	allocation	of	the	revenue	to	product	groups	based	upon	the	expected	usage	of	our	products.	The	actual	usage	of	our	products	by	these	customers	may differ	and,	if	that	proves	to	be	the	case,	the	revenue	allocation	in	the	table	above	would	differ.

# Revenue	by	Geography

|  |  |  |  |  | Change |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2018 | 2017 | 2016 | 2018\tvs.\t2017 | 2018\tvs.\t2017 | 2017\tvs.\t2016 | 2017\tvs.\t2016 |
|  |  |  | (In\tmillions,\texcept\tpercentages) | (In\tmillions,\texcept\tpercentages) |  |  |  |
| United\tStates | $924.6 | $829.4 | $832.6 | $95.2 | 11\t% | $(3.2) | —\t% |
| Other\tAmericas | 32.5 | 35.1 | 31.3 | (2.6) | (7)% | 3.8 | 12\t% |
| Asia | 605.4 | 526.2 | 445.5 | 79.2 | 15\t% | 80.7 | 18\t% |
| Europe,\tMiddle\tEast\tand\tAfrica | 406.9 | 385.7 | 346.7 | 21.2 | 5\t% | 39.0 | 11\t% |
| Japan | 168.6 | 166.6 | 160.0 | 2.0 | 1\t% | 6.6 | 4\t% |
| Total\trevenue | $2,138.0 | $1,943.0 | $1,816.1 | $195.0 | 10\t% | $126.9 | 7\t% |

For	the	primary	factors	contributing	to	the	increase	in	revenue	for	the	United	States,	Asia,	and	Europe,	Middle	East	and	Africa	during	fiscal	2018,	as	compared to	fiscal	2017,	see	the	general	description	under	"Revenue	by	Year"	above.	Revenue	for	the	United	States	decreased	during	fiscal	2017,	as	compared	to	fiscal	2016, primarily	due	to	lower	revenue	from	emulation	and	prototyping	hardware	and	services,	partially	offset	by	growth	in	revenue	from	software	and	IP.	For	the	primary factors	contributing	to	the	increase	in	revenue	for	Other	Americas,	Asia,	and	Europe,	Middle	East	and	Africa	and	Japan	during	fiscal	2017,	as	compared	to	fiscal 2016,	see	the	general	description	under	"Revenue	by	Year"	above.

# Revenue	by	Geography	as	a	Percent	of	Total	Revenue

|  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| United\tStates | 43% | 42% | 46% |
| Other\tAmericas | 2% | 2% | 2% |
| Asia | 28% | 27% | 25% |
| Europe,\tMiddle\tEast\tand\tAfrica | 19% | 20% | 19% |
| Japan | 8% | 9% | 8% |
| Total | 100% | 100% | 100% |

Most	of	our	revenue	is	transacted	in	the	United	States	dollar.	However,	certain	revenue	transactions	are	denominated	in	foreign	currencies.	For	an	additional description	of	how	changes	in	foreign	exchange	rates	affect	our	consolidated	financial	statements,	see	the	discussion	under	Item	7A,	"Quantitative	and	Qualitative Disclosures	About	Market	Risk	–	Foreign	Currency	Risk."

# Cost	of	Revenue

# Cost	of	Product	and	Maintenance

Cost	of	product	and	maintenance	includes	costs	associated	with	the	sale	and	lease	of	our	emulation	and	prototyping	hardware	and	licensing	of	our	software	and IP	products,	certain	employee	salary	and	benefits	and	other	employee-related	costs,	cost	of	our	customer	support	services,	amortization	of	technology-related	and maintenance-related	acquired	intangibles,	costs	of	technical	documentation	and	royalties	payable	to	third-party	vendors.	Costs	associated	with	our	emulation	and prototyping	hardware	products	include	components,	assembly,	testing,	applicable	reserves	and	overhead.	These	costs	make	our	cost	of	emulation	and	prototyping hardware	products	higher,	as	a	percentage	of	revenue,	than	our	cost	of	software	and	IP	products.

A	summary	of	cost	of	product	and	maintenance	for	fiscal	2018,	2017	and	2016	is	as	follows:

|  |  |  |  |  | Change |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2018 | 2017 | 2016 | 2018\tvs.\t2017 | 2018\tvs.\t2017 | 2017\tvs.\t2016 | 2017\tvs.\t2016 |
|  |  |  |  | (In\tmillions,\texcept\tpercentages) |  |  |  |
| Product\tand\tmaintenance-related\ncosts | $133.8 | $114.9 | $140.9 | $18.9 | 16\t% | $(26.0) | (18)% |
| Amortization\tof\tacquired\tintangibles | 39.2 | 41.8 | 42.4 | (2.6) | (6)% | (0.6) | (1)% |
| Total\tcost\tof\tproduct\tand\nmaintenance | $173.0 | $156.7 | $183.3 | $16.3 | 10\t% | $(26.6) | (15)% |

Cost	of	product	and	maintenance	depends	primarily	on	our	hardware	product	sales	in	any	given	period.	Cost	of	product	and	maintenance	is	also	affected	by employee	salary	and	benefits	and	other	employee-related	costs,	reserves	for	inventory,	as	well	as	the	timing	and	extent	to	which	we	acquire	intangible	assets,	acquire or	license	third-parties'	intellectual	property	or	technology	and	sell	our	products	that	include	such	acquired	or	licensed	intellectual	property	or	technology.

The	changes	in	product	and	maintenance-related	costs	were	due	to	the	following:

|  | Change |  |
| :--- | :--- | :--- |
|  | 2018\tvs.\t2017 | 2017\tvs.\t2016 |
|  | (In\tmillions) |  |
| Emulation\tand\tprototyping\thardware\tcosts | $17.7 | $(22.9) |
| Other\titems | 1.2 | (3.1) |
|  | $18.9 | $(26.0) |

Costs	of	emulation	and	prototyping	 increased	during	 fiscal	2018,	as	compared	 to	 fiscal	2017,	primarily	due	 to	 increased	sales	volume	 for	emulation	and prototyping	hardware	and	related	costs.	Costs	of	emulation	and	prototyping	hardware	decreased	during	fiscal	2017,	as	compared	to	fiscal	2016,	primarily	due	to decreased	 sales	 volume	 for	 emulation	 and	 prototyping	 hardware.	 Gross	 margins	 on	 our	 hardware	 products	 will	 fluctuate	 based	 on	 product	 life	 cycle,	 product competition,	product	mix	and	pricing	strategies.

# Cost	of	Services

Cost	of	services	primarily	 includes	employee	salary,	benefits	and	other	employee-related	costs	 to	perform	work	on	revenue-generating	projects,	costs	 to maintain	the	infrastructure	necessary	to	manage	a	services	organization,	and	provisions	for	contract	losses,	if	any.	Cost	of	services	will	fluctuate	from	period	to	period based	on	our	utilization	of	design	services	engineers	on	revenue-generating	projects	or	on	internal	development	projects.	Cost	of	services	increased	during	fiscal 2018,	as	compared	to	fiscal	2017,	and	during	fiscal	2017,	as	compared	to	fiscal	2016,	primarily	due	to	variation	in	the	number	of	personnel	dedicated	to	deliver	and support	our	services	and	custom	IP	offerings.

# Operating	Expenses

Our	operating	expenses	include	marketing	and	sales,	research	and	development,	and	general	and	administrative	expenses.	Factors	that	tend	to	cause	our operating	expenses	to	fluctuate	include	changes	in	the	number	of	employees	due	to	hiring	and	acquisitions,	restructuring	activities,	foreign	exchange	rate	movements, stock-based	compensation	and	the	impact	of	our	variable	compensation	programs	that	are	driven	by	operating	results.

Stock-based	compensation	included	in	our	operating	expenses	increased	during	fiscal	2018,	as	compared	to	fiscal	2017,	and	fiscal	2017,	as	compared	to	fiscal 2016,	primarily	because	successive	increases	in	the	price	of	our	common	stock	between	grant	dates	have	resulted	in	higher	grant	date	fair	values	for	the	mix	of	stock awards	expensed	in	each	period.	We	expect	stock-based	compensation	to	increase	operating	expenses	during	fiscal	2019,	as	compared	to	fiscal	2018.	For	further discussion	regarding	stock-based	compensation,	see	Note	10	in	the	notes	to	consolidated	financial	statements.

Many	 of	 our	 operating	 expenses	 are	 transacted	 in	 various	 foreign	 currencies.	 We	 recognize	 lower	 expenses	 in	 periods	 when	 the	 United	 States	 dollar strengthens	in	value	against	other	currencies	and	we	recognize	higher	expenses	when	the	United	States	dollar	weakens	against	other	currencies.	For	an	additional description	of	how	changes	in	foreign	exchange	rates	affect	our	consolidated	financial	statements,	see	the	discussion	in	Item	7A,	"Quantitative	and	Qualitative Disclosures	About	Market	Risk	–	Foreign	Currency	Risk."

The	changes	in	marketing	and	sales	expense	were	due	to	the	following:

|  | Change |  |
| :--- | :--- | :--- |
|  | 2018\tvs.\t2017 | 2017\tvs.\t2016 |
|  | (In\tmillions) |  |
| Salary,\tbenefits\tand\tother\temployee-related\tcosts | $9.0 | $18.5 |
| Stock-based\tcompensation | 7.8 | 4.1 |
| Professional\tservices | 2.2 | (1.6) |
| Facilities\tand\tother\tinfrastructure\tcosts | 0.8 | 4.8 |
| Other\titems | 0.7 | (1.8) |
|  | $20.5 | $24.0 |

Costs	included	in	marketing	and	sales	increased	during	fiscal	2018,	as	compared	to	fiscal	2017,	and	during	fiscal	2017,	as	compared	to	fiscal	2016,	primarily due	to	additional	headcount	in	fiscal	2018	and	an	increase	in	incentive	compensation.

	The	changes	in	research	and	development	expense	were	due	to	the	following:

|  | Change |  |
| :--- | :--- | :--- |
|  | 2018\tvs.\t2017 | 2017\tvs.\t2016 |
|  | (In\tmillions) |  |
| Salary,\tbenefits\tand\tother\temployee-related\tcosts | $52.5 | $44.4 |
| Stock-based\tcompensation | 27.1 | 13.2 |
| Depreciation | 2.7 | (0.5) |
| Facilities\tand\tother\tinfrastructure\tcosts | 0.4 | 9.8 |
| Materials\tand\tother\tpre-production\tcosts | (1.9) | 0.3 |
| Software\tlicense\tand\tmaintenance\tcosts | (1.7) | 0.6 |
| Professional\tservices | (0.1) | 3.2 |
| Other\titems | 1.6 | (2.1) |
|  | $80.6 | $68.9 |

We	must	invest	significantly	in	product	research	and	development	to	keep	pace	with	the	latest	manufacturing	technology.	The	demand	for	new	IC	manufacturing technology	directly	impacts	the	demand	for	our	newest	products	and	we	must	keep	pace	with	our	customers'	technical	developments,	satisfy	industry	standards	and meet	 our	 customers'	 increasingly	 demanding	 performance,	 productivity,	 quality	 and	 predictability	 requirements.	 Costs	 included	 in	 research	 and	 development increased	during	fiscal	2018,	as	compared	to	fiscal	2017,	and	during	fiscal	2017,	as	compared	to	fiscal	2016,	primarily	due	to	incremental	investments	in	research	and development	as	a	result	of	additional	hiring	and	incremental	costs	resulting	from	our	fiscal	2017	acquisitions.

# General	and	Administrative

The	changes	in	general	and	administrative	expense	were	due	to	the	following:

|  | Change |  |
| :--- | :--- | :--- |
|  | 2018\tvs.\t2017 | 2017\tvs.\t2016 |
|  | (In\tmillions) |  |
| Salary,\tbenefits\tand\tother\temployee-related\tcosts | $(4.6) | $3.3 |
| Professional\tservices | (1.9) | 4.4 |
| Bad\tdebt\texpense | 2.5 | 2.3 |
| Stock-based\tcompensation | 1.8 | 3.0 |
| Acquisition-related\tcosts | — | (4.9) |
| Other\titems | 1.4 | 1.0 |
|  | $(0.8) | $9.1 |

General	and	administrative	costs	decreased	during	fiscal	2018,	as	compared	to	fiscal	2017,	primarily	due	to	decreases	in	expense	related	to	our	nonqualified deferred	compensation	plan	that	are	included	in	salary,	benefits	and	other	employee-related	costs,	partially	offset	by	increases	in	reserves	on	receivables	from	our customers.	General	and	administrative	costs	increased	during	fiscal	2017,	as	compared	to	fiscal	2016,	primarily	due	to	an	increase	in	accounting	and	tax	services	and an	increase	in	employee	salaries	and	benefits.

# Amortization	of	Acquired	Intangibles

|  |  |  |  |  | Change | Change |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2018 | 2017 | 2016 | 2018\tvs.\t2017 | 2018\tvs.\t2017 | 2017\tvs.\t2016 |
|  |  |  | (In\tmillions,\texcept\tpercentages) | (In\tmillions,\texcept\tpercentages) |  |  |
| Amortization\tof\tacquired\tintangibles | $14.1 | $14.7 | $18.1 | $(0.6) | (4)% | $(3.4)\n(19)% |

# The	changes	in	amortization	of	acquired	intangibles	were	due	to	the	following:

|  | Change |  |
| :--- | :--- | :--- |
|  | 2018\tvs.\t2017 | 2017\tvs.\t2016 |
|  | (In\tmillions) |  |
| Increase\tdue\tto\tadditions\tof\tacquired\tintangibles | $0.6 | $0.3 |
| Decrease\tdue\tto\tcompleted\tamortization\tof\tacquired\tintangibles | (1.2) | (3.7) |
|  | $(0.6) | $(3.4) |

# Restructuring	and	Other	Charges

We	have	initiated	restructuring	plans	in	recent	years	to	better	align	our	resources	with	our	business	strategy.	Because	the	restructuring	charges	and	related benefits	 are	 derived	 from	 management's	 estimates	 made	 during	 the	 formulation	 of	 the	 restructuring	 plans,	 based	 on	 then-currently	 available	 information,	 our restructuring	plans	may	not	achieve	the	benefits	anticipated	on	the	timetable	or	at	the	level	contemplated.	Additional	actions,	including	further	restructuring	of	our operations,	may	be	required	in	the	future.

The	following	table	presents	restructuring	and	other	charges,	net	for	our	restructuring	plans:

| Severance	and	Benefits | $10.3 | $9.0 | $40.4 |
| :--- | :--- | :--- | :--- |
| Excess\tFacilities | 0.8 | 0.4 | 0.6 |
| Total | $11.1 | $9.4 | $41.0 |

For	an	additional	description	of	our	restructuring	plans,	see	Note	12	in	the	notes	to	consolidated	financial	statements.

# Interest	Expense

Interest	expense	for	fiscal	2018,	2017	and	2016	was	comprised	of	the	following:

|  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
|  |  | (In\tmillions) |  |
| Contractual\tcash\tinterest\texpense: |  |  |  |
| 2019\tTerm\tLoan | $5.3 | $7.6 | $5.6 |
| 2024\tNotes | 15.3 | 15.3 | 15.3 |
| Revolving\tcredit\tfacility | 1.1 | 1.3 | 1.6 |
| Amortization\tof\tdebt\tdiscount: |  |  |  |
| 2019\tTerm\tLoan | 0.2 | 0.2 | 0.2 |
| 2024\tNotes | 0.7 | 0.7 | 0.6 |
| Other | 0.5 | 0.6 | 0.4 |
| Total\tinterest\texpense | $23.1 | $25.7 | $23.7 |

During	fiscal	2018,	we	prepaid	the	outstanding	principal	balance	and	accrued	interest	on	our	$300.0	million	2019	Term	Loan.	For	an	additional	description	of	our debt	arrangements,	see	Note	3	in	the	notes	to	consolidated	financial	statements.

# Income	Taxes

The	following	table	presents	the	provision	for	income	taxes	and	the	effective	tax	rate	for	fiscal	2018,	2017	and	2016:

|  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
|  | (In\tmillions,\texcept\tpercentages) | (In\tmillions,\texcept\tpercentages) |  |
| Provision\tfor\tincome\ttaxes | $30.6 | $110.9 | $34.1 |
| Effective\ttax\trate | 8.1% | 35.2% | 14.4% |

Our	provision	for	income	taxes	for	fiscal	2018	primarily	resulted	from	the	federal	income	tax	effects	of	the	Tax	Act	and	state	and	foreign	income	taxes	on	fiscal 2018	income,	partially	offset	by	$21.3	million	of	tax	benefit	related	to	stock-based	compensation	that	vested	or	was	exercised	during	the	year.

During	fiscal	2018,	we	finalized	our	fiscal	2017	deemed	repatriation	transition	tax	calculation	and	reduced	our	estimate	from	$67.2	million	to	$65.8	million.	We finalized	our	other	fiscal	2017	provisional	estimates	without	change.	For	further	discussion	regarding	our	accounting	for	the	Tax	Act,	see	Note	6	in	the	notes	to	the consolidated	financial	statements.

Our	provision	for	income	taxes	for	fiscal	2017	is	primarily	attributable	to	income	tax	effects	of	the	Tax	Act.	The	provisional	amount	related	to	the	transition	tax was	$67.2	million	and	the	provisional	amount	related	to	the	re-measurement	of	our	U.S.	deferred	tax	assets	and	liabilities	for	the	U.S.	tax	rate	reduction	was	$25.2 million.	Our	provision	for	income	taxes	for	fiscal	2017	included	$32.0	million	of	tax	benefit	related	to	stock-based	compensation	that	vested	or	settled	during	the	period.

Our	provision	for	income	taxes	for	fiscal	2016	is	primarily	attributable	to	federal,	state	and	foreign	income	taxes	on	our	fiscal	2016	income	and	includes	the	tax benefit	resulting	from	the	permanent	reinstatement	of	the	United	States	research	tax	credit	in	December	2015.	During	fiscal	2016,	we	adopted	a	new	accounting standard	related	to	the	accounting	for	stock-based	compensation	that	required	all	income	tax	effects	of	stock-based	awards	to	be	recognized	in	our	consolidated income	statement	as	the	awards	vest	or	are	settled.	Our	provision	for	income	taxes	for	fiscal	2016	includes	$17.2	million	of	tax	benefit	related	to	stock-based compensation	that	vested	or	settled	during	the	period.

Our	future	effective	tax	rates	may	be	materially	impacted	by	tax	amounts	associated	with	our	foreign	earnings	at	rates	different	from	the	United	States	federal statutory	rate,	research	credits,	the	tax	impact	of	stock-based	compensation,	accounting	for	uncertain	tax	positions,	business	combinations,	closure	of	statutes	of limitations	or	settlement	of	tax	audits,	changes	in	valuation	allowance	and	changes	in	tax	law.	A	significant	amount	of	our	foreign	earnings	is	generated	by	our subsidiaries	organized	in	Ireland	and	Hungary.	Our	future	effective	tax	rates	may	be	adversely	affected	if	our	earnings	were	to	be	lower	in	countries	where	we	have lower	statutory	tax	rates.	We	currently	expect	that	our	fiscal	2019	effective	tax	rate	will	be	approximately	10%.	We	expect	that	our	quarterly	effective	tax	rates	will	vary from	our	fiscal	2019	effective	tax	rate	as	a	result	of	recognizing	the	income	tax	effects	of	stock-based	awards	in	the	quarterly	periods	that	the	awards	vest	or	are settled	and	other	items	that	we	cannot	anticipate.	We	may	also	revise	our	fiscal	2019	effective	tax	rate	as	a	result	of	further	analyzing	the	implications	of	the	Tax	Act, including	future	guidance	issued	by	the	U.S.	Department	of	Treasury	and	the	IRS.	For	additional	discussion	about	how	our	effective	tax	rate	could	be	affected	by various	risks,	see	Part	I,	Item	1A,	"Risk	Factors."	For	further	discussion	regarding	our	income	taxes,	see	Note	6	in	the	notes	to	consolidated	financial	statements.

# Liquidity	and	Capital	Resources

|  |  | As	of |  | Change |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | December\t29,\n2018 | December\t30,\n2017 | December\t31,\t2016 | 2018\tvs.\t2017 | 2017\tvs.\t2016 |
|  |  |  | (In\tmillions) |  |  |
| Cash\tand\tcash\tequivalents | $533.3 | $688.1 | $465.2 | $(154.8) | $222.9 |
| Net\tworking\tcapital | $242.1 | $337.6 | $116.5 | $(95.5) | $221.1 |

# Cash	and	Cash	Equivalents

As	 of	December	29,	2018,	our	principal	sources	of liquidity	consisted	of	$533.3	million	of	cash	and	cash	equivalents	as	compared to	$688.1	million	as	of December	30,	2017.

Our	primary	sources	of	cash	and	cash	equivalents	during	fiscal	2018	were	cash	generated	from	operations,	proceeds	from	borrowings	under	our	revolving credit	facility,	proceeds	from	the	exercise	of	stock	options	and	proceeds	from	stock	purchases	under	our	employee	stock	purchase	plan.

Our	primary	uses	of	cash	and	cash	equivalents	during	fiscal	2018	were	payments	related	to	salaries	and	benefits,	operating	expenses,	principal	payments	on the	2019	Term	Loan,	repurchases	of	our	common	stock,	purchases	of	non-marketable	investments,	payments	on	our	revolving	credit	facility,	tax	payments	and purchases	of	property,	plant	and	equipment.

Approximately	75%	of	our	cash	and	cash	equivalents	were	held	by	our	foreign	subsidiaries	as	of	December	29,	2018.	We	expect	that	current	cash	and	cash equivalent	balances,	cash	flows	that	are	generated	from	operations	and	cash	borrowings	available	under	our	revolving	credit	facility	will	be	sufficient	to	meet	our domestic	and	international	working	capital	needs,	and	other	capital	and	liquidity	requirements,	including	acquisitions	and	share	repurchases	for	at	least	the	next	12 months.

# Net	Working	Capital

Net	working	capital	is	comprised	of	current	assets	less	current	liabilities,	as	shown	on	our	consolidated	balance	sheets.	The	decrease	in	our	net	working	capital as	 of	December	29,	2018,	as	compared	 to	December	30,	2017,	is	primarily	due	to	a	decrease	in	cash	and	cash	equivalents	and	increases	in	current	liabilities, partially	offset	by	an	increase	in	accounts	receivable.

# Cash	Flows	from	Operating	Activities

Cash	flows	from	operating	activities	during	fiscal	2018,	2017	and	2016	were	as	follows:

|  |  |  |  | Change |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2018 | 2017 | 2016 | 2018\tvs.\t2017 | 2017\tvs.\t2016 |
|  |  |  | (In\tmillions) |  |  |
| Cash\tprovided\tby\toperating\tactivities | $604.8 | $470.7 | $444.9 | $134.1 | $25.8 |

Cash	flows	from	operating	activities	include	net	income,	adjusted	for	certain	non-cash	items,	as	well	as	changes	in	the	balances	of	certain	assets	and	liabilities. Our	cash	flows	from	operating	activities	are	significantly	influenced	by	business	levels	and	the	payment	terms	set	forth	in	our	customer	agreements.	The	increase	in cash	flows	from	operating	activities	during	fiscal	2018,	as	compared	to	fiscal	2017,	and	fiscal	2017,	as	compared	to	fiscal	2016,	was	primarily	due	to	the	improved results	from	operations	and	timing	of	cash	receipts	from	customers	and	disbursements	made	to	vendors.

# Cash	Flows	from	Investing	Activities

Cash	flows	provided	by	(used	for)	investing	activities	during	fiscal	2018,	2017	and	2016	were	as	follows:

|  |  |  |  | Change |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2018 | 2017 | 2016 | 2018\tvs.\t2017 | 2017\tvs.\t2016 |
|  |  |  | (In\tmillions) |  |  |
| Cash\tprovided\tby\t(used\tfor)\tinvesting\tactivities | $(173.8) | $(191.2) | $1.4 | $17.4 | $(192.6) |

The	decrease	in	cash	used	for	investing	activities	during	fiscal	2018,	as	compared	to	fiscal	2017,	was	primarily	because	we	did	not	acquire	any	businesses	in fiscal	2018,	offset	by	payments	to	acquire	equity	instruments	of	other	entities.	The	increase	in	cash	used	for	investing	activities	during	fiscal	2017,	as	compared	to fiscal	2016,	was	primarily	due	to	an	increase	in	cash	paid	for	business	combinations	and	a	decrease	in	net	proceeds	from	our	investment	portfolio.	We	expect	to continue	our	 investing	activities,	 including	purchasing	property,	plant	and	equipment,	purchasing	 intangible	assets,	business	combinations,	purchasing	software licenses,	and	making	strategic	investments.

# Cash	Flows	from	Financing	Activities

Cash	flows	used	for	financing	activities	during	fiscal	2018,	2017	and	2016	were	as	follows:

|  |  |  |  | Change |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2018 | 2017 | 2016 | 2018\tvs.\t2017 | 2017\tvs.\t2016 |
|  |  |  | (In\tmillions) |  |  |
| Cash\tused\tfor\tfinancing\tactivities | $(567.9) | $(70.1) | $(592.7) | $(497.8) | $522.6 |

The	increase	in	cash	used	for	financing	activities	during	fiscal	2018,	as	compared	to	fiscal	2017,	was	primarily	due	to	the	prepayment	of	the	outstanding principal	balance	on	our	$300.0	million	2019	Term	Loan,	an	increase	in	repurchases	of	common	stock	and	a	decrease	in	net	proceeds	on	our	revolving	credit	facility. The	decrease	in	cash	used	for	financing	activities	during	fiscal	2017,	as	compared	to	fiscal	2016,	was	primarily	due	to	a	decrease	in	payments	made	to	repurchase shares	of	our	common	stock,	partially	offset	by	a	net	decrease	in	proceeds	from	borrowings.

# Other	Factors	Affecting	Liquidity	and	Capital	Resources

# Stock	Repurchase	Program

In	January	2017,	our	Board	of	Directors	authorized	the	repurchase	of	shares	of	our	common	stock	with	a	value	of	up	to	$525.0	million	in	the	aggregate.	As	of December	29,	2018,	 approximately	$175.0	million	remained	available	under	this	authorization.	In	February	2019,	our	Board	of	Directors	authorized	the	additional repurchase	of	shares	of	our	common	stock	with	a	value	of	up	to	$500.0	million	in	the	aggregate.	The	actual	timing	and	amount	of	future	repurchases	are	subject	to business	and	market	conditions,	corporate	and	regulatory	requirements,	stock	price,	acquisition	opportunities	and	other	factors.	See	Part	II,	Item	5,	"Market	for Registrant's	Common	Equity,	Related	Stockholder	Matters	and	Issuer	Purchases	of	Equity	Securities"	for	additional	information.

# Revolving	Credit	Facility

Our	senior	unsecured	revolving	credit	facility	provides	for	borrowings	up	to	$350.0	million,	with	the	right	to	request	increased	capacity	up	to	an	additional	$250.0 million	upon	the	receipt	of	lender	commitments,	for	total	maximum	borrowings	of	$600.0	million.	The	credit	facility	expires	on	January	28,	2022	and	currently	has	no subsidiary	guarantors.	Any	outstanding	loans	drawn	under	the	credit	facility	are	due	at	maturity	on	January	28,	2022.	Outstanding	borrowings	may	be	paid	at	any	time prior	to	maturity.	As	of	December	29,	2018,	there	were	$100.0	million	of	borrowings	outstanding	under	our	revolving	credit	facility,	and	we	were	in	compliance	with	all financial	covenants	associated	with	the	revolving	credit	facility.

In	October	2014,	we	issued	$350.0	million	aggregate	principal	amount	of	4.375%	Senior	Notes	due	October	15,	2024.	We	received	net	proceeds	of	$342.4 million	from	the	issuance	of	the	2024	Notes,	net	of	a	discount	of	$1.4	million	and	issuance	costs	of	$6.2	million.	Interest	is	payable	in	cash	semi-annually.	The	2024 Notes	are	unsecured	and	rank	equal	in	right	of	payment	to	all	of	our	existing	and	future	senior	indebtedness.	As	of	December	29,	2018,	we	were	in	compliance	with	all covenants	associated	with	the	2024	Notes.

For	additional	information	relating	to	our	debt	arrangements,	see	Note	3	in	the	notes	to	consolidated	financial	statements.

# Contractual	Obligations

A	summary	of	our	contractual	obligations	as	of	December	29,	2018	is	as	follows:

|  |  | Less |  |  | More |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Total | Than\t1\tYear | 1-3\tYears | 3-5\tYears | Than\t5\tYears |
|  |  |  | (In\tmillions) |  |  |
| Operating\tlease\tobligations | $112.0 | $26.3 | $42.9 | $25.7 | $17.1 |
| Purchase\tobligations\t(1) | 24.7 | 18.1 | 5.8 | 0.7 | 0.1 |
| Long-term\tdebt | 350.0 | — | — | — | 350.0 |
| Revolving\tcredit\tfacility | 100.0 | 100.0 | — | — | — |
| Contractual\tinterest\tpayments | 97.4 | 19.7 | 31.7 | 30.7 | 15.3 |
| Current\tincome\ttax\tpayable | 5.1 | 5.1 | — | — | — |
| Other\tlong-term\tcontractual\tobligations\t(2) | 37.7 | 0.1 | 23.0 | 3.1 | 11.5 |
| Total | $726.9 | $169.3 | $103.4 | $60.2 | $394.0 |

(1)	With	respect	to	purchase	obligations	that	are	cancelable	by	us,	this	table	includes	the	amount	that	would	have	been	payable	if	we	had	canceled	the	obligation	as	of December	29,	2018	or	the	earliest	cancellation	date.

(2)	Included	in	other	long-term	contractual	obligations	are	long-term	income	tax	liabilities	of	$18.7	million	related	to	unrecognized	tax	benefits.	Of	the	$18.7	million,	we	estimate $17.5	million	will	be	paid	or	settled	within	1	to	3	years	and	$1.2	million	within	3	to	5	years.	The	remaining	portion	of	other	long-term	contractual	obligations	is	primarily liabilities	associated	with	defined	benefit	retirement	plans	and	acquisitions.

# Off-Balance	Sheet	Arrangements

As	of	December	29,	2018,	we	did	not	have	any	significant	off-balance	sheet	arrangements,	as	defined	in	Item	303(a)(4)(ii)	of	SEC	Regulation	S-K.

# Critical	Accounting	Estimates

In	 preparing	 our	 consolidated	 financial	 statements,	 we	 make	 assumptions,	 judgments	 and	 estimates	 that	 can	 have	 a	 significant	 impact	 on	 our	 revenue, operating	income	and	net	income,	as	well	as	on	the	value	of	certain	assets	and	liabilities	on	our	consolidated	balance	sheets.	We	base	our	assumptions,	judgments and	estimates	on	historical	experience	and	various	other	factors	that	we	believe	to	be	reasonable	under	the	circumstances.	Actual	results	could	differ	materially	from these	estimates	under	different	assumptions	or	conditions.	At	least	quarterly,	we	evaluate	our	assumptions,	judgments	and	estimates,	and	make	changes	as	deemed necessary.

We	believe	that	the	assumptions,	judgments	and	estimates	involved	in	the	accounting	for	income	taxes,	revenue	recognition	and	business	combinations	have the	greatest	potential	impact	on	our	consolidated	financial	statements;	therefore,	we	consider	these	to	be	our	critical	accounting	estimates.	For	information	on	our significant	accounting	policies,	see	Note	2	in	the	notes	to	consolidated	financial	statements.

# Accounting	for	Income	Taxes

We	are	subject	to	income	taxes	in	the	United	States	and	numerous	foreign	jurisdictions.	Significant	judgment	is	required	in	evaluating	and	estimating	our provision	for	these	taxes.	There	are	many	transactions	that	occur	during	the	ordinary	course	of	business	for	which	the	ultimate	tax	determination	is	uncertain.	The	Tax Act	has	many	provisions	that	require	additional	guidance	on	specific	interpretations	of	the	tax	law	changes.	Our	provision	for	income	taxes	could	be	adversely	affected by	our	earnings	being	lower	than	anticipated	in	countries	where	we	have	lower	statutory	rates	and	higher	than	anticipated	in	countries	where	we	have	higher	statutory rates,	 losses	 incurred	 in	 jurisdictions	 for	 which	 we	 are	 not	 able	 to	 realize	 the	 related	 tax	 benefit,	 changes	 in	 foreign	 currency	 exchange	 rates,	 entry	 into	 new businesses	and	geographies	and	changes	to	our	existing	businesses,	acquisitions	and	investments,	changes	in	our	deferred	tax	assets	and	liabilities	including changes	in	our	assessment	of	valuation	allowances,	changes	in	the	relevant	tax	laws	or	interpretations	of	these	tax	laws,	and	developments	in	current	and	future	tax examinations.

We	only	recognize	the	tax	benefit	of	an	income	tax	position	if	we	judge	that	it	is	more	likely	than	not	that	the	tax	position	will	be	sustained,	solely	on	its	technical merits,	in	a	tax	audit	including	resolution	of	any	related	appeals	or	litigation	processes.	To	make	this	judgment,	we	must	interpret	complex	and	sometimes	ambiguous tax	laws,	regulations	and	administrative	practices.	If	we	judge	that	an	income	tax	position	meets	this	recognition	threshold,	then	we	must	measure	the	amount	of	the tax	benefit	to	be	recognized	by	estimating	the	largest	amount	of	tax	benefit	that	has	a	greater	than	50%	cumulative	probability	of	being	realized	upon	settlement	with	a taxing	authority	that	has	full	knowledge	of	all	of	the	relevant	facts.	It	is	inherently	difficult	and	subjective	to	estimate	such	amounts,	as	this	requires	us	to	determine	the probability	of	various	possible	settlement	outcomes.	We	must	reevaluate	our	income	tax	positions	on	a	quarterly	basis	to	consider	factors	such	as	changes	in	facts	or circumstances,	changes	in	tax	law,	effectively	settled	issues	under	audit,	the	lapse	of	applicable	statute	of	limitations,	and	new	audit	activity.	Such	a	change	in recognition	 or	 measurement	 would	 result	 in	 recognition	 of	 a	 tax	 benefit	 or	 an	 additional	 charge	 to	 the	 tax	 provision.	 For	 a	 more	 detailed	 description	 of	 our unrecognized	tax	benefits,	see	Note	6	in	the	notes	to	consolidated	financial	statements.

# Revenue	Recognition

Our	contracts	with	customers	often	include	promises	to	transfer	multiple	software	and/or	IP	licenses,	hardware	and	services,	including	professional	services, technical	support	services,	and	rights	to	unspecified	updates	to	a	customer.	Determining	whether	licenses	and	services	are	distinct	performance	obligations	that should	be	accounted	for	separately,	or	not	distinct	and	thus	accounted	for	together,	requires	significant	judgment.	In	some	arrangements,	such	as	most	of	our	IP license	arrangements,	we	have	concluded	that	the	licenses	and	associated	services	are	distinct	from	each	other.	In	other	arrangements,	like	our	time-based	software arrangements,	the	licenses	and	certain	services	are	not	distinct	from	each	other.	Our	time-based	software	arrangements	include	multiple	software	licenses	and updates	to	the	licensed	software	products,	as	well	as	technical	support,	and	we	have	concluded	that	these	promised	goods	and	services	are	a	single,	combined performance	obligation.

Judgment	is	required	to	determine	the	stand-alone	selling	prices	("SSPs")	for	each	distinct	performance	obligation.	We	rarely	license	or	sell	products	on	a standalone	basis,	so	we	are	required	to	estimate	the	SSP	for	each	performance	obligation.	In	instances	where	the	SSP	is	not	directly	observable	because	we	do	not sell	the	license,	product	or	service	separately,	we	determine	the	SSP	using	information	that	may	include	market	conditions	and	other	observable	inputs.	We	typically have	more	than	one	SSP	for	individual	performance	obligations	due	to	the	stratification	of	those	items	by	classes	of	customers	and	circumstances.	In	these	instances, we	may	use	information	such	as	the	size	of	the	customer	and	geographic	region	of	the	customer	in	determining	the	SSP.

Revenue	 is	recognized	over	 time	 for	our	combined	performance	obligations	 that	 include	software	 licenses,	updates,	and	 technical	support	as	well	as	 for maintenance	and	professional	services	that	are	separate	performance	obligations.	For	our	professional	services,	revenue	is	recognized	over	time,	generally	using costs	incurred	or	hours	expended	to	measure	progress.	Judgment	is	required	in	estimating	project	status	and	the	costs	necessary	to	complete	projects.	A	number	of internal	and	external	factors	can	affect	these	estimates,	including	labor	rates,	utilization	and	efficiency	variances	and	specification	and	testing	requirement	changes. For	our	other	performance	obligations	recognized	over	time,	revenue	is	generally	recognized	using	a	time-based	measure	of	progress	reflecting	generally	consistent efforts	to	satisfy	those	performance	obligations	throughout	the	arrangement	term.

If	a	group	of	agreements	are	so	closely	related	that	they	are,	in	effect,	part	of	a	single	arrangement,	such	agreements	are	deemed	to	be	one	arrangement	for revenue	recognition	purposes.	We	exercise	significant	judgment	to	evaluate	the	relevant	facts	and	circumstances	in	determining	whether	the	separate	agreements should	be	accounted	for	separately	or	as,	in	substance,	a	single	arrangement.	Our	judgments	about	whether	a	group	of	contracts	comprise	a	single	arrangement	can affect	the	allocation	of	consideration	to	the	distinct	performance	obligations,	which	could	have	an	effect	on	results	of	operations	for	the	periods	involved.

We	are	required	to	estimate	the	total	consideration	expected	to	be	received	from	contracts	with	customers.	In	some	circumstances,	the	consideration	expected to	be	received	is	variable	based	on	the	specific	terms	of	the	contract	or	based	on	our	expectations	of	the	term	of	the	contract.	Generally,	we	have	not	experienced significant	returns	or	refunds	to	customers.	These	estimates	require	significant	judgment	and	the	change	in	these	estimates	could	have	an	effect	on	our	results	of operations	during	the	periods	involved.

# Business	Combinations

When	we	acquire	businesses,	we	allocate	the	purchase	price	to	the	acquired	tangible	assets	and	assumed	liabilities,	including	deferred	revenue,	liabilities associated	with	 the	 fair	value	of	contingent	consideration	and	acquired	 identifiable	 intangible	assets.	Any	residual	purchase	price	 is	recorded	as	goodwill.	The allocation	of	the	purchase	price	requires	us	to	make	significant	estimates	in	determining	the	fair	values	of	these	acquired	assets	and	assumed	liabilities,	especially with	respect	to	intangible	assets	and	goodwill.	These	estimates	are	based	on	information	obtained	from	management	of	the	acquired	companies,	our	assessment	of this	information,	and	historical	experience.	These	estimates	can	include,	but	are	not	limited	to,	the	cash	flows	that	an	acquired	business	is	expected	to	generate	in the	future,	the	cash	flows	that	specific	assets	acquired	with	that	business	are	expected	to	generate	in	the	future,	the	appropriate	weighted-average	cost	of	capital,	and the	cost	savings	expected	to	be	derived	from	acquiring	an	asset.	These	estimates	are	inherently	uncertain	and	unpredictable,	and	if	different	estimates	were	used, the	purchase	price	for	the	acquisition	could	be	allocated	to	the	acquired	assets	and	assumed	liabilities	differently	from	the	allocation	that	we	have	made	to	the acquired	assets	and	assumed	liabilities.	In	addition,	unanticipated	events	and	circumstances	may	occur	that	may	affect	the	accuracy	or	validity	of	such	estimates,	and if	such	events	occur,	we	may	be	required	to	adjust	the	value	allocated	to	acquired	assets	or	assumed	liabilities.

We	also	make	significant	judgments	and	estimates	when	we	assign	useful	lives	to	the	definite-lived	intangible	assets	identified	as	part	of	our	acquisitions.	These estimates	 are	 inherently	 uncertain	 and	 if	 we	 used	 different	 estimates,	 the	 useful	 life	 over	 which	 we	 amortize	 intangible	 assets	 would	 be	 different.	 In	 addition, unanticipated	 events	 and	 circumstances	 may	 occur	 that	 may	 impact	 the	 useful	 life	 assigned	 to	 our	 intangible	 assets,	 which	 would	 impact	 our	 amortization	 of intangible	assets	expense	and	our	results	of	operations.

# New	Accounting	Standards

# Leases

In	February	2016,	the	FASB	issued	ASU	2016-02,	"Leases	(Topic	842),"	requiring,	among	other	things,	the	recognition	of	lease	liabilities	and	corresponding right-of-use	assets	on	the	balance	sheet	by	lessees	for	all	leases	with	a	term	longer	than	12	months.	The	new	standard	is	effective	for	us	in	the	first	quarter	of	fiscal 2019.	A	modified	retrospective	approach	is	required,	applying	the	new	standard	to	leases	existing	as	of	the	date	of	initial	application.	An	entity	may	choose	to	apply the	standard	as	of	either	its	effective	date	or	the	beginning	of	the	earliest	comparative	period	presented	in	the	financial	statements.	We	adopted	the	new	standard	on December	30,	2018,	the	first	day	of	fiscal	2019,	and	used	the	effective	date	as	our	date	of	initial	application.	Consequently,	financial	information	will	not	be	updated, and	the	disclosures	required	under	the	new	standard	will	not	be	provided	for	dates	and	periods	prior	to	the	first	quarter	of	fiscal	2019.	We	elected	certain	practical expedients	permitted	under	the	transition	guidance	within	the	new	standard,	which	among	other	things,	allowed	us	to	carry	forward	our	prior	conclusions	about	lease identification	and	classification.

We	estimate	the	key	change	upon	adoption	of	the	standard	will	result	in	balance	sheet	recognition	of	additional	lease	assets	and	lease	liabilities	ranging	from $75	to	$85	million	as	of	December	30,	2018,	which	is	based	on	the	present	value	of	committed	lease	payments.	We	do	not	expect	the	adoption	of	the	new	standard	to have	a	material	impact	on	the	recognition,	measurement	or	presentation	of	lease	expenses	within	our	consolidated	income	statements,	consolidated	statements	of comprehensive	income	or	consolidated	statements	of	cash	flows.

The	new	standard	also	provides	updated	guidance	for	lessor	accounting;	however,	we	do	not	expect	the	new	standard	to	have	a	material	effect	on	our	financial statements	for	arrangements	in	which	we	are	the	lessor.

# Credit	Losses

In	 June	 2016,	 the	 FASB	 issued	ASU	 2016-13,	 "Measurement	 of	 Credit	 Losses	 on	 Financial	 Instruments,"	 which	 supersedes	 current	 guidance	 requiring recognition	of	credit	losses	when	it	is	probable	that	a	loss	has	been	incurred.	The	new	standard	requires	the	establishment	of	an	allowance	for	estimated	credit	losses on	financial	assets,	including	trade	and	other	receivables,	at	each	reporting	date.	The	new	standard	will	result	in	earlier	recognition	of	allowances	for	losses	on	trade and	other	receivables	and	other	contractual	rights	to	receive	cash.	The	new	standard	will	be	effective	for	us	in	the	first	quarter	of	fiscal	2020,	and	early	adoption	is permitted.	We	are	currently	reviewing	this	standard	to	assess	the	impact	on	our	consolidated	financial	statements	and	the	related	disclosures.

# Goodwill	Impairment

In	January	2017,	the	FASB	issued	ASU	2017-04,	"Simplifying	the	Test	for	Goodwill	Impairment,"	that	eliminates	"Step	2"	from	the	goodwill	impairment	test.	The new	standard	is	effective	for	us	in	the	first	quarter	of	fiscal	2020,	and	early	adoption	is	permitted.	The	new	guidance	must	be	applied	on	a	prospective	basis.	We	do not	anticipate	that	the	adoption	of	this	standard	will	have	a	significant	impact	on	our	consolidated	financial	statements	or	the	related	disclosures.

# Income	Tax	Effects	within	Accumulated	Other	Comprehensive	Income

In	February	2018,	the	FASB	issued	ASU	2018-02,	"Reclassification	of	Certain	Tax	Effects	from	Accumulated	Other	Comprehensive	Income,"	which	allows	a reclassification	of	the	income	tax	effects	of	the	Tax	Act	on	items	within	accumulated	other	comprehensive	income	to	retained	earnings.	The	new	guidance	may	be applied	at	the	beginning	of	the	period	of	adoption	or	retrospectively	to	each	period	in	which	the	effect	of	the	change	in	federal	income	tax	rate	from	the	Tax	Act	is recognized.	The	new	standard	became	effective	for	us	in	the	first	quarter	of	fiscal	2019.	We	do	not	anticipate	that	the	adoption	of	this	standard	will	impact	our consolidated	financial	statements	or	the	related	disclosures.

# Stock-based	Compensation

In	June	2018,	the	FASB	issued	ASU	2018-07,	"Improvements	to	Nonemployee	Share-Based	Payment	Accounting,"	to	simplify	the	accounting	for	share-based transactions	with	nonemployees	in	which	the	grantor	acquires	goods	or	services	to	be	used	or	consumed.	Under	the	new	standard,	most	of	the	guidance	on	recording share-based	compensation	granted	to	nonemployees	will	be	aligned	with	the	requirements	for	share-based	compensation	granted	to	employees.	This	standard became	effective	for	us	in	the	first	quarter	of	fiscal	2019,	and	early	adoption	is	permitted.	We	do	not	expect	the	adoption	of	this	standard	to	have	a	material	impact	on our	consolidated	financial	statements.

# Fair	Value	Measurements

In	August	2018,	the	FASB	issued	ASU	2018-13,	"Disclosure	Framework	—	Changes	to	the	Disclosure	Requirements	for	Fair	Value	Measurement,"	which modifies	the	disclosure	requirements	on	fair	value	measurements.	The	new	standard	is	effective	for	us	in	the	first	quarter	of	fiscal	2020,	and	early	adoption	is permitted.	While	we	continue	to	assess	the	potential	impact	of	this	standard,	we	do	not	expect	the	adoption	of	this	standard	to	have	a	material	impact	on	our condensed	consolidated	financial	statements.

# Internal-use	Software

In	August	2018,	the	FASB	issued	ASU	2018-15,	"Customer's	Accounting	for	Implementation	Costs	Incurred	in	a	Cloud	Computing	Arrangement	That	Is	a Service	Contract,"	which	clarifies	the	accounting	for	implementation	costs	in	cloud	computing	arrangements.	The	new	standard	is	effective	for	us	in	the	first	quarter	of fiscal	2020,	and	early	adoption	is	permitted.	We	are	currently	reviewing	this	standard	to	assess	the	impact	on	our	condensed	consolidated	financial	statements.

# Item	7A.	Quantitative	and	Qualitative	Disclosures	About	Market	Risk

# Foreign	Currency	Risk

A	material	portion	of	our	revenue,	expenses	and	business	activities	are	transacted	in	the	U.S.	dollar.	In	certain	foreign	countries	where	we	price	our	products and	services	in	U.S.	dollars,	a	decrease	in	value	of	the	local	currency	relative	to	the	U.S.	dollar	results	in	an	increase	in	the	prices	for	our	products	and	services compared	to	those	products	of	our	competitors	that	are	priced	in	local	currency.	This	could	result	in	our	prices	being	uncompetitive	in	certain	markets.

In	certain	countries	where	we	may	invoice	customers	in	the	local	currency	our	revenues	benefit	from	a	weaker	dollar	and	are	adversely	affected	by	a	stronger dollar.	The	opposite	impact	occurs	in	countries	where	we	record	expenses	in	local	currencies.	In	those	cases,	our	costs	and	expenses	benefit	from	a	stronger	dollar and	are	adversely	affected	by	a	weaker	dollar.	The	fluctuations	in	our	operating	expenses	outside	the	United	States	resulting	from	volatility	in	foreign	exchange	rates are	not	generally	moderated	by	corresponding	fluctuations	in	revenues	from	existing	contracts.

We	enter	into	foreign	currency	forward	exchange	contracts	to	protect	against	currency	exchange	risks	associated	with	existing	assets	and	liabilities.	A	foreign currency	forward	exchange	contract	acts	as	a	hedge	by	increasing	in	value	when	underlying	assets	decrease	in	value	or	underlying	liabilities	increase	in	value	due	to changes	in	foreign	exchange	rates.	Conversely,	a	foreign	currency	forward	exchange	contract	decreases	in	value	when	underlying	assets	increase	in	value	or underlying	 liabilities	 decrease	 in	 value	 due	 to	 changes	 in	 foreign	 exchange	 rates.	 These	 forward	 contracts	 are	 not	 designated	 as	 accounting	 hedges,	 so	 the unrealized	gains	and	losses	are	recognized	in	other	income,	net,	in	advance	of	the	actual	foreign	currency	cash	flows	with	the	fair	value	of	these	forward	contracts being	recorded	as	accrued	liabilities	or	other	current	assets.

We	do	not	use	forward	contracts	for	trading	purposes.	Our	forward	contracts	generally	have	maturities	of	90	days	or	less.	We	enter	into	foreign	currency	forward exchange	contracts	based	on	estimated	future	asset	and	liability	exposures,	and	the	effectiveness	of	our	hedging	program	depends	on	our	ability	to	estimate	these future	asset	and	liability	exposures.	Recognized	gains	and	losses	with	respect	to	our	current	hedging	activities	will	ultimately	depend	on	how	accurately	we	are	able	to match	the	amount	of	foreign	currency	forward	exchange	contracts	with	actual	underlying	asset	and	liability	exposures.

The	following	table	provides	information	about	our	foreign	currency	forward	exchange	contracts	as	of	December	29,	2018.	The	information	is	provided	in	United States	dollar	equivalent	amounts.	The	table	presents	the	notional	amounts,	at	contract	exchange	rates,	and	the	weighted	average	contractual	foreign	currency exchange	rates	expressed	as	units	of	the	foreign	currency	per	United	States	dollar,	which	in	some	cases	may	not	be	the	market	convention	for	quoting	a	particular currency.	All	of	these	forward	contracts	matured	during	February	2019.

We	actively	monitor	our	foreign	currency	risks,	but	our	foreign	currency	hedging	activities	may	not	substantially	offset	the	impact	of	fluctuations	in	currency exchange	rates	on	our	results	of	operations,	cash	flows	and	financial	position.

# Interest	Rate	Risk

Our	exposure	to	market	risk	for	changes	in	interest	rates	relates	primarily	to	our	portfolio	of	cash	and	cash	equivalents	and	balances	outstanding	on	our revolving	credit	facility,	if	any.	We	are	exposed	to	interest	rate	fluctuations	in	many	of	the	world's	leading	industrialized	countries,	but	our	interest	income	and	expense is	most	sensitive	to	fluctuations	in	the	general	level	of	United	States	interest	rates.	In	this	regard,	changes	in	United	States	interest	rates	affect	the	interest	earned	on our	cash	and	cash	equivalents	and	the	costs	associated	with	foreign	currency	hedges.

All	highly	liquid	securities	with	a	maturity	of	three	months	or	less	at	the	date	of	purchase	are	considered	to	be	cash	equivalents.	The	carrying	value	of	our interest-bearing	instruments	approximated	fair	value	as	of	December	29,	2018.

Interest	rates	under	our	revolving	credit	facility	are	variable,	so	interest	expense	could	be	adversely	affected	by	changes	in	interest	rates,	particularly	for	periods when	we	maintain	a	balance	outstanding	under	the	revolving	credit	facility.	Interest	rates	for	our	revolving	credit	facility	can	fluctuate	based	on	changes	in	market interest	rates	and	in	an	interest	rate	margin	that	varies	based	on	our	consolidated	leverage	ratio.	As	of	December	29,	2018,	there	were	$100.0	million	borrowings outstanding	under	our	revolving	credit	facility.	For	an	additional	description	of	the	revolving	credit	facility,	see	Note	3	in	the	notes	to	consolidated	financial	statements.

# Equity	Price	Risk

# Equity	Investments

We	have	a	portfolio	of	equity	investments	that	includes	marketable	equity	securities	and	non-marketable	investments.	Our	equity	investments	are	made	primarily in	connection	with	our	strategic	investment	program.	Under	our	strategic	investment	program,	from	time	to	time,	we	make	cash	investments	in	companies	with technologies	that	are	potentially	strategically	important	to	us.	See	Note	7	in	the	notes	to	consolidated	financial	statements	for	an	additional	description	of	these investments.

# Item	8.	Financial	Statements	and	Supplementary	Data

The	financial	statements	required	by	Item	8	are	submitted	as	a	separate	section	of	this	Annual	Report	on	Form	10-K.	See	Part	IV,	Item	15,	"Exhibits	and Financial	Statement	Schedules."

# Summary	Quarterly	Data-Unaudited

|  |  | 2018 |  |  |  | 2017 |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 4th | 3rd | 2nd | 1st | 4th | 3rd | 2nd | 1st |
|  |  |  |  | (In\tthousands,\texcept\tper\tshare\tamounts) | (In\tthousands,\texcept\tper\tshare\tamounts) |  |  |  |
| Revenue\t(1) | $569,850 | $532,468 | $518,391 | $517,313 | $501,722 | $485,398 | $479,001 | $476,911 |
| Cost\tof\trevenue\t(1) | 76,124 | 60,454 | 58,960 | 63,209 | 60,284 | 54,482 | 60,832 | 61,792 |
| Net\tincome\t(loss)\t(1)\t(2) | 98,425 | 99,318 | 75,149 | 72,885 | (14,442) | 81,157 | 69,127 | 68,259 |
| Net\tincome\t(loss)\tper\tshare\t- |  |  |  |  |  |  |  |  |
| basic\t(1)\t(2) | 0.36 | 0.36 | 0.27 | 0.27 | (0.05) | 0.30 | 0.25 | 0.25 |
| Net\tincome\t(loss)\tper\tshare\t-\ndiluted\t(1)\t(2) | 0.35 | 0.35 | 0.27 | 0.26 | (0.05) | 0.29 | 0.25 | 0.25 |

# Item	9.	Changes	in	and	Disagreements	With	Accountants	on	Accounting	and	Financial	Disclosure

# Item	9A.	Controls	and	Procedures

# Evaluation	of	Disclosure	Controls	and	Procedures

As	required	by	Rule	13a-15	of	the	Securities	Exchange	Act	of	1934,	as	amended	(the	"Exchange	Act")	under	the	supervision	and	with	the	participation	of	our management,	including	our	Chief	Executive	Officer	("CEO")	and	our	Chief	Financial	Officer	("CFO"),	we	evaluated	the	effectiveness	of	the	design	and	operation	of	our disclosure	controls	and	procedures	(as	defined	in	Rules	13a-15(e)	and	15d-15(e)	under	the	Exchange	Act)	as	of	December	29,	2018.

The	evaluation	of	our	disclosure	controls	and	procedures	included	a	review	of	our	processes	and	the	effect	on	the	information	generated	for	use	in	this	Annual Report	on	Form	10-K.	In	the	course	of	this	evaluation,	we	sought	to	identify	any	material	weaknesses	in	our	disclosure	controls	and	procedures,	to	determine	whether we	had	identified	any	acts	of	fraud	involving	personnel	who	have	a	significant	role	in	our	disclosure	controls	and	procedures,	and	to	confirm	that	any	necessary corrective	 action,	 including	 process	 improvements,	 was	 taken.	 This	 type	 of	 evaluation	 is	 done	 every	 fiscal	 quarter	 so	 that	 our	 conclusions	 concerning	 the effectiveness	of	these	controls	can	be	reported	in	our	periodic	reports	filed	with	the	SEC.	The	overall	goals	of	these	evaluation	activities	are	to	monitor	our	disclosure controls	and	procedures	and	to	make	modifications	as	necessary.	We	intend	to	maintain	these	disclosure	controls	and	procedures,	modifying	them	as	circumstances warrant.

Based	on	their	evaluation	as	of	December	29,	2018,	our	CEO	and	CFO	have	concluded	that	our	disclosure	controls	and	procedures	were	effective	to	provide reasonable	 assurance	 that	 the	 information	 required	 to	 be	 disclosed	 by	 us	 in	 our	 reports	 filed	 or	 submitted	 under	 the	 Exchange	Act	 is	 recorded,	 processed, summarized	and	reported	within	the	time	periods	specified	in	the	SEC's	rules	and	forms	and	is	accumulated	and	communicated	to	our	management,	including	the CEO	and	CFO,	as	appropriate	to	allow	timely	decisions	regarding	required	disclosure.

# Changes	in	Internal	Control	Over	Financial	Reporting

There	 were	 no	 changes	 in	 our	 internal	 control	 over	 financial	 reporting	 during the fiscal	 quarter	 ended	December	29,	2018 that	 materially	 affected,	 or	 are reasonably	likely	to	materially	affect,	our	internal	control	over	financial	reporting.

# Inherent	Limitations	on	Effectiveness	of	Controls

Our	management,	including	our	CEO	and	CFO,	does	not	expect	that	our	disclosure	controls	and	procedures	or	our	internal	control	over	financial	reporting	will prevent	or	detect	all	errors	and	all	fraud.	Internal	control	over	financial	reporting,	no	matter	how	well	conceived	and	operated,	can	provide	only	reasonable,	not absolute,	assurance	that	the	objectives	of	internal	control	are	met.	Further,	the	design	of	internal	control	must	reflect	the	fact	that	there	are	resource	constraints,	and the	benefits	of	the	control	must	be	considered	relative	to	their	costs.	While	our	disclosure	controls	and	procedures	and	internal	control	over	financial	reporting	are designed	to	provide	reasonable	assurance	of	their	effectiveness,	because	of	the	inherent	limitations	in	all	control	systems,	no	evaluation	of	controls	can	provide absolute	assurance	that	all	control	issues	and	instances	of	fraud,	if	any,	within	Cadence,	have	been	detected.

# Management's	Report	on	Internal	Control	Over	Financial	Reporting

Our	management	is	responsible	for	establishing	and	maintaining	adequate	internal	control	over	financial	reporting	(as	defined	in	Rule	13a-15(f)	under	the Exchange	Act).	Our	management	assessed	the	effectiveness	of	our	internal	control	over	financial	reporting	as	of	December	29,	2018.	In	making	this	assessment,	our management	used	the	criteria	established	in	Internal	Control-Integrated	Framework	(2013)	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway Commission	("COSO").	Our	management	has	concluded	that,	as	of	December	29,	2018,	our	internal	control	over	financial	reporting	is	effective	based	on	these criteria.	Our	independent	registered	public	accounting	firm,	KPMG	LLP,	has	issued	an	attestation	report	on	our	internal	control	over	financial	reporting,	which	is included	in	Part	IV,	Item	15,	"Exhibits	and	Financial	Statement	Schedules."

# Item	9B.	Other	Information

# PART	III.

# Item	10.	Directors,	Executive	Officers	and	Corporate	Governance

The	information	required	by	Item	10	as	to	directors	is	incorporated	herein	by	reference	from	the	sections	entitled	"Proposal	1	-	Election	of	Directors"	and "Security	Ownership	of	Certain	Beneficial	Owners	and	Management	-	Section	16(a)	Beneficial	Ownership	Reporting	Compliance"	 in	Cadence's	definitive	proxy statement	for	its	2019	Annual	Meeting	of	Stockholders.	The	executive	officers	of	Cadence	are	listed	at	the	end	of	Item	1	of	Part	I	of	this	Annual	Report	on	Form	10-K.

The	information	required	by	Item	10	as	to	Cadence's	code	of	ethics	is	incorporated	herein	by	reference	from	the	section	entitled	"Corporate	Governance	-	Code of	Business	Conduct"	in	Cadence's	definitive	proxy	statement	for	its	2019	Annual	Meeting	of	Stockholders.

The	information	required	by	Item	10	as	to	the	director	nomination	process	and	Cadence's	Audit	Committee	is	incorporated	by	reference	from	the	section	entitled "Board	of	Directors	-	Committees	of	the	Board"	in	Cadence's	definitive	proxy	statement	for	its	2019	Annual	Meeting	of	Stockholders.

# Item	11.	Executive	Compensation

The	information	required	by	Item	11	is	incorporated	herein	by	reference	from	the	sections	entitled	"Board	of	Directors	-	Components	of	Director	Compensation," "Board	 of	 Directors	 -	 Director	 Compensation	 for	 Fiscal	 2018,"	 "Compensation	 Discussion	 and	 Analysis,"	 "Compensation	 Committee	 Report,"	 "Compensation Committee	Interlocks	and	Insider	Participation,"	"Compensation	of	Executive	Officers,"	"Potential	Payments	Upon	Termination	or	Change	In	Control,"	and	"Pay	Ratio Disclosure"	in	Cadence's	definitive	proxy	statement	for	its	2019	Annual	Meeting	of	Stockholders.

# Item	12.	Security	Ownership	of	Certain	Beneficial	Owners	and	Management	and	Related	Stockholder	Matters

The	information	required	by	Item	12	is	incorporated	herein	by	reference	from	the	sections	entitled	"Security	Ownership	of	Certain	Beneficial	Owners	and Management"	and	"Equity	Compensation	Plan	Information"	in	Cadence's	definitive	proxy	statement	for	its	2019	Annual	Meeting	of	Stockholders.

# Item	13.	Certain	Relationships	and	Related	Transactions	and	Director	Independence

The	information	required	by	Item	13	is	incorporated	herein	by	reference	from	the	sections	entitled	"Certain	Transactions"	and	"Board	of	Directors	-	Director Independence"	in	Cadence's	definitive	proxy	statement	for	its	2019	Annual	Meeting	of	Stockholders.

# Item	14.	Principal	Accountant	Fees	and	Services

The	information	required	by	Item	14	is	incorporated	herein	by	reference	from	the	section	entitled	"Fees	Billed	to	Cadence	by	KPMG	LLP	During	Fiscal	2018 and	2017"	in	Cadence's	definitive	proxy	statement	for	its	2019	Annual	Meeting	of	Stockholders.

# PART	IV.

# Item	15.	Exhibits	and	Financial	Statement	Schedules

| Report	of	Independent	Registered	Public	Accounting	Firm | 42 |
| :--- | :--- |
| Consolidated\tBalance\tSheets\tas\tof\tDecember\t29,\t2018\tand\tDecember\t30,\t2017 | 44 |
| Consolidated\tIncome\tStatements\tfor\tthe\tthree\tfiscal\tyears\tended\tDecember\t29,\t2018 | 45 |
| Consolidated\tStatements\tof\tComprehensive\tIncome\tfor\tthe\tthree\tfiscal\tyears\tended\tDecember\t29,\t2018 | 46 |
| Consolidated\tStatements\tof\tStockholders'\tEquity\tfor\tthe\tthree\tfiscal\tyears\tended\tDecember\t29,\t2018 | 47 |
| Consolidated\tStatements\tof\tCash\tFlows\tfor\tthe\tthree\tfiscal\tyears\tended\tDecember\t29,\t2018 | 48 |
| Notes\tto\tConsolidated\tFinancial\tStatements | 49 |
| (a)\t2.\tFinancial\tStatement\tSchedules |  |
| All\tfinancial\tstatement\tschedules\tare\tomitted\tbecause\tthey\tare\tnot\tapplicable,\tnot\trequired\tor\tthe\trequired\tinformation\tis\tshown\tin\tthe\nconsolidated\tfinancial\tstatements\tor\tnotes\tthereto. |  |
| (a)\t3.\tExhibits | 79 |

The	exhibits	listed	in	the	accompanying	Exhibit	Index	are	filed	or	incorporated	by	reference	as	part	of	this	Annual	Report	on	Form	10-K.

The	exhibits	filed	or	incorporated	by	reference	as	part	of	this	Annual	Report	on	Form	10-K	contain	agreements	to	which	Cadence	is	a	party.	These	agreements are	included	to	provide	information	regarding	their	terms	and	are	not	intended	to	provide	any	other	factual	or	disclosure	information	about	Cadence	or	the	other parties	to	the	agreements.	Certain	of	the	agreements	contain	representations	and	warranties	by	each	of	the	parties	to	the	applicable	agreement,	and	any	such representations	and	warranties	have	been	made	solely	for	the	benefit	of	the	other	parties	to	the	applicable	agreement	as	of	specified	dates,	may	apply	materiality standards	that	are	different	than	those	applied	by	investors,	and	may	be	subject	to	important	qualifications	and	limitations	that	are	not	necessarily	reflected	in	the agreement.	Accordingly,	these	representations	and	warranties	may	not	describe	the	actual	state	of	affairs	as	of	the	date	they	were	made	or	at	any	other	time,	and should	not	be	relied	upon	as	statements	of	factual	information.

©	 2019	 Cadence	 Design	 Systems,	 Inc.	 All	 rights	 reserved	 worldwide.	 Cadence,	 the	 Cadence	 logo,	 and	 the	 other	 Cadence	 marks	 found	 at www.cadence.com/go/trademarks	are	trademarks	or	registered	trademarks	of	Cadence	Design	Systems,	Inc.	All	other	trademarks	are	the	property	of	 their respective	holders.

# Report	of	Independent	Registered	Public	Accounting	Firm

# The	Board	of	Directors	and	Stockholders

# Opinions	on	the	Consolidated	Financial	Statements	and	Internal	Control	Over	Financial	Reporting

We	have	audited	the	accompanying	consolidated	balance	sheets	of	Cadence	Design	Systems,	Inc.	and	subsidiaries	("the	Company")	as	of	December	29,	2018	and December	30,	2017,	the	related	consolidated	income	statements,	statements	of	comprehensive	income,	stockholders'	equity,	and	cash	flows	for	each	of	the	years	in the	three-year	period	ended	December	29,	2018,	and	the	related	notes	(collectively,	the	"consolidated	financial	statements").	We	also	have	audited	the	Company's internal	control	over	financial	reporting	as	of	December	29,	2018,	based	on	criteria	established	in	Internal	Control	-	Integrated	Framework	(2013)	issued	by	the Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission.

In	our	opinion,	the	consolidated	financial	statements	referred	to	above	present	fairly,	in	all	material	respects,	the	financial	position	of	the	Company	as	of	December	29, 2018	and	December	30,	2017,	and	the	results	of	its	operations	and	its	cash	flows	for	each	of	the	years	in	the	three-year	period	ended	December	29,	2018,	in conformity	with	U.S.	generally	accepted	accounting	principles.	Also	in	our	opinion,	the	Company	maintained,	in	all	material	respects,	effective	internal	control	over financial	reporting	as	of	December	29,	2018	based	on	criteria	established	in	Internal	Control	-	Integrated	Framework	(2013)	issued	by	the	Committee	of	Sponsoring Organizations	of	the	Treadway	Commission.

# Change	in	Accounting	Principle

As	discussed	in	Note	2	to	the	consolidated	financial	statements,	the	Company	has	changed	its	method	of	accounting	for	revenue	recognition	on	December	31,	2017 due	to	the	adoption	of	FASB	ASU	2014-09,	"Revenue	from	Contracts	with	Customers	(Topic	606)."

# Basis	for	Opinions

The	Company's	management	is	responsible	for	these	consolidated	financial	statements,	for	maintaining	effective	internal	control	over	financial	reporting,	and	for	its assessment	of	the	effectiveness	of	internal	control	over	financial	reporting,	included	in	the	accompanying	Management's	Report	on	Internal	Control	over	Financial Reporting	included	in	Item	9A.	Our	responsibility	is	to	express	an	opinion	on	the	Company's	consolidated	financial	statements	and	an	opinion	on	the	Company's internal	control	over	financial	reporting	based	on	our	audits.	We	are	a	public	accounting	firm	registered	with	the	Public	Company	Accounting	Oversight	Board	(United States)	("PCAOB")	and	are	required	to	be	independent	with	respect	to	the	Company	in	accordance	with	the	U.S.	federal	securities	laws	and	the	applicable	rules	and regulations	of	the	Securities	and	Exchange	Commission	and	the	PCAOB.

We	conducted	our	audits	in	accordance	with	the	standards	of	the	PCAOB.	Those	standards	require	that	we	plan	and	perform	the	audits	to	obtain	reasonable assurance	about	whether	the	consolidated	financial	statements	are	free	of	material	misstatement,	whether	due	to	error	or	fraud,	and	whether	effective	internal	control over	financial	reporting	was	maintained	in	all	material	respects.

Our	 audits	 of	 the	 consolidated	 financial	 statements	 included	 performing	 procedures	 to	 assess	 the	 risks	 of	 material	 misstatement	 of	 the	 consolidated	 financial statements,	whether	due	to	error	or	fraud,	and	performing	procedures	that	respond	to	those	risks.	Such	procedures	included	examining,	on	a	test	basis,	evidence regarding	the	amounts	and	disclosures	in	the	consolidated	financial	statements.	Our	audits	also	included	evaluating	the	accounting	principles	used	and	significant estimates	made	by	management,	as	well	as	evaluating	the	overall	presentation	of	the	consolidated	financial	statements.	Our	audit	of	internal	control	over	financial reporting	 included	 obtaining	 an	 understanding	 of	 internal	 control	 over	 financial	 reporting,	 assessing	 the	 risk	 that	 a	 material	 weakness	 exists,	 and	 testing	 and evaluating	the	design	and	operating	effectiveness	of	internal	control	based	on	the	assessed	risk.	Our	audits	also	included	performing	such	other	procedures	as	we considered	necessary	in	the	circumstances.	We	believe	that	our	audits	provide	a	reasonable	basis	for	our	opinions.

# Definition	and	Limitations	of	Internal	Control	Over	Financial	Reporting

A	company's	internal	control	over	financial	reporting	is	a	process	designed	to	provide	reasonable	assurance	regarding	the	reliability	of	financial	reporting	and	the preparation	of	financial	statements	for	external	purposes	in	accordance	with	generally	accepted	accounting	principles.	A	company's	internal	control	over	financial reporting	includes	those	policies	and	procedures	that	(1)	pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately	and	fairly	reflect	the	transactions and	dispositions	of	the	assets	of	the	company;	(2)	provide	reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	of	financial statements	in	accordance	with	generally	accepted	accounting	principles,	and	that	receipts	and	expenditures	of	the	company	are	being	made	only	in	accordance	with authorizations	 of	 management	 and	 directors	 of	 the	 company;	 and	 (3)	 provide	 reasonable	 assurance	 regarding	 prevention	 or	 timely	 detection	 of	 unauthorized acquisition,	use,	or	disposition	of	the	company's	assets	that	could	have	a	material	effect	on	the	financial	statements.

Because	 of	 its	 inherent	 limitations,	 internal	 control	 over	 financial	 reporting	 may	 not	 prevent	 or	 detect	 misstatements.	 Also,	 projections	 of	 any	 evaluation	 of effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of	compliance	with the	policies	or	procedures	may	deteriorate.

# /s/	KPMG	LLP

We	have	served	as	the	Company's	auditor	since	2002.

Santa	Clara,	California

# CONSOLIDATED	BALANCE	SHEETS

# (In	thousands,	except	par	value)

| ASSETS | December	29,<br>2018 | December	30,<br>2017 |
| :--- | :--- | :--- |
| Current\tassets: |  |  |
| Cash\tand\tcash\tequivalents | $533,298 | $688,087 |
| Receivables,\tnet | 297,082 | 190,426 |
| Inventories | 28,162 | 33,209 |
| Prepaid\texpenses\tand\tother | 92,550 | 68,266 |
| Total\tcurrent\tassets | 951,092 | 979,988 |
| Property,\tplant\tand\tequipment,\tnet | 252,630 | 251,342 |
| Goodwill | 662,272 | 666,009 |
| Acquired\tintangibles,\tnet | 225,457 | 278,835 |
| Long-term\treceivables | 5,972 | 12,239 |
| Other\tassets | 371,231 | 230,301 |
| Total\tassets | $2,468,654 | $2,418,714 |
| LIABILITIES\tAND\tSTOCKHOLDERS'\tEQUITY |  |  |
| Current\tliabilities: |  |  |
| Revolving\tcredit\tfacility | $100,000 | $85,000 |
| Accounts\tpayable\tand\taccrued\tliabilities | 256,526 | 221,101 |
| Current\tportion\tof\tdeferred\trevenue | 352,456 | 336,297 |
| Total\tcurrent\tliabilities | 708,982 | 642,398 |
| Long-term\tliabilities: |  |  |
| Long-term\tportion\tof\tdeferred\trevenue | 48,718 | 61,513 |
| Long-term\tdebt | 345,291 | 644,369 |
| Other\tlong-term\tliabilities | 77,262 | 81,232 |
| Total\tlong-term\tliabilities | 471,271 | 787,114 |
| Commitments\tand\tcontingencies\t(Notes\t6\tand\t17) |  |  |
| Stockholders'\tequity: |  |  |
|  | — | — |
| 282,067,\trespectively | 1,936,124 | 1,829,950 |
| Treasury\tstock,\tat\tcost;\t49,144\tshares\tand\t47,092\tshares,\trespectively | (1,395,652) | (1,178,121) |
| Retained\tearnings | 772,709 | 341,003 |
| Accumulated\tother\tcomprehensive\tloss | (24,780) | (3,630) |
| Total\tstockholders'\tequity | 1,288,401 | 989,202 |
| Total\tliabilities\tand\tstockholders'\tequity | $2,468,654 | $2,418,714 |

# CONSOLIDATED	INCOME	STATEMENTS

# For	the	three	fiscal	years	ended	December	29,	2018

# (In	thousands,	except	per	share	amounts)

|  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| Revenue: |  |  |  |
| Product\tand\tmaintenance | $1,997,887 | $1,813,987 | $1,683,771 |
| Services | 140,135 | 129,045 | 132,312 |
| Total\trevenue | 2,138,022 | 1,943,032 | 1,816,083 |
| Costs\tand\texpenses: |  |  |  |
| Cost\tof\tproduct\tand\tmaintenance | 173,011 | 156,676 | 183,291 |
| Cost\tof\tservice | 85,736 | 80,714 | 73,201 |
| Marketing\tand\tsales | 439,669 | 419,161 | 395,194 |
| Research\tand\tdevelopment | 884,816 | 804,223 | 735,340 |
| General\tand\tadministrative | 133,406 | 134,181 | 125,106 |
| Amortization\tof\tacquired\tintangibles | 14,086 | 14,716 | 18,095 |
| Restructuring\tand\tother\tcharges | 11,089 | 9,406 | 40,955 |
| Total\tcosts\tand\texpenses | 1,741,813 | 1,619,077 | 1,571,182 |
| Income\tfrom\toperations | 396,209 | 323,955 | 244,901 |
| Interest\texpense | (23,139) | (25,664) | (23,670) |
| Other\tincome,\tnet | 3,320 | 16,755 | 15,922 |
| Income\tbefore\tprovision\tfor\tincome\ttaxes | 376,390 | 315,046 | 237,153 |
| Provision\tfor\tincome\ttaxes | 30,613 | 110,945 | 34,067 |
| Net\tincome | $345,777 | $204,101 | $203,086 |
| Net\tincome\tper\tshare\t–\tbasic | $1.26 | $0.75 | $0.71 |
| Net\tincome\tper\tshare\t–\tdiluted | $1.23 | $0.73 | $0.70 |
| Weighted\taverage\tcommon\tshares\toutstanding\t–\tbasic | 273,729 | 272,097 | 284,502 |
| Weighted\taverage\tcommon\tshares\toutstanding\t–\tdiluted | 281,144 | 280,221 | 291,256 |

# CONSOLIDATED	STATEMENTS	OF	COMPREHENSIVE	INCOME

# (In	thousands)

|  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| Net\tincome | $345,777 | $204,101 | $203,086 |
| Other\tcomprehensive\tincome\t(loss),\tnet\tof\ttax\teffects: |  |  |  |
| Foreign\tcurrency\ttranslation\tadjustments | (17,885) | 19,394 | (12,801) |
| Changes\tin\tunrealized\tholding\tgains\tor\tlosses\ton\tavailable-for-sale\tsecurities,\tnet\tof\nreclassification\tadjustments\tfor\trealized\tgains\tand\tlosses | — | 1,712 | 716 |
| Changes\tin\tdefined\tbenefit\tplan\tliabilities | (627) | 424 | (650) |
| Total\tother\tcomprehensive\tincome\t(loss),\tnet\tof\ttax\teffects | (18,512) | 21,530 | (12,735) |
| Comprehensive\tincome | $327,265 | $225,631 | $190,351 |

See	notes	to	consolidated	financial	statements.

# CONSOLIDATED	STATEMENTS	OF	STOCKHOLDERS'	EQUITY

|  |  | Par	Value |  | Retained | Accumulated |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | and\tCapital |  | Earnings | Other |  |
|  |  | in\tExcess | Treasury | (Accumulated | Comprehensive |  |
|  | Shares | of\tPar | Stock | \tDeficit) | Income\t(Loss) | Total |
| Balance,\tJanuary\t2,\t2016 | 309,392 | $1,863,086 | $(400,555) | $(73,991) | $(12,425) | $1,376,115 |
| Cumulative\teffect\tadjustment | — | 364 | — | 7,807 | — | $8,171 |
| Net\tincome | — | — | — | 203,086 | — | $203,086 |
| Other\tcomprehensive\tloss,\tnet\tof\ttaxes | — | — | — | — | (12,735) | $(12,735) |
| Purchase\tof\ttreasury\tstock | (40,493) | — | (960,289) | — | — | $(960,289) |
| Issuance\tof\tcommon\tstock\tand\treissuance\tof\ttreasury\tstock\nunder\tequity\tincentive\tplans,\tnet\tof\tforfeitures | 10,587 | (147,074) | 202,506 | — | — | $55,432 |
| Stock\treceived\tfor\tpayment\tof\temployee\ttaxes\ton\tvesting\tof\nrestricted\tstock | (1,387) | (5,512) | (31,715) | — | — | $(37,227) |
| Stock-based\tcompensation\texpense | — | 109,217 | — | — | — | $109,217 |
| Balance,\tDecember\t31,\t2016 | 278,099 | $1,820,081 | $(1,190,053) | $136,902 | $(25,160) | $741,770 |
| Net\tincome | — | — | — | 204,101 | — | $204,101 |
| Other\tcomprehensive\tincome,\tnet\tof\ttaxes | — | — | — | — | 21,530 | $21,530 |
| Purchase\tof\ttreasury\tstock | (2,495) | — | (100,025) | — | — | $(100,025) |
| Issuance\tof\tcommon\tstock\tand\treissuance\tof\ttreasury\tstock\nunder\tequity\tincentive\tplans,\tnet\tof\tforfeitures | 7,905 | (111,982) | 160,946 | — | — | $48,964 |
| Stock\treceived\tfor\tpayment\tof\temployee\ttaxes\ton\tvesting\tof\nrestricted\tstock | (1,442) | (8,172) | (48,989) | — | — | $(57,161) |
| Stock-based\tcompensation\texpense | — | 130,023 | — | — | — | $130,023 |
| Balance,\tDecember\t30,\t2017 | 282,067 | $1,829,950 | $(1,178,121) | $341,003 | $(3,630) | $989,202 |
| Cumulative\teffect\tadjustment | — | — | — | 85,929 | (2,638) | $83,291 |
| Net\tincome | — | — | — | 345,777 | — | $345,777 |
| Other\tcomprehensive\tloss,\tnet\tof\ttaxes | — | — | — | — | (18,512) | $(18,512) |
| Purchase\tof\ttreasury\tstock | (5,934) | — | (250,059) | — | — | $(250,059) |
| Issuance\tof\tcommon\tstock\tand\treissuance\tof\ttreasury\tstock\nunder\tequity\tincentive\tplans,\tnet\tof\tforfeitures | 5,274 | (50,570) | 91,478 | — | — | $40,908 |
| Stock\treceived\tfor\tpayment\tof\temployee\ttaxes\ton\tvesting\tof\nrestricted\tstock | (1,392) | (10,971) | (58,950) | — | — | $(69,921) |
| Stock-based\tcompensation\texpense | — | 167,715 | — | — | — | $167,715 |
| Balance,\tDecember\t29,\t2018 | 280,015 | $1,936,124 | $(1,395,652) | $772,709 | $(24,780) | $1,288,401 |

# CONSOLIDATED	STATEMENTS	OF	CASH	FLOWS

|  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| Cash\tand\tcash\tequivalents\tat\tbeginning\tof\tyear | $688,087 | $465,232 | $616,686 |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |
| Net\tincome | 345,777 | 204,101 | 203,086 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| Depreciation\tand\tamortization | 118,721 | 115,524 | 119,588 |
| Amortization\tof\tdebt\tdiscount\tand\tfees | 1,196 | 1,211 | 1,069 |
| Stock-based\tcompensation | 167,715 | 130,023 | 109,217 |
| Gain\ton\tinvestments,\tnet | (1,261) | (13,869) | (4,725) |
| Gain\ton\tsale\tof\tproperty,\tplant\tand\tequipment | — | — | (923) |
| Deferred\tincome\ttaxes | (11,676) | 79,934 | (4,869) |
| Provisions\tfor\tlosses\ton\treceivables | 5,102 | 2,623 | 308 |
| Other\tnon-cash\titems | 1,136 | 5,068 | 4,027 |
| Changes\tin\toperating\tassets\tand\tliabilities,\tnet\tof\teffect\tof\tacquired\tbusinesses: |  |  |  |
| Receivables | (87,083) | (31,032) | (3,607) |
| Inventories | 752 | 5,034 | 4,934 |
| Prepaid\texpenses\tand\tother | (19,622) | (25,793) | (6,903) |
| Other\tassets | (16,077) | (22,336) | (6,566) |
| Accounts\tpayable\tand\taccrued\tliabilities | 1,553 | (25,987) | 2,655 |
| Deferred\trevenue | 100,696 | 33,614 | 30,742 |
| Other\tlong-term\tliabilities | (2,178) | 12,625 | (3,154) |
| Net\tcash\tprovided\tby\toperating\tactivities | 604,751 | 470,740 | 444,879 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |
| Purchases\tof\tavailable-for-sale\tsecurities | — | — | (20,525) |
| Proceeds\tfrom\tthe\tsale\tof\tavailable-for-sale\tsecurities | — | 833 | 55,619 |
| Proceeds\tfrom\tthe\tmaturity\tof\tavailable-for-sale\tsecurities | — | — | 57,762 |
| Purchases\tof\tnon-marketable\tinvestments | (115,839) | — | — |
| Proceeds\tfrom\tthe\tsale\tof\tnon-marketable\tinvestments | 3,497 | 9,108 | 2,917 |
| Proceeds\tfrom\tthe\tsale\tof\tproperty,\tplant\tand\tequipment | — | — | 923 |
| Purchases\tof\tproperty,\tplant\tand\tequipment | (61,503) | (57,901) | (53,712) |
| Cash\tpaid\tin\tbusiness\tcombinations\tand\tasset\tacquisitions,\tnet\tof\tcash\tacquired | — | (143,249) | (41,627) |
| Net\tcash\tprovided\tby\t(used\tfor)\tinvesting\tactivities | (173,845) | (191,209) | 1,357 |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |
| Proceeds\tfrom\trevolving\tcredit\tfacility | 100,000 | 135,000 | 115,000 |
| Payment\ton\trevolving\tcredit\tfacility | (85,000) | (100,000) | (65,000) |
| Proceeds\tfrom\tterm\tloan | — | — | 300,000 |
| Principal\tpayments\ton\tterm\tloan | (300,000) | — | — |
| Payment\tof\tdebt\tissuance\tcosts | — | (793) | (622) |
| Proceeds\tfrom\tissuance\tof\tcommon\tstock | 40,908 | 48,965 | 55,440 |
| Stock\treceived\tfor\tpayment\tof\temployee\ttaxes\ton\tvesting\tof\trestricted\tstock | (69,921) | (57,161) | (37,226) |
| Payments\tfor\trepurchases\tof\tcommon\tstock | (250,059) | (100,025) | (960,289) |
| Change\tin\tbook\toverdraft | (3,867) | 3,867 | — |
| Net\tcash\tused\tfor\tfinancing\tactivities | (567,939) | (70,147) | (592,697) |
| Effect\tof\texchange\trate\tchanges\ton\tcash\tand\tcash\tequivalents | (17,756) | 13,471 | (4,993) |
| Increase\t(decrease)\tin\tcash\tand\tcash\tequivalents | (154,789) | 222,855 | (151,454) |
| Cash\tand\tcash\tequivalents\tat\tend\tof\tyear | $533,298 | $688,087 | $465,232 |
| Supplemental\tcash\tflow\tinformation: |  |  |  |
| Cash\tpaid\tfor\tinterest | $23,018 | $24,160 | $21,024 |
| Cash\tpaid\tfor\tincome\ttaxes,\tnet | 68,040 | 59,072 | 36,823 |

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

# NOTE	1.	BUSINESS	OVERVIEW

Cadence	Design	Systems,	Inc.	("Cadence")	provides	solutions	that	enable	its	customers	to	design	complex	and	innovative	electronic	products.	Cadence's solutions	are	designed	to	give	its	customers	a	competitive	edge	in	their	development	of	electronic	systems,	integrated	circuits	("ICs")	and	electronic	devices	and increasingly	sophisticated	manufactured	products,	by	optimizing	performance,	minimizing	power	consumption,	shortening	the	time	to	bring	their	products	to	market and	reducing	their	design,	development	and	manufacturing	costs.	Cadence's	product	offerings	include	software,	hardware,	services	and	reusable	IC	design	blocks, which	are	commonly	referred	to	as	intellectual	property	("IP").	Cadence	also	provides	maintenance	for	its	software,	hardware,	and	IP	product	offerings.

# NOTE	2.	SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES

# Principles	of	Consolidation	and	Basis	of	Presentation

The	consolidated	financial	statements	include	the	accounts	of	Cadence	and	its	subsidiaries	after	elimination	of	intercompany	accounts	and	transactions.	All consolidated	subsidiaries	are	wholly	owned	by	Cadence.	Certain	prior	period	balances	have	been	reclassified	to	conform	to	the	current	period	presentation.

Cadence's	fiscal	years	are	52-	or	53-week	periods	ending	on	the	Saturday	closest	to	December	31.	Fiscal	2017,	2016	and	2015	were	each	52-week	fiscal years.

# Use	of	Estimates

Preparation	of	the	consolidated	financial	statements	in	conformity	with	United	States	generally	accepted	accounting	principles	requires	management	to	make estimates	and	assumptions	that	affect	the	reported	amounts	of	assets	and	liabilities	and	disclosure	of	contingent	assets	and	liabilities	at	the	date	of	the	consolidated financial	statements	and	the	reported	amounts	of	revenue	and	expenses	during	the	reporting	period.	Actual	results	could	differ	from	those	estimates.

# Comparability

Effective	 on	 the	 first	 day	 of	 fiscal	 2018,	 Cadence	 adopted	 multiple	 new	 accounting	 standards.	 Prior	 periods	 were	 not	 retrospectively	 restated,	 so	 the consolidated	balance	sheet	as	of	December	29,	2018	and	the	consolidated	income	statements	for	fiscal	2018	were	prepared	using	accounting	standards	that	were different	than	those	in	effect	for	fiscal	2017	and	fiscal	2016.	Therefore,	the	consolidated	balance	sheets	as	of	December	29,	2018	are	not	directly	comparable	to	the consolidated	balance	sheets	as	of	December	30,	2017,	nor	are	the	results	of	operations	for	fiscal	2018	comparable	to	the	results	of	operations	for	fiscal	2017	and fiscal	2016.

# Recently	Adopted	Accounting	Standards

# Revenue	from	Contracts	with	Customers

In	 May	 2014,	 the	 Financial	Accounting	 Standards	 Board	 ("FASB")	 issued	ASU	 2014-09,	 "Revenue	 from	 Contracts	 with	 Customers	 (Topic	 606),"	 which supersedes	the	revenue	recognition	requirements	in	"Revenue	Recognition	(Topic	605)"	and	Subtopic	985-605	"Software	-	Revenue	Recognition."	Topic	605	and Subtopic	985-605	are	collectively	referred	to	as	"Topic	605"	or	"prior	GAAP."	Under	Topic	606,	revenue	is	recognized	when	a	customer	obtains	control	of	promised goods	or	services	in	an	amount	that	reflects	the	consideration	to	which	the	entity	expects	to	be	entitled	in	exchange	for	those	goods	or	services.	In	addition,	Topic	606 requires	enhanced	disclosures,	including	disclosure	of	the	nature,	amount,	timing,	and	uncertainty	of	revenue	and	cash	flows	arising	from	contracts	with	customers. The	FASB	issued	several	amendments	to	the	standard,	including	updates	on	accounting	for	licenses	of	IP	and	identifying	performance	obligations.

Cadence	adopted	Topic	606	on	the	first	day	of	fiscal	2018	using	the	modified	retrospective	transition	method.	Under	this	method,	Cadence	evaluated	contracts that	were	in	effect	at	the	beginning	of	fiscal	2018	as	if	those	contracts	had	been	accounted	for	under	Topic	606.	Cadence	did	not	evaluate	individual	modifications	for those	periods	prior	to	the	adoption	date,	but	the	aggregate	effect	of	all	modifications	as	of	the	adoption	date	and	such	effects	are	provided	below.	Under	the	modified retrospective	transition	approach,	periods	prior	to	the	adoption	date	were	not	adjusted	and	continue	to	be	reported	in	accordance	with	historical,	pre-Topic	606 accounting.	A	cumulative	catch	up	adjustment	was	recorded	to	beginning	retained	earnings	to	reflect	the	impact	of	all	existing	arrangements	under	Topic	606.

# The	most	significant	impacts	of	the	adoption	of	Topic	606	were	as	follows:

•At	the	adoption	date,	Cadence	increased	retained	earnings	by	$85.4	million	for	uncompleted	contracts	for	which	revenue	will	not	be	recognized	in	future periods	under	Topic	606.	This	revenue	would	otherwise	have	been	recognized	in	prior	periods,	so	the	beginning	balance	of	unbilled	receivables increased	by	$47.3	million,	contract	assets	were	established	at	$4.0	million,	deferred	revenue	decreased	by	$57.4	million	and	accrued	liabilities increased	by	$23.3	million;

•Revenue	generated	under	Topic	606	was	slightly	lower	than	revenue	would	have	been	under	Topic	605	in	fiscal	2018.	This	is	the	result	of	a combination	of	factors,	including	the	elimination	of	deferred	revenue	that,	under	Topic	605,	would	have	continued	to	be	recognized	into	revenue	in	2018 and	beyond,	as	well	as	changes	in	the	timing	of	revenue	recognition	as	discussed	below.	The	actual	effects	on	revenue	recognized	for	fiscal	2018	are reported	in	the	table	below;	and

•Cadence	capitalized	$27.3	million	of	incremental	sales	commission	costs	at	the	adoption	date	directly	related	to	obtaining	customer	contracts	and	is amortizing	these	costs	over	the	life	of	the	contract.

Notwithstanding	the	shift	from	recognizing	revenue	under	Topic	605	to	doing	so	under	Topic	606,	Cadence	continues	to	recognize	revenue	over	time	for	its time-based	software	arrangements,	which	generate	a	majority	of	total	revenue.	Under	Topic	605,	Cadence	could	not	establish	vendor	specific	objective	evidence ("VSOE")	for	its	undelivered	elements	and	therefore	was	not	able	to	separate	its	delivered	software	licenses	from	those	undelivered	elements,	such	as	technical support	and	unspecified	(when-and-if	available)	update	rights.	Topic	606	no	longer	requires	separability	of	promised	goods	or	services,	such	as	software	licenses, technical	support,	or	unspecified	update	rights	on	the	basis	of	VSOE.	Rather,	Topic	606	requires	Cadence	to	identify	the	performance	obligations	in	the	contract	— that	is,	those	promised	goods	and	services	(or	bundles	of	promised	goods	or	services)	that	are	distinct	—	and	allocate	the	transaction	price	of	the	contract	to	those performance	obligations	on	the	basis	of	stand-alone	selling	prices	("SSPs").	The	transaction	price	allocated	to	each	performance	obligation	is	then	recognized	either at	 a	 point	 in	 time	 or	 over	 time	 using	 an	 appropriate	 measure	 of	 progress.	 Under	Topic	 606,	 Cadence	 has	 concluded	 that	 its	 software	 licenses	 in	 time-based arrangements	are	not	distinct	from	each	other,	or	from	its	obligation	to	provide	unspecified	software	updates	to	the	licensed	software	throughout	the	license	term, because	the	multiple	software	licenses	represent	inputs	to	a	single,	combined	offering,	and	timely,	relevant	software	updates	are	integral	to	maintaining	the	utility	of the	software	licenses.	Cadence	will	recognize	revenue	for	the	combined	performance	obligation,	which	also	includes	the	coterminous	technical	support	provided	to the	customer,	ratably	over	the	term	of	the	arrangement.

In	contrast	to	the	similar	accounting	result	for	time-based	software	arrangements,	revenue	related	to	certain	IP	licenses	are	now	recognized	upon	delivery	under Topic	606,	as	opposed	to	over	time	under	Topic	605,	because	the	requirement	to	have	VSOE	for	undelivered	elements	under	prior	GAAP	is	eliminated	under	Topic 606.	Certain	perpetual	software	licenses	are	now	recognized	over	time	under	Topic	606,	as	opposed	to	upon	delivery	under	Topic	605,	because	these	software licenses	and	the	when-and-if	available	updates	provided	to	the	customer	are	accounted	for	together	as	one	performance	obligation	and	recognized	over	time.

More	judgments	and	estimates	are	required	under	Topic	606	than	were	required	under	Topic	605.	Due	to	the	complexity	of	certain	contracts,	the	actual	revenue recognition	treatment	required	under	Topic	606	for	the	Company's	arrangements	may	be	dependent	on	contract-specific	terms	and	may	vary	in	some	instances.

The	timing	of	revenue	recognition	for	hardware	and	professional	services	remained	substantially	unchanged.	Cadence's	overall	mix	of	revenue	recognized	at	a point	in	time	versus	over	time	remained	relatively	constant,	with	approximately	90%	recognizable	over	time.

The	following	table	summarizes	the	effects	of	adopting	Topic	606	on	Cadence's	consolidated	balance	sheet	as	of	December	29,	2018:

| Receivables,	net | $297,082 | $(12,099) | $284,983 |
| :--- | :--- | :--- | :--- |
| Prepaid\texpenses\tand\tother | 92,550 | (10,055) | 82,495 |
| Long-term\treceivables | 5,972 | (623) | 5,349 |
| Other\tassets | 371,231 | (17,013) | 354,218 |
| Accounts\tpayable\tand\taccrued\tliabilities* | 256,526 | (17,438) | 239,088 |
| Current\tportion\tof\tdeferred\trevenue | 352,456 | 45,119 | 397,575 |
| Long-term\tportion\tof\tdeferred\trevenue | 48,718 | 17,637 | 66,355 |
| Retained\tearnings | 772,709 | (86,120) | 686,589 |
| Accumulated\tother\tcomprehensive\tloss | (24,780) | 1,012 | (23,768) |

*	Cadence	has	certain	arrangements	under	which	consideration	is	received	from	customers	prior	to	identifying	the	specific	goods	or	services	to	be	delivered	under	the	contract. Cadence	records	an	accrued	liability	on	a	contract-by-contract	basis	at	the	end	of	each	reporting	period	for	cash	consideration	received.

# The	following	table	summarizes	the	effects	of	adopting	Topic	606	on	Cadence's	consolidated	income	statement	for	fiscal	2018:

|  | As	reported	under<br>Topic	606 | Adjustments | Balances	under	Prior<br>GAAP |
| :--- | :--- | :--- | :--- |
|  |  | (In\tthousands,\texcept\tper\tshare\tamounts) |  |
| Product\tand\tmaintenance\trevenue | $1,997,887 | $1,031 | $1,998,918 |
| Services\trevenue | 140,135 | 6,643 | 146,778 |
| Cost\tof\tproduct\tand\tmaintenance | 173,011 | 571 | 173,582 |
| Marketing\tand\tsales\texpense | 439,669 | 3,947 | 443,616 |
| Provision\tfor\tincome\ttaxes | 30,613 | (2,364) | 28,249 |
| Net\tincome | 345,777 | 5,520 | 351,297 |
| Net\tincome\tper\tshare\t-\tbasic | 1.26 | 0.02 | 1.28 |
| Net\tincome\tper\tshare\t-\tdiluted | 1.23 | 0.02 | 1.25 |

Cadence's	net	cash	provided	by	operating	activities	for	fiscal	2018	did	not	change	due	to	the	adoption	of	Topic	606.	The	following	table	summarizes	the	effects of	adopting	Topic	606	on	the	financial	statement	line	items	of	Cadence's	consolidated	statement	of	cash	flows	for	fiscal	2018:

| Net	income | $345,777 | $5,520 | $351,297 |
| :--- | :--- | :--- | :--- |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| Deferred\tincome\ttaxes | (11,676) | (2,213) | (13,889) |
| Changes\tin\toperating\tassets\tand\tliabilities: |  |  |  |
| Receivables | (87,083) | (28,226) | (115,309) |
| Prepaid\texpenses\tand\tother | (19,622) | 5,968 | (13,654) |
| Other\tassets | (16,077) | 3,461 | (12,616) |
| Accounts\tpayable\tand\taccrued\tliabilities | 1,553 | 10,100 | 11,653 |
| Deferred\trevenue | 100,696 | 5,390 | 106,086 |

# Financial	Instruments

In	January	2016,	the	FASB	issued	ASU	2016-01,	"Financial	Instruments—Overall	(Subtopic	825-10):	Recognition	and	Measurement	of	Financial	Assets	and Financial	Liabilities."	Cadence	adopted	this	standard	on	the	first	day	of	fiscal	2018,	modifying	its	accounting	and	required	disclosures	for	investments	in	equity securities,	other	than	those	accounted	for	using	the	equity	method	of	accounting.

Prior	to	the	adoption	of	the	updated	standard,	Cadence's	investment	in	marketable	equity	securities	was	classified	as	available-for-sale,	and	changes	in	the	fair value	of	the	underlying	securities	were	reported	in	accumulated	other	comprehensive	loss	in	the	consolidated	balance	sheets.	The	new	standard	eliminated	the available-for-sale	classification	for	equity	securities	and	requires	changes	in	the	fair	value	of	Cadence's	investment	to	be	recognized	through	net	income	for	fiscal 2018	and	each	subsequent	reporting	period.	Upon	adoption,	Cadence	recorded	a	cumulative-effect	adjustment	to	increase	retained	earnings	in	the	amount	of	$2.6 million	related	to	unrealized	holding	gains	previously	recorded	in	accumulated	other	comprehensive	loss.

Cadence's	 non-marketable	 investments	 in	 equity	 securities	 consist	 of	 investments	 in	 privately-held	 companies	 and	 are	 presented	 as	 other	 assets	 in	 the consolidated	balance	sheets.	Prior	to	the	adoption	of	the	updated	standard,	non-marketable	investments	that	were	not	accounted	for	using	the	equity	method	of accounting	were	recorded	at	cost,	less	impairment.	The	new	standard	eliminated	the	cost	method	of	accounting	for	investments	in	equity	securities	that	do	not	have readily	determinable	fair	values	and	permits	the	election	of	a	measurement	alternative	that	allows	such	securities	to	be	recorded	at	cost,	less	impairment,	if	any,	plus or	minus	changes	resulting	from	observable	price	changes	in	market-based	transactions	for	an	identical	or	similar	investment	of	the	same	issuer.	Cadence	adopted the	provisions	of	the	new	standard	applicable	to	its	investments	in	equity	securities	without	a	readily	determinable	fair	value	on	a	prospective	basis	and	elected	the measurement	alternative	for	non-marketable	investments	previously	accounted	for	under	the	cost	method	of	accounting.	Gains	and	losses	resulting	from	observable price	changes	or	 impairment	will	be	recorded	 through	net	 income	 in	 the	period	 incurred.	For	additional	 information	regarding	Cadence's	 investments	 in	equity securities,	see	Note	7	to	the	consolidated	financial	statements.

# Income	Tax

In	October	2016,	the	FASB	issued	ASU	2016-16,	"Income	taxes	(Topic	740):	Intra-entity	Transfers	of	Assets	Other	Than	Inventory."	The	new	guidance	requires the	recognition	of	the	income	tax	consequences	of	an	intra-entity	asset	transfer	when	the	transfer	occurs	rather	than	when	the	asset	has	been	sold	to	a	third	party. For	intra-entity	transfers	of	inventory,	the	income	tax	effects	will	continue	to	be	deferred	until	the	inventory	has	been	sold	to	a	third	party.	Cadence	adopted	the	new standard	on	 the	 first	day	of	 fiscal	2018	using	 the	modified	retrospective	 transition	approach	and	recorded	a	cumulative-effect	adjustment	 to	decrease	retained earnings	in	the	amount	of	$8.3	million.	The	cumulative-effect	adjustment	includes	the	write-off	of	income	tax	consequences	deferred	from	prior	intra-entity	transfers involving	assets	other	than	inventory	and	new	deferred	tax	assets	for	amounts	not	recognized	under	U.S.	GAAP.	We	anticipate	the	potential	for	increased	volatility	in future	effective	tax	rates	from	the	adoption	of	this	guidance.

In	May	2017,	the	FASB	issued	ASU	2017-09,	"Compensation—Stock	Compensation	(Topic	718):	Scope	of	Modification	Accounting,"	that	provides	guidance about	which	changes	to	the	terms	or	conditions	of	a	share-based	payment	award	require	an	entity	to	apply	modification	accounting.	Cadence	adopted	the	standard	on the	first	day	of	fiscal	2018.	The	adoption	of	this	standard	did	not	impact	Cadence's	consolidated	financial	statements	or	the	related	disclosures.

# Cumulative	Effect	Adjustments	to	Retained	Earnings

The	following	table	presents	the	cumulative	effect	adjustments,	net	of	income	tax	effects,	to	beginning	retained	earnings	for	new	accounting	standards	adopted by	Cadence	on	the	first	day	of	fiscal	2018:

| by	Cadence	on	the	first	day	of	fiscal	2018: |  |
| :--- | :--- |
|  | Retained\tEarnings |
|  | (In\tthousands) |
| Balance,\tDecember\t30,\t2017,\tas\tpreviously\treported | $341,003 |
| Cumulative\teffect\tadjustment\tfrom\tthe\tadoption\tof\tnew\taccounting\tstandards: |  |
| Revenue\tfrom\tContracts\twith\tCustomers\t(Topic\t606)* | 91,640 |
| Financial\tInstruments—Overall\t(Subtopic\t825-10):\tRecognition\tand\tMeasurement\tof\tFinancial\tAssets\tand\tFinancial\tLiabilities | 2,638 |
| Income\ttaxes\t(Topic\t740):\tIntra-entity\tTransfers\tof\tAssets\tOther\tThan\tInventory | (8,349) |
| Balance,\tDecember\t30,\t2017,\tas\tadjusted | 426,932 |
| Net\tIncome | 345,777 |
| Balance,\tDecember\t29,\t2018 | $772,709 |

*	The	cumulative	effect	adjustment	from	the	adoption	of	Revenue	from	Contracts	with	Customers	(Topic	606)	is	presented	net	of	the	related	income	tax	effect	of	$17.5	million.

# New	Accounting	Standards	Not	Yet	Adopted

In	February	2016,	the	FASB	issued	ASU	2016-02,	"Leases	(Topic	842),"	requiring,	among	other	things,	the	recognition	of	lease	liabilities	and	corresponding right-of-use	assets	on	the	balance	sheet	by	lessees	for	all	leases	with	a	term	longer	than	12	months.	The	new	standard	is	effective	for	Cadence	in	the	first	quarter	of fiscal	2019.	A	modified	retrospective	approach	is	required,	applying	the	new	standard	to	leases	existing	as	of	the	date	of	initial	application.	An	entity	may	choose	to apply	the	standard	as	of	either	its	effective	date	or	the	beginning	of	the	earliest	comparative	period	presented	in	the	financial	statements.	Cadence	adopted	the	new standard	on	December	30,	2018,	the	first	day	of	fiscal	2019,	and	used	the	effective	date	as	the	date	of	initial	application.	Consequently,	financial	information	will	not be	updated	and	the	disclosures	required	under	the	new	standard	will	not	be	provided	for	dates	and	periods	prior	to	the	first	quarter	of	fiscal	2019.	Cadence	elected certain	practical	expedients	permitted	under	the	transition	guidance	within	the	new	standard,	which	among	other	things,	allowed	Cadence	to	carry	forward	its	prior conclusions	about	lease	identification	and	classification.

Cadence	estimates	the	key	change	upon	adoption	of	the	standard	will	result	in	balance	sheet	recognition	of	additional	lease	assets	and	lease	liabilities	ranging from	$75	to	$85	million	as	of	December	30,	2018,	which	is	based	on	the	present	value	of	committed	lease	payments.	Cadence	does	not	expect	the	adoption	of	the new	standard	to	have	a	material	impact	on	the	recognition,	measurement	or	presentation	of	lease	expenses	within	its	consolidated	income	statements,	consolidated statements	of	comprehensive	income	or	consolidated	statements	of	cash	flows.

The	new	standard	also	provides	updated	guidance	for	lessor	accounting;	however,	Cadence	does	not	expect	the	new	standard	to	have	a	material	effect	on	its consolidated	financial	statements	for	arrangements	in	which	it	is	the	lessor.

# Foreign	Operations

Cadence	transacts	business	in	various	foreign	currencies.	The	United	States	dollar	is	the	functional	currency	of	Cadence's	consolidated	entities	operating	in	the United	States	and	certain	of	its	consolidated	subsidiaries	operating	outside	the	United	States.	The	functional	currency	for	Cadence's	other	consolidated	entities operating	outside	of	the	United	States	is	generally	the	country's	local	currency.

Cadence	translates	the	financial	statements	of	consolidated	entities	whose	functional	currency	is	not	the	United	States	dollar	into	United	States	dollars.	Cadence translates	assets	and	liabilities	at	the	exchange	rate	in	effect	as	of	the	financial	statement	date	and	translates	income	statement	accounts	using	an	average	exchange rate	for	the	period.	Cadence	includes	adjustments	from	translating	assets	and	liabilities	into	United	States	dollars,	and	the	effect	of	exchange	rate	changes	on intercompany	transactions	of	a	long-term	investment	nature	in	stockholders'	equity	as	a	component	of	accumulated	other	comprehensive	income.	Cadence	reports gains	and	losses	from	foreign	exchange	rate	changes	related	to	intercompany	receivables	and	payables	that	are	not	of	a	long-term	investment	nature,	as	well	as gains	and	losses	from	foreign	currency	transactions	of	a	monetary	nature	in	other	income,	net,	in	the	consolidated	income	statements.

# Concentrations	of	Credit	Risk

Financial	instruments,	including	derivative	financial	instruments,	that	may	potentially	subject	Cadence	to	concentrations	of	credit	risk,	consist	principally	of	cash and	cash	equivalents,	accounts	receivable,	investments	and	forward	contracts.	Credit	exposure	related	to	Cadence's	foreign	currency	forward	contracts	is	limited	to the	realized	and	unrealized	gains	on	these	contracts.

Cadence	considers	all	highly	liquid	investments	with	original	maturities	of	three	months	or	less	on	the	date	of	purchase	to	be	cash	equivalents.	Book	overdraft balances	are	recorded	in	accounts	payable	and	accrued	liabilities	in	the	consolidated	balance	sheets	and	are	reported	as	a	component	of	cash	flows	from	financing activities	in	the	consolidated	statement	of	cash	flows.

# Receivables

Cadence's	receivables,	net	 includes	 invoiced	accounts	receivable	and	 the	current	portion	of	unbilled	receivables.	Unbilled	receivables	represent	amounts Cadence	has	recorded	as	revenue	for	which	payments	from	a	customer	are	due	over	time	and	Cadence	has	an	unconditional	right	to	the	payment.	Cadence's accounts	receivable	and	unbilled	receivables	were	initially	recorded	at	the	transaction	value.	Cadence's	long-term	receivables	balance	includes	receivable	balances	to be	invoiced	more	than	one	year	after	each	balance	sheet	date.

# Allowances	for	Doubtful	Accounts

Each	fiscal	quarter,	Cadence	assesses	its	ability	to	collect	outstanding	receivables,	and	provides	allowances	for	a	portion	of	its	receivables	when	collection	is	not probable.	Cadence	analyzes	the	creditworthiness	of	its	customers,	historical	experience,	changes	in	customer	demand	and	the	overall	economic	climate	in	the industries	that	Cadence	serves.	Provisions	are	made	based	upon	a	specific	review	of	customer	receivables	and	are	recorded	in	operating	expenses.

# Inventories

Inventories	are	stated	at	the	lower	of	cost	or	net	realizable	value.	Cadence's	inventories	include	high	technology	parts	and	components	for	complex	emulation and	prototyping	hardware	systems.	These	parts	and	components	are	specialized	in	nature	and	may	be	subject	to	rapid	technological	obsolescence.	While	Cadence has	programs	to	minimize	the	required	inventories	on	hand	and	considers	technological	obsolescence	when	estimating	required	reserves	to	reduce	recorded	amounts to	market	values,	it	is	reasonably	possible	that	such	estimates	could	change	in	the	near	term.	Cadence's	policy	is	to	reserve	for	inventory	in	excess	of	12-month demand	or	for	other	known	obsolescence	or	realization	issues.

# Property,	Plant	and	Equipment

Property,	plant	and	equipment	is	stated	at	historical	cost.	Depreciation	and	amortization	are	generally	provided	over	the	estimated	useful	lives,	using	the straight-line	method,	as	follows:

Cadence	 capitalizes	 certain	 costs	 of	 software	 developed	 for	 internal	 use.	 Capitalization	 of	 software	 developed	 for	 internal	 use	 begins	 at	 the	 application development	phase	of	the	project.	Amortization	begins	when	the	computer	software	is	substantially	complete	and	ready	for	its	intended	use.	Amortization	is	recorded on	a	straight-line	basis	over	the	estimated	useful	life.	Cadence	capitalized	costs	of	software	developed	for	internal	use	of	$3.6	million,	$2.2	million,	and	$3.5	million during	fiscal	2018,	2017	and	2016,	respectively.

Cadence	recorded	depreciation	and	amortization	expense	of	$60.4	million,	$52.9	million	and	$52.7	million	during	fiscal	2018,	2017	 and	2016,	respectively,	for property,	plant	and	equipment.

# Software	Development	Costs

Software	development	costs	are	capitalized	beginning	when	a	product's	technological	feasibility	has	been	established	by	completion	of	a	working	model	of	the product	and	amortization	begins	when	a	product	is	available	for	general	release	to	customers.	The	period	between	the	achievement	of	technological	feasibility	and	the general	release	of	Cadence's	products	has	typically	been	of	short	duration.	Costs	incurred	during	fiscal	2018,	2017	and	2016	were	not	material.

# Deferred	Sales	Commissions

Cadence	records	an	asset	for	the	incremental	costs	of	obtaining	a	contract	with	a	customer,	including	direct	sales	commissions	that	are	earned	upon	execution of	the	contract.	Cadence	uses	the	portfolio	method	to	recognize	the	amortization	expense	related	to	these	capitalized	costs	related	to	initial	contracts	and	renewals and	such	expense	is	recognized	over	a	period	associated	with	the	revenue	of	the	related	portfolio,	which	is	generally	two	to	three	years	for	Cadence's	software arrangements	and	upon	delivery	for	its	hardware	and	IP	arrangements.	Incremental	costs	related	to	initial	contracts	and	renewals	are	amortized	over	the	period	of	the arrangement	in	each	case	because	Cadence	pays	the	same	commission	rate	for	both	new	contracts	and	renewals.	Deferred	sales	commissions	are	tested	for impairment	on	an	ongoing	basis	when	events	or	changes	in	circumstances	indicate	that	the	carrying	amount	may	not	be	recoverable.		An	impairment	is	recognized	to the	extent	that	the	amount	of	deferred	sales	commission	exceeds	the	remaining	expected	gross	margin	(remaining	revenue	less	remaining	direct	costs)	on	the	goods and	services	to	which	the	deferred	sales	commission	relates.	Total	capitalized	costs	as	of	December	29,	2018	were	$31.2	million	and	are	included	in	other	assets	in Cadence's	 consolidated	 balance	 sheet.	Amortization	 of	 these	 assets	 during	 fiscal	 2018	 was	$26.5	million	 and	 is	 included	 in	 sales	 and	 marketing	 expense	 in Cadence's	consolidated	income	statement.

# Goodwill

Cadence	conducts	a	goodwill	impairment	analysis	annually	and	as	necessary	if	changes	in	facts	and	circumstances	indicate	that	the	fair	value	of	Cadence's single	reporting	unit	may	be	less	than	its	carrying	amount.	Cadence's	goodwill	impairment	test	consists	of	two	steps.	The	first	step	requires	that	Cadence	compare the	estimated	fair	value	of	its	single	reporting	unit	to	the	carrying	value	of	the	reporting	unit's	net	assets,	including	goodwill.	If	the	fair	value	of	the	reporting	unit	is greater	than	the	carrying	value	of	its	net	assets,	goodwill	is	not	considered	to	be	impaired	and	no	further	testing	is	required.	If	the	fair	value	of	the	reporting	unit	is	less than	the	carrying	value	of	its	net	assets,	Cadence	would	be	required	to	complete	the	second	step	of	the	test	by	analyzing	the	fair	value	of	its	goodwill.	If	the	carrying value	of	the	goodwill	exceeds	its	fair	value,	an	impairment	charge	is	recorded.

# Long-Lived	Assets,	Including	Acquired	Intangibles

Cadence's	long-lived	assets	consist	of	property,	plant	and	equipment	and	acquired	intangibles.	Acquired	intangibles	with	definite	lives	are	amortized	on	a straight-line	basis	over	the	estimated	economic	life	of	the	underlying	products	and	technologies,	which	range	from	two	to	fourteen	years.	Acquired	intangibles	with indefinite	lives,	or	in-process	technology,	consists	of	projects	that	had	not	reached	technological	feasibility	by	the	date	of	acquisition.	Upon	completion	of	the	project, the	assets	are	amortized	over	their	estimated	useful	lives.	If	the	project	is	abandoned	rather	than	completed,	the	asset	is	written	off.	In-process	technology	is	tested for	impairment	annually	and	as	necessary	if	changes	in	facts	and	circumstances	indicate	that	the	assets	might	be	impaired.

Cadence	reviews	its	long-lived	assets,	including	acquired	intangibles,	for	impairment	whenever	events	or	changes	in	circumstances	indicate	that	the	carrying amount	of	a	long-lived	asset	or	asset	group	may	not	be	recoverable.	Recoverability	of	an	asset	or	asset	group	is	measured	by	comparison	of	its	carrying	amount	to the	expected	future	undiscounted	cash	flows	that	the	asset	or	asset	group	is	expected	to	generate.	If	it	is	determined	that	the	carrying	amount	of	an	asset	group	is	not recoverable,	an	impairment	loss	is	recorded	in	the	amount	by	which	the	carrying	amount	of	the	asset	or	asset	group	exceeds	its	fair	value.

# Investments	in	Equity	Securities

Cadence's	investments	in	marketable	equity	securities	are	carried	at	fair	value	as	a	component	of	prepaid	expenses	and	other	in	the	consolidated	balance sheets.	Cadence	records	realized	and	unrealized	holding	gains	or	losses	as	part	of	other	income,	net	in	the	consolidated	income	statements.

Cadence's	non-marketable	investments	include	its	investments	in	privately-held	companies.	These	investments	are	initially	recorded	at	cost	and	are	included	in other	assets	in	the	consolidated	balance	sheets.	Cadence	accounts	for	these	investments	using	the	measurement	alternative	when	the	fair	value	of	the	investment	is not	readily	determinable	and	Cadence	does	not	have	the	ability	to	exercise	significant	influence	or	the	equity	method	of	accounting	when	it	is	determined	that	Cadence has	the	ability	to	exercise	significant	influence.	For	investments	accounted	for	using	the	equity	method	of	accounting,	Cadence	records	its	proportionate	share	of	the investee's	income	or	loss,	net	of	the	effects	of	any	basis	differences,	to	other	income,	net	on	a	one-quarter	lag	in	Cadence's	consolidated	income	statements.

Cadence	 reviews	 its	 non-marketable	 investments	 on	 a	 regular	 basis	 to	 determine	 whether	 its	 investments	 in	 these	 companies	 are	 other-than-temporarily impaired.	Cadence	considers	investee	financial	performance	and	other	information	received	from	the	investee	companies,	as	well	as	any	other	available	estimates	of the	fair	value	of	the	investee	companies	in	its	review.	If	Cadence	determines	the	carrying	value	of	an	investment	exceeds	its	fair	value,	and	that	difference	is	other than	temporary,	Cadence	writes	down	the	value	of	the	investment	to	its	fair	value.	Cadence	records	investment	write-downs	in	other	income,	net,	in	the	consolidated income	statements.

# Derivative	Financial	Instruments

Cadence	enters	into	foreign	currency	forward	exchange	contracts	with	financial	institutions	to	protect	against	currency	exchange	risks	associated	with	existing assets	and	liabilities.	A	foreign	currency	forward	exchange	contract	acts	as	a	hedge	by	increasing	in	value	when	underlying	assets	decrease	in	value	or	underlying liabilities	increase	in	value	due	to	changes	in	foreign	exchange	rates.	Conversely,	a	foreign	currency	forward	exchange	contract	decreases	in	value	when	underlying assets	increase	in	value	or	underlying	liabilities	decrease	in	value	due	to	changes	in	foreign	exchange	rates.	The	forward	contracts	are	not	designated	as	accounting hedges	and,	therefore,	the	unrealized	gains	and	losses	are	recognized	in	other	income,	net,	in	advance	of	the	actual	foreign	currency	cash	flows.	The	fair	value	of these	forward	contracts	is	recorded	in	accrued	liabilities	or	in	other	current	assets.	These	forward	contracts	generally	have	maturities	of	90	days	or	less.

# Nonqualified	Deferred	Compensation	Trust

Executive	officers,	senior	management	and	members	of	Cadence's	Board	of	Directors	may	elect	to	defer	compensation	payable	to	them	under	Cadence's Nonqualified	Deferred	Compensation	Plan	("NQDC").	Deferred	compensation	payments	are	held	in	investment	accounts	and	the	values	of	the	accounts	are	adjusted each	quarter	based	on	the	fair	value	of	the	investments	held	in	the	NQDC.

The	selected	investments	held	in	the	NQDC	accounts	are	carried	at	fair	value,	with	the	unrealized	gains	and	losses	recognized	in	the	consolidated	income statements	as	other	income,	net.	These	securities	are	classified	in	other	assets	in	the	consolidated	balance	sheets	because	they	are	not	available	for	Cadence's	use in	its	operations.

Cadence's	obligation	with	respect	to	the	NQDC	trust	is	recorded	in	other	long-term	liabilities	on	the	consolidated	balance	sheets.	Increases	and	decreases	in the	NQDC	trust	liability	are	recorded	as	compensation	expense	in	the	consolidated	income	statements.

# Treasury	Stock

Cadence	generally	issues	shares	related	to	its	stock-based	compensation	plans	from	shares	held	in	treasury.	When	treasury	stock	is	reissued	at	an	amount higher	than	its	cost,	the	difference	is	recorded	as	a	component	of	capital	in	excess	of	par	in	the	consolidated	statements	of	stockholders'	equity.	When	treasury	stock is	reissued	at	an	amount	lower	than	its	cost,	the	difference	is	recorded	as	a	component	of	capital	in	excess	of	par	to	the	extent	that	gains	exist	to	offset	the	losses.	If there	are	no	accumulated	treasury	stock	gains	in	capital	in	excess	of	par,	the	losses	upon	reissuance	of	treasury	stock	are	recorded	as	a	component	of	retained earnings	in	the	consolidated	statements	of	stockholders'	equity.	There	were	no	losses	recorded	by	Cadence	on	the	reissuance	of	treasury	stock	during	fiscal	2018, 2017	or	2016.

Revenue	is	recognized	upon	transfer	of	control	of	promised	products	or	services	to	customers	in	an	amount	that	reflects	the	consideration	to	which	Cadence expects	to	be	entitled	in	exchange	for	promised	goods	or	services.	Cadence's	performance	obligations	are	satisfied	either	over	time	or	at	a	point	in	time.	Revenue from	 performance	 obligations	 that	 transferred	 to	 customers	 over	 time	 accounted	 for	 approximately	90%	 of	 Cadence's	 total	 revenue	 for	 the	 fiscal	 year	 ended December	29,	2018.

Product	and	maintenance	revenue	includes	Cadence's	licenses	of	time-based	and	perpetual	software,	sales	of	emulation	hardware,	licenses	of	per-use	IP,	and the	related	maintenance	on	these	licenses	and	sales.

Service	revenue	includes	revenue	received	for	performing	engineering	services	(which	are	generally	not	related	to	the	functionality	of	other	licensed	products), customized	IP	on	a	fixed	fee	basis,	and	sales	from	cloud-based	solutions	that	provide	customers	with	software	and	services	over	a	period	of	time.

Cadence	enters	into	contracts	that	can	include	various	combinations	of	licenses,	products	and	services,	some	of	which	are	distinct	and	are	accounted	for	as separate	performance	obligations.	For	contracts	with	multiple	performance	obligations,	Cadence	allocates	the	transaction	price	of	the	contract	to	each	performance obligation,	generally	on	a	relative	basis	using	its	standalone	selling	price.	The	stated	contract	value	is	generally	the	transaction	price	to	be	allocated	to	the	separate performance	obligations.	Revenue	is	recognized	net	of	any	taxes	collected	from	customers	that	are	subsequently	remitted	to	governmental	authorities.

# Software	Revenue	Recognition

Cadence's	time-based	license	arrangements	grant	customers	the	right	to	access	and	use	all	of	the	licensed	products	at	the	outset	of	an	arrangement	and updates	are	generally	made	available	throughout	the	entire	term	of	the	arrangement,	which	is	generally	two	to	three	years.	Cadence's	updates	provide	continued access	to	evolving	technology	as	customers'	designs	migrate	to	more	advanced	nodes	and	as	our	customers'	technological	requirements	evolve.	In	addition,	certain time-based	license	arrangements	include	remix	rights	and	unspecified	additional	products	that	become	commercially	available	during	the	term	of	the	agreement. Payments	are	generally	received	in	equal	or	near	equal	installments	over	the	term	of	the	agreement.

Multiple	software	licenses,	related	updates,	and	technical	support	in	these	time-based	arrangements	constitute	a	single,	combined	performance	obligation	and revenue	is	recognized	over	the	term	of	the	license,	commencing	upon	the	later	of	the	effective	date	of	the	arrangement	or	transfer	of	the	software	license.	Remix rights	are	not	an	additional	promised	good	or	service	in	the	contract,	and	where	unspecified	additional	software	product	rights	are	part	of	the	contract	with	the customer,	such	rights	are	accounted	for	as	part	of	the	single	performance	obligation	that	includes	the	licenses,	updates,	and	technical	support	because	such	rights are	provided	for	the	same	period	of	time	and	have	the	same	time-based	pattern	of	transfer	to	the	customer.

# Hardware	Revenue	Recognition

Cadence	generally	has	two	performance	obligations	in	arrangements	involving	the	sale	or	lease	of	hardware	products.	The	first	performance	obligation	is	to transfer	 the	 hardware	 product	 (which	 includes	 software	 integral	 to	 the	 functionality	 of	 the	 hardware	 product).	The	 second	 performance	 obligation	 is	 to	 provide maintenance	on	hardware	and	its	embedded	software,	which	includes	rights	to	technical	support,	hardware	repairs	and	software	updates	that	are	all	provided	over	the same	term	and	have	the	same	time-based	pattern	of	transfer	to	the	customer.	The	transaction	price	allocated	to	the	hardware	product	is	generally	recognized	as revenue	at	the	time	of	delivery	because	the	customer	obtains	control	of	the	product	at	that	point	in	time.	Cadence	has	concluded	that	control	generally	transfers	at	that point	in	time	because	the	customer	has	title	to	the	hardware,	physical	possession,	and	a	present	obligation	to	pay	for	the	hardware.	The	transaction	price	allocated	to maintenance	is	recognized	as	revenue	ratably	over	the	maintenance	term.	Payments	for	hardware	contracts	are	generally	received	upon	delivery	of	the	hardware product.	Shipping	and	handling	costs	are	considered	 fulfillment	costs	and	are	 included	 in	cost	of	product	and	maintenance	 in	Cadence's	consolidated	 income statements.

# IP	Revenue	Recognition

Cadence	generally	licenses	IP	under	nonexclusive	license	agreements	that	provide	usage	rights	for	specific	designs.	In	addition,	for	certain	of	Cadence's	IP license	agreements,	royalties	are	collected	as	customers	ship	their	own	products	that	incorporate	Cadence	IP.	These	arrangements	generally	have	two	performance obligations	—	transferring	the	licensed	IP	and	associated	maintenance,	which	includes	rights	to	technical	support	and	software	updates	that	are	all	provided	over	the maintenance	term	and	have	a	time-based	pattern	of	transfer	to	the	customer.	Revenue	allocated	to	the	IP	license	is	recognized	at	a	point	in	time	upon	the	later	of	the delivery	of	the	IP	or	the	beginning	of	the	license	period	and	revenue	allocated	to	the	maintenance	is	recognized	over	the	maintenance	term.	Royalties	are	recognized as	revenue	in	the	quarter	in	which	the	applicable	Cadence	customer	ships	its	products	that	incorporate	Cadence	IP.	Payments	for	IP	contracts	are	generally	received upon	delivery	of	the	IP.	Cadence	customizes	certain	IP	and	revenue	related	to	this	customization	is	recognized	as	services	revenue	as	described	below.

# Services	Revenue	Recognition

Revenue	from	service	contracts	is	recognized	over	time,	generally	using	costs	incurred	or	hours	expended	to	measure	progress.	Cadence	has	a	history	of accurately	estimating	project	status	and	the	costs	necessary	to	complete	projects.	A	number	of	internal	and	external	factors	can	affect	these	estimates,	including	labor rates,	utilization	and	efficiency	variances	and	specification	and	testing	requirement	changes.	Payments	for	services	are	generally	due	upon	milestones	in	the	contract or	upon	consumption	of	the	hourly	resources.

Cadence	recognizes	the	cost	of	awards	of	equity	instruments	granted	to	employees	in	exchange	for	their	services	as	stock-based	compensation	expense.	Stock- based	compensation	expense	is	measured	at	the	grant	date	based	on	the	value	of	the	award	and	is	recognized	as	expense	over	the	requisite	service	period,	which	is typically	the	vesting	period.	Cadence	recognizes	stock-based	compensation	expense	on	the	straight-line	method	for	awards	that	only	contain	a	service	condition	and on	the	graded-vesting	method	for	awards	that	contain	both	a	service	and	performance	condition.	Cadence	recognizes	the	impact	of	forfeitures	on	stock-based compensation	expense	as	they	occur.

The	fair	value	of	stock	options	and	purchase	rights	issued	under	Cadence's	Employee	Stock	Purchase	Plan	("ESPP")	are	calculated	using	the	Black-Scholes option	pricing	model.	The	computation	of	the	expected	volatility	assumption	used	for	new	awards	is	based	on	implied	volatility	when	the	remaining	maturities	of	the underlying	traded	options	are	at	least	one	year.	When	the	remaining	maturities	of	the	underlying	traded	options	are	less	than	one	year,	expected	volatility	is	based	on a	weighting	of	historical	and	implied	volatilities.	When	determining	the	expected	term,	Cadence	reviews	historical	employee	exercise	behavior	from	options	having similar	vesting	periods.	The	risk-free	interest	rate	for	the	period	within	the	expected	term	of	the	option	is	based	on	the	yield	of	United	States	Treasury	notes	for	the comparable	term	in	effect	at	the	time	of	grant.	The	expected	dividend	yield	used	in	the	calculation	is	zero	because	Cadence	has	not	historically	paid	and	currently does	not	expect	to	pay	dividends	in	the	foreseeable	future.

# Advertising

Cadence	expenses	the	costs	of	advertising	as	incurred.	Total	advertising	expense,	including	marketing	programs	and	events,	was	$7.6	million,	$7.4	million	and $8.4	million	during	fiscal	2018,	2017	and	2016,	respectively,	and	is	included	in	marketing	and	sales	in	the	consolidated	income	statements.

# Restructuring	Charges

Cadence	 records	 personnel-related	 restructuring	 charges	 with	 termination	 benefits	 when	 the	 costs	 are	 both	 probable	 and	 estimable.	 Cadence	 records personnel-related	restructuring	charges	with	non-customary	termination	benefits	when	the	plan	has	been	communicated	to	the	affected	employees.	Cadence	records facilities-related	restructuring	charges	in	the	period	in	which	the	affected	facilities	are	vacated.	In	connection	with	facilities-related	restructuring	plans,	Cadence	has made	a	number	of	estimates	and	assumptions	related	to	losses	on	excess	facilities	that	have	been	vacated	or	consolidated,	particularly	the	timing	of	subleases	and sublease	terms.	Closure	and	space	reduction	costs	included	in	the	restructuring	charges	include	payments	required	under	leases	less	any	applicable	estimated sublease	income	after	the	facilities	are	abandoned,	lease	buyout	costs	and	certain	contractual	costs	to	maintain	facilities	during	the	period	after	abandonment.

Cadence	records	estimated	provisions	for	termination	benefits	and	outplacement	costs	along	with	other	personnel-related	restructuring	costs,	long-term	asset impairments	related	to	abandoned	assets	and	other	costs	associated	with	the	restructuring	plan.	Cadence	regularly	evaluates	the	adequacy	of	its	lease	loss	accruals and	severance	and	related	benefits	accruals,	and	adjusts	 the	balances	based	on	actual	costs	 incurred	or	changes	 in	estimates	and	assumptions.	Subsequent adjustments	to	restructuring	accruals	are	classified	in	restructuring	and	other	charges	in	the	consolidated	income	statements.

Cadence	accounts	for	the	effect	of	income	taxes	in	its	consolidated	financial	statements	using	the	asset	and	liability	method.	This	process	involves	estimating actual	current	tax	liabilities	together	with	assessing	carryforwards	and	temporary	differences	resulting	from	differing	treatment	of	items,	such	as	depreciation,	for	tax and	accounting	purposes.	These	differences	result	in	deferred	tax	assets	and	liabilities,	measured	using	enacted	tax	rates	expected	to	apply	to	taxable	income	in	the years	when	those	temporary	differences	are	expected	to	be	recovered	or	settled.

Cadence	then	records	a	valuation	allowance	to	reduce	the	deferred	tax	assets	to	the	amount	that	Cadence	believes	is	more	likely	than	not	to	be	realized	based on	its	judgment	of	all	available	positive	and	negative	evidence.	The	weight	given	to	the	potential	effect	of	negative	and	positive	evidence	is	commensurate	with	the extent	to	which	the	strength	of	the	evidence	can	be	objectively	verified.	This	assessment,	which	is	completed	on	a	taxing	jurisdiction	basis,	takes	into	account	a number	of	types	of	evidence,	including	the	following:

•The	 nature	 and	 history	 of	 current	 or	 cumulative financial reporting income	 or losses;

•Sources	of	future	taxable	income;

•The	anticipated	reversal	or	expiration	dates	of	the	deferred	tax	assets; and

•Tax planning strategies.

Cadence	takes	a	two-step	approach	to	recognizing	and	measuring	the	financial	statement	benefit	of	uncertain	tax	positions.	The	first	step	is	to	evaluate	the	tax position	for	recognition	by	determining	whether	the	weight	of	available	evidence	indicates	that	it	is	more	likely	than	not	that	the	tax	position	will	be	sustained	on	audit, including	resolution	of	any	related	appeals	or	litigation	processes.	The	second	step	is	to	measure	the	tax	benefit	as	the	largest	amount	that	is	more	than	50%	likely	of being	realized	upon	settlement	of	the	audit.	Cadence	classifies	interest	and	penalties	on	unrecognized	tax	benefits	as	income	tax	expense	or	benefit.

For	additional	discussion	of	income	taxes,	see	Note	6	in	the	notes	to	the	consolidated	financial	statements.

# NOTE	3.	DEBT

Cadence's	outstanding	debt	as	of	December	29,	2018	and	December	30,	2017	was	as	follows:

|  | Principal | Unamortized<br>Discount | Carrying	Value | Principal | Unamortized<br>Discount | Carrying	Value |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Revolving\tCredit\tFacility | $100,000 | $— | $100,000 | $85,000 | $— | $85,000 |
| 2019\tTerm\tLoan | — | — | — | 300,000 | (226) | 299,774 |
| 2024\tNotes | 350,000 | (4,709) | 345,291 | 350,000 | (5,405) | 344,595 |
| Total\toutstanding\tdebt | $450,000 | $(4,709) | $445,291 | $735,000 | $(5,631) | $729,369 |

On	January	30,	2017,	Cadence	entered	into	a	five-year	senior	unsecured	revolving	credit	facility	with	a	group	of	lenders	led	by	JPMorgan	Chase	Bank,	N.A.,	as administrative	 agent.	 The	 credit	 facility	 provides	 for	 borrowings	 up	 to	$350.0	 million,	 with	 the	 right	 to	 request	 increased	 capacity	 up	 to	 an	 additional	$250.0 million	upon	the	receipt	of	lender	commitments,	for	total	maximum	borrowings	of	$600.0	million.	The	credit	facility	expires	on	January	28,	2022	and	has	no	subsidiary guarantors.	Any	outstanding	loans	drawn	under	the	credit	facility	are	due	at	maturity	on	January	28,	2022.	Outstanding	borrowings	may	be	paid	at	any	time	prior	to maturity.

Interest	accrues	on	borrowings	under	the	credit	facility	at	either	LIBOR	plus	a	margin	between	1.250%	and	1.875%	per	annum	or	at	the	base	rate	plus	a	margin between	0.25%	 and	0.875%	 per	 annum.	 As	 of	December	 29,	 2018,	 the	 interest	 rate	 on	 Cadence's	 credit	 facility	 was	4.07%.	 Interest	 is	 payable	 quarterly.	A commitment	fee	ranging	from	0.15%	to	0.30%	is	assessed	on	the	daily	average	undrawn	portion	of	revolving	commitments.

The	credit	facility	contains	customary	negative	covenants	that,	among	other	things,	restrict	Cadence's	ability	to	incur	additional	indebtedness,	grant	liens,	make certain	investments	(including	acquisitions),	dispose	of	certain	assets	and	make	certain	payments,	including	share	repurchases	and	dividends.	In	addition,	the	credit facility	contains	financial	covenants	that	require	Cadence	to	maintain	a	funded	debt	to	EBITDA	ratio	not	greater	than	3.00	to	1,	with	a	step	up	to	3.50	to	1	for	one	year following	an	acquisition	by	Cadence	of	at	least	$250.0	million	that	results	in	a	pro	forma	leverage	ratio	between	2.75	to	1	and	3.25	to	1.	As	of	December	29,	2018	and December	30,	2017,	Cadence	was	in	compliance	with	all	financial	covenants	associated	with	the	revolving	credit	facility.

In	January	2016,	Cadence	entered	into	a	$300.0	million	three-year	senior	unsecured	non-amortizing	term	loan	facility	due	on	January	28,	2019	(the	"2019	Term Loan")	with	a	group	of	lenders	led	by	JPMorgan	Chase	Bank,	N.A.,	as	administrative	agent.	In	July	2018,	Cadence	prepaid	the	outstanding	principal	amount	of	$300.0 million	and	all	accrued	interest.

In	October	2014,	Cadence	 issued	$350.0	million	 aggregate	 principal	 amount	 of	4.375%	Senior	Notes	due	October	15,	2024	(the	"2024	Notes").	Cadence received	net	proceeds	of	$342.4	million	from	the	issuance	of	the	2024	Notes,	net	of	a	discount	of	$1.4	million	and	issuance	costs	of	$6.2	million.	Both	the	discount	and issuance	costs	are	being	amortized	to	interest	expense	over	the	term	of	the	2024	Notes	using	the	effective	interest	method.	Interest	is	payable	in	cash	semi-annually in	April	and	October.	The	2024	Notes	are	unsecured	and	rank	equal	in	right	of	payment	to	all	of	Cadence's	existing	and	future	senior	indebtedness.	The	carrying	value of	the	2024	Notes	approximates	the	estimated	fair	value	as	of	December	29,	2018.

Cadence	may	redeem	the	2024	Notes,	in	whole	or	in	part,	at	a	redemption	price	equal	to	the	greater	of	(a)	100%	of	the	principal	amount	of	the	notes	to	be redeemed	and	(b)	the	sum	of	the	present	values	of	the	remaining	scheduled	payments	of	principal	and	interest,	plus	any	accrued	and	unpaid	interest,	as	more particularly	described	in	the	indenture	governing	the	2024	Notes.

The	indenture	governing	the	2024	Notes	includes	customary	representations,	warranties	and	restrictive	covenants,	including,	but	not	limited	to,	restrictions	on Cadence's	ability	to	grant	liens	on	assets,	enter	into	sale	and	lease-back	transactions,	or	merge,	consolidate	or	sell	assets,	and	also	includes	customary	events	of default.

# NOTE	4.	RECEIVABLES,	NET

Cadence's	current	and	long-term	receivables	balances	as	of	December	29,	2018	and	December	30,	2017	were	as	follows:

|  | December	29,<br>2018 | December	30,<br>2017 |
| :--- | :--- | :--- |
|  | (In\tthousands) |  |
| Accounts\treceivable | $164,223 | $119,325 |
| Unbilled\taccounts\treceivable | 136,795 | 71,101 |
| Long-term\treceivables | 5,972 | 12,239 |
| Total\treceivables | 306,990 | 202,665 |
| Less\tallowance\tfor\tdoubtful\taccounts | (3,936) | — |
| Total\treceivables,\tnet | $303,054 | $202,665 |

Cadence's	 customers	 are	 primarily	 concentrated	 within	 the	 semiconductor	 and	 electronics	 systems	 industries.	 As	 of	December	 29,	 2018,	one	 customer accounted	for	11%	of	Cadence's	total	receivables.	As	of	December	30,	2017,	one	customer	accounted	for	17%	of	Cadence's	total	receivables.

# Allowance	for	doubtful	accounts

Cadence's	provisions	for	losses	on	its	accounts	receivable	during	fiscal	2018,	2017	and	2016	were	as	follows:

|  | Balance	at	Beginning<br>of	Period | Charged	to	Costs<br>and	Expenses | Uncollectible<br>Accounts	Written	Off,<br>Net | Balance	at	End	of<br>Period |
| :--- | :--- | :--- | :--- | :--- |
| Year\tended\tDecember\t29,\t2018 | $— | $5,102 | $(1,166) | $3,936 |
| Year\tended\tDecember\t30,\t2017 | — | 2,623 | (2,623) | — |
| Year\tended\tDecember\t31,\t2016 | $— | $308 | $(308) | $— |

# NOTE	5.	REVENUE

Cadence	combines	its	products	and	technologies	into	five	product	groups	related	to	major	design	activities.	The	following	table	shows	the	percentage	of	product and	related	maintenance	revenue	contributed	by	each	of	Cadence's	five	product	groups	and	services	for	fiscal	2018,	2017	and	2016:

|  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| Functional\tVerification,\tincluding\tEmulation\tand\tPrototyping\tHardware | 24% | 22% | 25% |
| Digital\tIC\tDesign\tand\tSignoff | 29% | 29% | 29% |
| Custom\tIC\tDesign\tand\tSimulation | 26% | 27% | 25% |
| System\tInterconnect\tand\tAnalysis | 9% | 10% | 10% |
| IP | 12% | 12% | 11% |
| Total | 100% | 100% | 100% |

Revenue	by	product	group	fluctuates	from	period	to	period	based	on	demand	for	products	and	services,	and	Cadence's	available	resources	to	deliver	them. Certain	of	Cadence's	licensing	arrangements	allow	customers	the	ability	to	remix	among	software	products.	Cadence	also	has	arrangements	with	customers	that include	a	combination	of	products,	with	the	actual	product	selection	and	number	of	licensed	users	to	be	determined	at	a	later	date.	For	these	arrangements,	Cadence estimates	the	allocation	of	the	revenue	to	product	groups	based	upon	the	expected	usage	of	products.

# Significant	Judgments

Cadence's	contracts	with	customers	often	include	promises	to	transfer	to	a	customer	multiple	software	and/or	IP	licenses	and	services,	including	professional services,	technical	support	services,	and	rights	to	unspecified	updates.	Determining	whether	licenses	and	services	are	distinct	performance	obligations	that	should	be accounted	for	separately,	or	not	distinct	and	thus	accounted	for	together,	requires	significant	judgment.	In	some	arrangements,	such	as	most	of	Cadence's	IP	license arrangements,	 Cadence	 has	 concluded	 that	 the	 licenses	 and	 associated	 services	 are	 distinct	 from	 each	 other.	 In	 others,	 like	 Cadence's	 time-based	 software arrangements,	the	licenses	and	certain	services	are	not	distinct	from	each	other.	Cadence's	time-based	software	arrangements	include	multiple	software	licenses	and updates	to	the	licensed	software	products,	as	well	as	technical	support,	and	Cadence	has	concluded	that	these	promised	goods	and	services	are	a	single,	combined performance	obligation.

Judgment	is	required	to	determine	the	SSP	for	each	distinct	performance	obligation.	Cadence	rarely	licenses	or	sells	products	on	a	standalone	basis,	so Cadence	is	required	to	estimate	the	SSP	for	each	performance	obligation.	In	instances	where	the	SSP	is	not	directly	observable	because	Cadence	does	not	sell	the license,	 product	 or	 service	 separately,	 Cadence	 determines	 the	 SSP	 using	 information	 that	 maximizes	 the	 use	 of	 observable	 inputs	 and	 may	 include	 market conditions.	Cadence	typically	has	more	than	one	SSP	for	individual	performance	obligations	due	to	the	stratification	of	those	items	by	classes	of	customers	and circumstances.	In	these	instances,	Cadence	may	use	information	such	as	the	size	of	the	customer	and	geographic	region	of	the	customer	in	determining	the	SSP.

Revenue	is	recognized	over	time	for	Cadence's	combined	performance	obligations	that	include	software	licenses,	updates,	technical	support	and	maintenance that	are	separate	performance	obligations.	For	Cadence's	professional	services,	revenue	is	recognized	over	time,	generally	using	costs	incurred	or	hours	expended to	measure	progress.	Judgment	is	required	in	estimating	project	status	and	the	costs	necessary	to	complete	projects.	A	number	of	internal	and	external	factors	can affect	these	estimates,	including	labor	rates,	utilization	and	efficiency	variances	and	specification	and	testing	requirement	changes.	For	Cadence's	other	performance obligations	recognized	over	time,	revenue	is	generally	recognized	using	a	time-based	measure	of	progress	reflecting	generally	consistent	efforts	to	satisfy	those performance	obligations	throughout	the	arrangement	term.

If	a	group	of	agreements	are	so	closely	related	that	they	are,	in	effect,	part	of	a	single	arrangement,	such	agreements	are	deemed	to	be	one	arrangement	for revenue	 recognition	 purposes.	 Cadence	 exercises	 significant	 judgment	 to	 evaluate	 the	 relevant	 facts	 and	 circumstances	 in	 determining	 whether	 the	 separate agreements	should	be	accounted	for	separately	or	as,	in	substance,	a	single	arrangement.	Cadence's	judgments	about	whether	a	group	of	contracts	comprise	a single	arrangement	can	affect	the	allocation	of	consideration	to	the	distinct	performance	obligations,	which	could	have	an	effect	on	results	of	operations	for	the periods	involved.

Cadence	is	required	to	estimate	the	total	consideration	expected	to	be	received	from	contracts	with	customers.	In	limited	circumstances,	the	consideration expected	to	be	received	is	variable	based	on	the	specific	terms	of	the	contract	or	based	on	Cadence's	expectations	of	the	term	of	the	contract.	Generally,	Cadence has	not	experienced	significant	returns	or	refunds	to	customers.	These	estimates	require	significant	judgment	and	the	change	in	these	estimates	could	have	an	effect on	its	results	of	operations	during	the	periods	involved.

# Contract	Balances

The	timing	of	revenue	recognition	may	differ	from	the	timing	of	invoicing	to	customers,	and	these	timing	differences	result	in	receivables,	contract	assets,	or contract	liabilities	(deferred	revenue)	on	Cadence's	consolidated	balance	sheets.	For	certain	software,	hardware	and	IP	agreements	with	payment	plans,	Cadence records	an	unbilled	receivable	related	to	revenue	recognized	upon	transfer	of	control	because	it	has	an	unconditional	right	to	invoice	and	receive	payment	in	the future	related	to	those	transferred	products	or	services.	Cadence	records	a	contract	asset	when	revenue	is	recognized	prior	to	invoicing	and	Cadence	does	not	have the	 unconditional	 right	 to	 invoice	 or	 retains	 performance	 risk	 with	 respect	 to	 that	 performance	 obligation.	 Cadence	 records	 deferred	 revenue	 when	 revenue	 is recognized	subsequent	to	invoicing.	For	Cadence's	time-based	software	agreements,	customers	are	generally	invoiced	in	equal,	quarterly	amounts,	although	some customers	prefer	to	be	invoiced	in	single	or	annual	amounts.

The	contract	assets	indicated	below	are	presented	as	prepaid	expenses	and	other	in	the	consolidated	balance	sheet	and	primarily	relate	to	Cadence's	rights	to consideration	for	work	completed	but	not	billed	as	of	December	29,	2018	on	services	and	customized	IP	contracts.	The	contract	assets	are	transferred	to	receivables when	the	rights	become	unconditional,	usually	upon	completion	of	a	milestone.

Cadence's	contract	balances	as	of	December	29,	2018	and	December	30,	2017	were	as	follows:

|  | (In	thousands) |  |
| :--- | :--- | :--- |
| Contract\tassets | $10,055 | $3,964 |
| Deferred\trevenue | 401,174 | 336,060 |

During	 fiscal	 2018,	 Cadence	 recognized	 revenue	 of	$284.3	million	 that	 was	 included	 in	 the	 deferred	 revenue	 balance,	 as	 adjusted for	 Topic	 606,	 as	 of December	30,	2017.	All	other	activity	in	deferred	revenue	is	due	to	the	timing	of	invoices	in	relation	to	the	timing	of	revenue	as	described	above.

Revenue	allocated	 to	remaining	performance	obligations	represents	 the	 transaction	price	allocated	 to	 the	performance	obligations	 that	are	unsatisfied,	or partially	unsatisfied,	which	includes	unearned	revenue	and	amounts	that	will	be	invoiced	and	recognized	as	revenue	in	future	periods.	The	Company	has	elected	to exclude	the	future	royalty	payments	from	the	remaining	performance	obligations.	Contracted	but	unsatisfied	performance	obligations	were	approximately	$2.9	billion as	of	December	29,	2018,	of	which	Cadence	expects	to	recognize	approximately	60%	of	the	revenue	over	the	next	12	months	and	the	remainder	thereafter.

Payment	terms	and	conditions	vary	by	contract	type,	although	terms	generally	include	a	requirement	of	payment	within	30	to	60	days.	In	instances	where	the timing	of	revenue	recognition	differs	from	the	timing	of	invoicing,	Cadence	has	determined	that	its	contracts	generally	do	not	include	a	significant	financing	component. The	primary	purpose	of	invoicing	terms	is	to	provide	customers	with	simplified	and	predictable	ways	of	purchasing	Cadence's	products	and	services,	and	not	to facilitate	financing	arrangements.

During	fiscal	2018,	Cadence	recognized	revenue	of	$34.3	million	from	performance	obligations	satisfied	in	previous	periods.	These	amounts	represent	royalties earned	during	the	period	and	exclude	contracts	with	nonrefundable	prepaid	royalties.	Nonrefundable	prepaid	royalties	are	recognized	upon	delivery	of	the	IP	because Cadence's	right	to	the	consideration	is	not	contingent	upon	customers'	future	shipments.

# NOTE	6.	INCOME	TAXES

Cadence's	income	before	provision	for	income	taxes	included	income	from	the	United	States	and	from	foreign	subsidiaries	for	fiscal	2018,	2017	and	2016,	was as	follows:

| United	States | $58,963 | $81,619 | $84,694 |
| :--- | :--- | :--- | :--- |
| Foreign\tsubsidiaries | 317,427 | 233,427 | 152,459 |
| Total\tincome\tbefore\tprovision\tfor\tincome\ttaxes | $376,390 | $315,046 | $237,153 |

| Federal | $902 | $(2,193) | $4,839 |
| :--- | :--- | :--- | :--- |
| State\tand\tlocal | (1,270) | (2,097) | 50 |
| Foreign | 42,657 | 35,301 | 34,047 |
| Total\tcurrent | 42,289 | 31,011 | 38,936 |
| Deferred: |  |  |  |
| Federal | (10,324) | 76,494 | (5,291) |
| State\tand\tlocal | 886 | 5,571 | 6,006 |
| Foreign | (2,238) | (2,131) | (5,584) |
| Total\tdeferred | (11,676) | 79,934 | (4,869) |
| Total\tprovision\tfor\tincome\ttaxes | $30,613 | $110,945 | $34,067 |

The	provision	for	income	taxes	differs	from	the	amount	estimated	by	applying	the	United	States	statutory	federal	income	tax	rates	of	21%	to	income	before provision	for	income	taxes	for	fiscal	2018	and	of	35%	to	income	before	provision	for	income	taxes	for	fiscal	2017	and	2016	as	follows:

| Provision	computed	at	federal	statutory	income	tax	rate | $79,042 | $110,266 | $83,003 |
| :--- | :--- | :--- | :--- |
| State\tand\tlocal\tincome\ttax,\tnet\tof\tfederal\ttax\teffect | 15,540 | 5,867 | 5,534 |
| Foreign\tincome\ttax\trate\tdifferential | (37,031) | (65,296) | (36,098) |
| Deemed\trepatriation\ttransition\ttax | (1,409) | 67,188 | — |
| Remeasurement\tof\tU.S.\tdeferred\ttax\tassets\tand\tliabilities | — | 25,200 | — |
| U.S.\ttax\ton\tforeign\tentities | 28,846 | — | — |
| Stock-based\tcompensation | (13,539) | (24,455) | (13,132) |
| Change\tin\tdeferred\ttax\tasset\tvaluation\tallowance | 13,234 | 4,689 | 1,243 |
| Tax\tcredits | (72,815) | (26,789) | (39,765) |
| Repatriation\tof\tforeign\tearnings | — | — | 25,145 |
| Non-deductible\tresearch\tand\tdevelopment\texpense | 4,700 | — | — |
| Tax\teffects\tof\tintra-entity\ttransfer\tof\tassets | 79 | (8,450) | (7,661) |
| Domestic\tproduction\tactivity\tdeduction | — | (2,474) | (2,826) |
| Withholding\ttaxes | 11,535 | 11,225 | 9,870 |
| Tax\tsettlements,\tforeign | — | 3,086 | 5,620 |
| Increase\tin\tunrecognized\ttax\tbenefits\tnot\tincluded\tin\ttax\tsettlements | (1,545) | 4,054 | 614 |
| Other | 3,976 | 6,834 | 2,520 |
| Provision\tfor\tincome\ttaxes | $30,613 | $110,945 | $34,067 |
| Effective\ttax\trate | 8% | 35% | 14% |

The	Tax	Act	was	enacted	in	December	2017	and	included	several	provisions	that	affected	Cadence	significantly,	such	as	a	one-time,	mandatory	transition	tax on	its	previously	untaxed	foreign	earnings	and	a	reduction	in	the	federal	corporation	income	tax	rate	from	35%	to	21%	as	of	January	1,	2018,	among	others.

Cadence	is	required	to	recognize	the	effect	of	tax	law	changes	in	the	period	of	enactment,	which	in	the	case	of	the	Tax	Act	was	December	2017,	even	though the	effective	date	for	most	provisions	of	the	Tax	Act	was	January	1,	2018.	The	Securities	and	Exchange	Commission	issued	Staff	Accounting	Bulletin	No.	118	("SAB 118"),	which	allowed	registrants	to	record	reasonable	estimates	or	to	apply	tax	laws	in	effect	prior	to	the	enactment	of	the	Tax	Act	for	a	period	of	up	to	one	year	from the	date	of	enactment	when	it	did	not	have	the	necessary	information	available,	prepared	or	analyzed	in	reasonable	detail	to	complete	its	accounting	for	the	changes in	taxation.

Due	to	the	timing	of	the	enactment	and	the	complexity	involved	in	applying	the	provisions	of	the	Tax	Act,	Cadence	recorded	a	provisional	$67.2	million	expense related	to	the	one-time	transition	tax	during	fiscal	2017.	In	accordance	with	SAB	118,	this	amount	was	updated	to	$65.8	million	of	expense	during	fiscal	2018.	For purposes	of	SAB	118,	the	accounting	for	the	tax	effects	of	the	Tax	Act	is	complete.

Cadence	adopted	the	new	accounting	standard	related	to	stock-based	compensation	in	fiscal	2016,	which	required	the	excess	tax	benefits	or	deficiencies	to	be reflected	in	the	consolidated	income	statements	as	a	component	of	the	provision	for	income	taxes,	whereas	these	income	tax	effects	were	previously	recognized	in stockholders'	equity	in	the	consolidated	balance	sheets.	Total	excess	tax	benefits	recognized	in	the	provision	for	income	taxes	in	fiscal	2018,	fiscal	2017	and	fiscal 2016,	were	$21.3	million,	$32.0	million	and	$17.2	million,	respectively.

# The	components	of	deferred	tax	assets	and	liabilities	consisted	of	the	following	as	of	December	29,	2018	and	December	30,	2017:

| Tax	credit	carryforwards | $197,524 | $164,687 |
| :--- | :--- | :--- |
| Reserves\tand\taccruals | 43,522 | 42,357 |
| Intangible\tassets | 12,096 | 13,112 |
| Capitalized\tresearch\tand\tdevelopment\texpense\tfor\tincome\ttax\tpurposes | 6,975 | 10,621 |
| Operating\tloss\tcarryforwards | 15,347 | 20,650 |
| Deferred\tincome | 6,580 | 12,178 |
| Capital\tloss\tcarryforwards | 20,342 | 20,266 |
| Stock-based\tcompensation\tcosts | 15,329 | 15,782 |
| Depreciation\tand\tamortization | 8,759 | 7,665 |
| Investments | 2,900 | 3,201 |
| Total\tdeferred\ttax\tassets | 329,374 | 310,519 |
| Valuation\tallowance | (108,724) | (95,491) |
| Net\tdeferred\ttax\tassets | 220,650 | 215,028 |
| Deferred\ttax\tliabilities: |  |  |
| Intangible\tassets | (36,194) | (36,683) |
| Undistributed\tforeign\tearnings | (27,627) | (23,563) |
| Other | (2,497) | (2,730) |
| Total\tdeferred\ttax\tliabilities | (66,318) | (62,976) |
| Total\tnet\tdeferred\ttax\tassets | $154,332 | $152,052 |

During	fiscal	2018	and	2017,	Cadence	maintained	valuation	allowances	of	$108.7	million	and	$95.5	million,	respectively,	on	certain	federal,	state	and	foreign deferred	tax	assets	because	the	realization	of	these	deferred	tax	assets	require	future	income	of	a	specific	character	or	amount	that	Cadence	considered	uncertain. The	valuation	allowance	primarily	relates	to	the	following:

•Tax	credits	in	certain	states	that	are	accumulating	at	a	rate	greater	than	Cadence's	capacity	to	utilize	the	credits	and	tax	credits	in	certain	states	where	it is	likely	the	credits	will	expire	unused;

•Federal,	state	and	foreign	deferred	tax	assets	related	to	investments	and	capital	losses	that	can	only	be	utilized	against	gains	that	are	capital	in	nature; and

•Foreign	tax	credits	that	can	only	be	fully	utilized	if	Cadence	has	sufficient	income	of	a	specific	character	in	the

future.

As	of	December	29,	2018,	Cadence's	operating	loss	carryforwards	were	as	follows:

Amount Expiration	Periods

# As	of	December	29,	2018,	Cadence	had	tax	credit	carryforwards	of:

*Certain	of	Cadence's	foreign	tax	credits	have	yet	to	be	realized	and	as	a	result	do	not	yet	have	an	expiration	period.

# Examinations	by	Tax	Authorities

Taxing	authorities	regularly	examine	Cadence's	income	tax	returns.	As	of	December	29,	2018	Cadence's	earliest	tax	years	that	remain	open	to	examination	and the	assessment	of	additional	tax	include:

*	Includes	unrecognized	tax	benefits	of	tax	positions	recorded	in	connection	with	acquisitions

The	total	amounts	of	interest,	net	of	tax,	and	penalties	recognized	in	the	consolidated	income	statements	as	provision	for	income	taxes	for	fiscal	2018,	2017	and 2016	were	as	follows:

| Interest | $585 | $1,865 | $1,166 |
| :--- | :--- | :--- | :--- |
| Penalties | 342 | 218 | 3 |

The	total	amounts	of	gross	accrued	interest	and	penalties	recognized	in	the	consolidated	balance	sheets	as	of	December	29,	2018	 and	December	30,	2017 were	as	follows:

|  | December	29,<br>2018 | December	30,<br>2017 |
| :--- | :--- | :--- |
|  | (In\tthousands) |  |
| Interest | $2,699 | $2,511 |
| Penalties | 10 | 151 |

# NOTE	7.	INVESTMENTS

Cadence	has	a	portfolio	of	equity	investments	that	includes	investments	in	both	marketable	and	non-marketable	securities.	These	investments	primarily	consist of	cash	investments	in	companies	with	technologies	or	services	that	are	potentially	strategically	important	to	Cadence.

# Marketable	Investments

Cadence's	investment	in	marketable	equity	securities	consists	of	purchased	shares	of	a	publicly-held	company	and	is	included	in	prepaid	expense	and	other	in Cadence's	consolidated	balance	sheets.	During	fiscal	2018,	with	the	adoption	of	ASU	2016-01,	changes	in	the	fair	value	of	these	investments	were	recorded	to	other income,	 net	 in	 Cadence's	 consolidated	 income	 statements.	During	 fiscal	 2017	 and	 fiscal	 2016,	 changes	 in	 fair	 value	 of	 these	 investments	 were	 recorded	 to accumulated	other	comprehensive	loss	in	Cadence's	consolidated	balance	sheets.	For	additional	information	regarding	the	adoption	of	ASU	2016-01,	see	Note	2	to the	consolidated	financial	statements	under	the	heading	"Recently	Adopted	Accounting	Standards."

# Non-Marketable	investments

Cadence's	investments	in	non-marketable	equity	securities	generally	consist	of	stock,	convertible	debt	or	other	instruments	of	privately-held	entities	and	are included	in	other	assets	on	Cadence's	consolidated	balance	sheets.	For	investments	accounted	for	using	the	equity	method	of	accounting,	Cadence	records	its proportionate	share	of	income	or	loss,	net	of	the	effects	of	any	basis	differences,	to	other	income,	net	on	a	one-quarter	lag	in	Cadence's	consolidated	income statements.

In	December	2018,	Cadence	made	a	minority	investment	in	a	privately	held	company	for	approximately	$116	million.	The	investment	is	being	accounted	for using	the	equity	method	of	accounting.	Cadence's	investments	in	non-marketable	equity	securities	that	are	accounted	for	using	the	equity	method	of	accounting ranged	 from	 approximately	12%	 to	35%	equity	ownership	and	had	an	aggregate	carrying	value	of	$118.2	million	 and	$2.5	million	 as	 of	December	29,	2018	and December	30,	2017,	respectively.

Cadence	also	holds	other	non-marketable	investments	in	privately	held	companies	where	Cadence	does	not	have	the	ability	to	exercise	significant	influence	and the	fair	value	of	the	investments	is	not	readily	determinable.	These	investments	are	recorded	at	cost,	less	impairment,	if	any,	plus	or	minus	changes	resulting	from observable	price	changes	in	market-based	transactions	for	identical	or	similar	investments	of	the	same	issuer.	During	the	fiscal	year	ended	December	29,	2018,	there were	no	observable	price	changes	or	impairments	related	to	Cadence's	non-marketable	investments	in	equity	securities	without	a	readily	determinable	fair	value.	The carrying	value	of	these	investments	was	$0.5	million	as	of	December	29,	2018	and	December	30,	2017.

# NOTE	8.	ACQUISITIONS

During	fiscal	2017,	Cadence	completed	two	business	combinations	for	total	cash	consideration	of	$142.8	million,	after	taking	into	account	cash	acquired	of	$4.2 million.	The	 total	 purchase	 consideration	 was	 allocated	 to	 the	 assets	 acquired	 and	 liabilities	 assumed	 based	 on	 their	 respective	 estimated	 fair	 values	 on	 the acquisition	dates.	Cadence	recorded	a	total	of	$76.4	million	of	acquired	intangible	assets	(of	which	$71.5	million	represents	in-process	technology),	$90.2	million	of goodwill	and	$19.6	million	of	net	liabilities	consisting	primarily	of	deferred	tax	liabilities.	Cadence	will	also	make	payments	to	certain	employees,	subject	to	continued employment	and	other	performance-based	conditions,	through	the	fourth	quarter	of	fiscal	2020.

During	fiscal	2016,	Cadence	completed	two	business	combinations	for	total	cash	consideration	of	$42.4	million,	after	taking	into	account	cash	acquired	of	$1.8 million.	The	 total	 purchase	 consideration	 was	 allocated	 to	 the	 assets	 acquired	 and	 liabilities	 assumed	 based	 on	 their	 respective	 estimated	 fair	 values	 on	 the acquisition	dates.	Cadence	recorded	a	total	of	$23.6	million	of	goodwill,	$23.2	million	of	acquired	intangible	assets	and	$2.6	million	of	net	liabilities	consisting	primarily of	deferred	revenue.	Cadence	will	also	make	payments	to	certain	employees,	subject	to	continued	employment	and	other	conditions,	through	the	second	quarter	of fiscal	2019.

A	trust	for	the	benefit	of	the	children	of	Lip-Bu	Tan,	Cadence's	Chief	Executive	Officer	("CEO")	and	director,	owned	less	than	3%	of	nusemi	inc,	one	of	the companies	acquired	in	2017,	and	less	than	2%	of	Rocketick	Technologies	Ltd.,	one	of	the	companies	acquired	in	2016.	Mr.	Tan	and	his	wife	serve	as	co-trustees	of the	trust	and	disclaim	pecuniary	and	economic	interest	in	the	trust.	The	Board	of	Directors	of	Cadence	reviewed	the	transactions	and	concluded	that	it	was	in	the	best interests	of	Cadence	to	proceed	with	the	transactions.	Mr.	Tan	recused	himself	from	the	Board	of	Directors'	discussion	of	the	valuation	of	nusemi	inc	and	Rocketick Technologies	Ltd.	and	on	whether	to	proceed	with	the	transactions.

# Acquisition-related	Transaction	Costs

There	were	no	direct	transaction	costs	associated	with	acquisitions	during	fiscal	2018.	Transaction	costs	associated	with	acquisitions	were	$0.6	million	and	$1.1 million	during	fiscal	2017	and	2016,	respectively.	These	costs	consist	of	professional	fees	and	administrative	costs	and	were	expensed	as	incurred	in	Cadence's consolidated	income	statements.

# NOTE	9.	GOODWILL	AND	ACQUIRED	INTANGIBLES

The	changes	in	the	carrying	amount	of	goodwill	during	fiscal	2018	and	2017	were	as	follows:

|  | Gross	Carrying<br>Amount |
| :--- | :--- |
|  | (In\tthousands) |
| Balance\tas\tof\tDecember\t31,\t2016 | $572,764 |
| Goodwill\tresulting\tfrom\tacquisitions | 90,218 |
| Effect\tof\tforeign\tcurrency\ttranslation | 3,027 |
| Balance\tas\tof\tDecember\t30,\t2017 | 666,009 |
| Effect\tof\tforeign\tcurrency\ttranslation | (3,737) |
| Balance\tas\tof\tDecember\t29,\t2018 | $662,272 |

Cadence	completed	its	annual	goodwill	impairment	test	during	the	third	quarter	of	fiscal	2018	and	determined	that	the	fair	value	of	Cadence's	single	reporting unit	substantially	exceeded	the	carrying	amount	of	its	net	assets	and	that	no	impairment	existed.

# Acquired	Intangibles,	Net

Acquired	intangibles	as	of	December	29,	2018	were	as	follows,	excluding	intangibles	that	were	fully	amortized	as	of	December	30,	2017:

| Existing	technology | $330,500 | $(225,383) | $105,117 |
| :--- | :--- | :--- | :--- |
| Agreements\tand\trelationships | 146,426 | (100,211) | 46,215 |
| Tradenames,\ttrademarks\tand\tpatents | 10,718 | (8,093) | 2,625 |
| Total\tacquired\tintangibles\twith\tdefinite\tlives | 487,644 | (333,687) | 153,957 |
| In-process\ttechnology | 71,500 | — | 71,500 |
| Total\tacquired\tintangibles | $559,144 | $(333,687) | $225,457 |

In-process	 technology	as	of	December	29,	2018	consisted	of	acquired	projects	 that,	 if	completed,	will	contribute	 to	Cadence's	design	 IP	offerings.	As	of December	29,	2018,	these	projects	were	expected	to	be	completed	in	approximately	three	to	twelve	months.	During	fiscal	2018,	there	were	no	transfers	from	in- process	technology	to	existing	technology.

Acquired	intangibles	as	of	December	30,	2017	were	as	follows,	excluding	intangibles	that	were	fully	amortized	as	of	December	31,	2016:

| Existing	technology | $342,810 | $(199,529) | $143,281 |
| :--- | :--- | :--- | :--- |
| Agreements\tand\trelationships | 151,063 | (90,675) | 60,388 |
| Tradenames,\ttrademarks\tand\tpatents | 10,918 | (7,252) | 3,666 |
| Total\tacquired\tintangibles\twith\tdefinite\tlives | 504,791 | (297,456) | 207,335 |
| In-process\ttechnology | 71,500 | — | 71,500 |
| Total\tacquired\tintangibles | $576,291 | $(297,456) | $278,835 |

Amortization	expense	from	existing	technology	and	maintenance	agreements	is	included	in	cost	of	product	and	maintenance.	Amortization	expense	for	fiscal 2018,	2017	and	2016,	by	consolidated	income	statement	caption,	was	as	follows:

| Cost	of	product	and	maintenance | $39,247 | $41,781 | $42,387 |
| :--- | :--- | :--- | :--- |
| Amortization\tof\tacquired\tintangibles | 14,086 | 14,716 | 18,095 |
| Total\tamortization\tof\tacquired\tintangibles | $53,333 | $56,497 | $60,482 |

Estimated	amortization	expense	for	intangible	assets	with	definite	lives	for	the	following	five	fiscal	years	and	thereafter	was	as	follows:

|  | (In	thousands) |
| :--- | :--- |
| 2019 | $46,217 |
| 2020 | 40,612 |
| 2021 | 36,115 |
| 2022 | 17,810 |
| 2023 | 5,325 |
| Thereafter | 7,878 |
| Total\testimated\tamortization\texpense | $153,957 |

# NOTE	10.	STOCK	COMPENSATION	PLANS	AND	STOCK-BASED	COMPENSATION

# Equity	Incentive	Plans

Cadence's	Omnibus	Plan	provides	for	the	issuance	of	both	incentive	and	non-qualified	options,	restricted	stock	awards,	restricted	stock	units,	stock	bonuses and	the	rights	to	acquire	restricted	stock	to	both	executive	and	non-executive	employees.	During	fiscal	2018,	Cadence's	stockholders	approved	an	amendment	to	the Omnibus	Plan	to	increase	the	number	of	shares	of	common	stock	authorized	for	issuance	by	2.0	million.	As	 of	December	29,	2018,	the	total	number	of	shares available	for	future	issuance	under	the	Omnibus	Plan	was	9.4	million.	Options	granted	under	the	Omnibus	Plan	have	an	exercise	price	not	less	than	the	fair	market value	of	the	stock	on	the	date	of	grant.	Options	and	restricted	stock	generally	vest	over	a	three-	to	four-year	period.	Options	granted	under	the	Omnibus	Plan	expire seven	years	from	the	date	of	grant.	Vesting	of	restricted	stock	awards	granted	under	the	Omnibus	Plan	may	require	the	attainment	of	specified	performance	criteria.

Cadence's	1995	Directors	Stock	Incentive	Plan	(the	"Directors	Plan")	provides	for	the	issuance	of	non-qualified	options,	restricted	stock	awards	and	restricted stock	units	to	its	non-employee	directors.	Options	granted	under	the	Directors	Plan	have	an	exercise	price	not	less	than	the	fair	market	value	of	the	stock	on	the	date of	grant.	As	of	December	29,	2018,	the	total	number	of	shares	available	for	future	issuance	under	the	Directors	Plan	was	0.5	million.	Options	granted	under	the Directors	Plan	expire	after	ten	years,	and	options,	restricted	stock	awards	and	restricted	stock	units	vest	one	year	from	the	date	of	grant.

Cadence	has	assumed	certain	options	granted	to	employees	of	acquired	companies	("Acquired	Options").	The	Acquired	Options	were	assumed	by	Cadence outside	of	its	stock	option	plans,	and	each	option	is	administered	under	the	terms	of	the	respective	original	plans	of	the	acquired	companies.	All	of	the	Acquired Options	have	been	adjusted	for	the	price	conversion	under	the	terms	of	the	acquisition	agreement	between	Cadence	and	the	relevant	acquired	company.	If	the Acquired	Options	are	canceled,	forfeited	or	expire,	they	do	not	become	available	for	future	grant.

Stock-based	compensation	expense	and	the	related	income	tax	benefit	recognized	in	connection	with	stock	options,	restricted	stock	and	the	ESPP	during	fiscal 2018,	2017	and	2016	were	as	follows:

| Stock	options | $5,581 | $5,417 | $5,649 |
| :--- | :--- | :--- | :--- |
| Restricted\tstock | 153,348 | 117,797 | 96,989 |
| ESPP | 8,786 | 6,809 | 6,579 |
| Total\tstock-based\tcompensation\texpense | $167,715 | $130,023 | $109,217 |
| Income\ttax\tbenefit | $32,830 | $36,664 | $30,980 |

Stock-based	compensation	expense	is	reflected	in	Cadence's	consolidated	income	statements	during	fiscal	2018,	2017	and	2016	as	follows:

| Cost	of	product	and	maintenance | $2,631 | $2,218 | $1,995 |
| :--- | :--- | :--- | :--- |
| Cost\tof\tservices | 3,714 | 3,232 | 2,911 |
| Marketing\tand\tsales | 34,665 | 26,838 | 22,700 |
| Research\tand\tdevelopment | 104,353 | 77,222 | 64,061 |
| General\tand\tadministrative | 22,352 | 20,513 | 17,550 |
| Total\tstock-based\tcompensation\texpense | $167,715 | $130,023 | $109,217 |

# Stock	Options

The	exercise	price	of	each	stock	option	granted	under	Cadence's	employee	equity	incentive	plans	is	equal	to	or	greater	than	the	closing	price	of	Cadence's common	stock	on	the	date	of	grant.	The	fair	value	of	each	option	grant	is	estimated	on	the	date	of	grant	using	the	Black-Scholes	option	pricing	model.	The	weighted- average	grant	date	fair	value	of	options	granted	and	the	weighted-average	assumptions	used	in	the	model	for	fiscal	2018,	2017	and	2016	were	as	follows:

|  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| Dividend\tyield | None | None | None |
| Expected\tvolatility | 24.3% | 21.2% | 31.5% |
| Risk-free\tinterest\trate | 2.54% | 2.01% | 1.21% |
| Expected\tterm\t(in\tyears) | 4.8 | 4.8 | 4.8 |
| Weighted-average\tfair\tvalue\tof\toptions\tgranted | $10.24 | $6.86 | $5.84 |

# A	summary	of	the	changes	in	stock	options	outstanding	under	Cadence's	equity	incentive	plans	during	fiscal	2018	is	presented	below:

|  |  | Weighted-<br>Average | Weighted-<br>Average<br>Remaining<br>Contractual<br>Terms | Aggregate<br>Intrinsic |
| :--- | :--- | :--- | :--- | :--- |
|  | Shares | Exercise\tPrice | (Years) | Value |
|  | (In\tthousands) |  |  | (In\tthousands) |
| Options\toutstanding\tas\tof\tDecember\t30,\t2017 | 5,783 | $16.56 |  |  |
| Granted | 736 | 39.57 |  |  |
| Exercised | (993) | 11.84 |  |  |
| Canceled\tand\tforfeited | (112) | 18.83 |  |  |
| Options\toutstanding\tas\tof\tDecember\t29,\t2018 | 5,414 | $20.51 | 3.6 | $120,215 |
| Options\tvested\tas\tof\tDecember\t29,\t2018 | 4,029 | $16.68 | 3.0 | $104,852 |

Cadence	had	total	unrecognized	compensation	expense	related	to	stock	option	grants	of	$10.8	million	as	of	December	29,	2018,	which	will	be	recognized	over the	remaining	vesting	period.	The	remaining	weighted-average	vesting	period	of	unvested	awards	is	2.3	years.

The	total	intrinsic	value	of	and	cash	received	from	options	exercised	during	fiscal	2018,	2017	and	2016	was:

| Intrinsic	value	of	options	exercised | $31,109 | $45,643 | $44,835 |
| :--- | :--- | :--- | :--- |
| Cash\treceived\tfrom\toptions\texercised | 11,748 | 22,255 | 30,984 |

# Restricted	Stock

Generally,	restricted	stock,	which	includes	restricted	stock	awards	and	restricted	stock	units,	vests	over	three	 to	four	years	and	is	subject	to	the	employee's continuing	service	to	Cadence.	Stock-based	compensation	expense	is	recognized	ratably	over	the	vesting	term.	The	vesting	of	certain	restricted	stock	grants	is subject	to	attainment	of	specified	performance	criteria.	Each	fiscal	quarter,	Cadence	estimates	the	probability	of	the	achievement	of	these	performance	goals	and recognizes	any	related	stock-based	compensation	expense	using	the	graded-vesting	method.	The	amount	of	stock-based	compensation	expense	recognized	in	any one	 period	 can	 vary	 based	 on	 the	 attainment	 or	 expected	 attainment	 of	 the	 various	 performance	 goals.	 If	 such	 performance	 goals	 are	 not	 ultimately	 met,	 no compensation	expense	is	recognized	and	any	previously	recognized	compensation	expense	is	reversed.

Certain	long-term,	performance-based	stock	awards	granted	to	executives	vest	over	three	to	five	years	and	are	subject	to	certain	market	conditions	and	the executive's	continuing	service	to	Cadence.	Stock-based	compensation	expense	is	recognized	straight-line	over	the	vesting	term.	If	the	market	conditions	are	not ultimately	met,	compensation	expense	previously	recognized	is	not	reversed.	As	of	December	29,	2018,	Cadence	had	granted	a	total	of	1.53	million	shares	of	long- term,	performance-based	stock	awards	to	executives.

Stock-based	compensation	expense	related	to	performance-based	restricted	stock	grants	for	fiscal	2018,	2017	and	2016	was	as	follows:

# A	summary	of	the	changes	in	restricted	stock	outstanding	under	Cadence's	equity	incentive	plans	during	fiscal	2018	is	presented	below:

|  |  | Weighted-<br>Average	Grant	Date | Weighted-<br>Average<br>Remaining<br>Vesting<br>Terms | Aggregate<br>Intrinsic |
| :--- | :--- | :--- | :--- | :--- |
|  | Shares | Fair\tValue | (Years) | Value |
|  | (In\tthousands) |  |  | (In\tthousands) |
| Unvested\tshares\tas\tof\tDecember\t30,\t2017 | 11,968 | $27.11 |  |  |
| Granted | 3,940 | 42.88 |  |  |
| Vested | (5,457) | 28.49 |  |  |
| Forfeited | (749) | 28.15 |  |  |
| Unvested\tshares\tas\tof\tDecember\t29,\t2018 | 9,702 | $32.67 | 1.1 | $420,464 |

Cadence	had	total	unrecognized	compensation	expense	related	to	restricted	stock	grants	of	$261.6	million	as	of	December	29,	2018,	which	will	be	recognized over	the	remaining	vesting	period.	The	remaining	weighted-average	vesting	period	of	unvested	awards	is	1.9	years.

The	total	fair	value	realized	by	employees	upon	vesting	of	restricted	stock	during	fiscal	2018,	2017	and	2016	was:

# Employee	Stock	Purchase	Plan

Cadence	provides	an	ESPP,	as	amended	from	time	to	time.	A	majority	of	Cadence	employees	are	eligible	to	participate	in	the	ESPP.	Under	the	terms	of	the ESPP,	for	the	offering	period	that	commenced	August	1,	2018,	eligible	employees	may	purchase	Cadence's	common	stock	at	a	price	equal	to	 85%	of	the	lower	of	the fair	market	value	at	the	beginning	or	the	end	of	the	applicable	offering	period,	in	an	amount	not	to	exceed	10%	of	their	annual	base	earnings	plus	bonuses	and commissions,	and	subject	to	a	limit	in	any	calendar	year	of	$10,000.	Each	offering	period	has	a	six-month	duration	beginning	on	either	February	1	or	August	1.	The purchase	dates	fall	on	the	last	days	of	the	six-month	offering	periods.	Under	the	ESPP	and	through	the	July	31,	2018	purchase	date,	participating	employees	could contribute	up	to	7%	of	their	annual	base	earnings	plus	bonuses	and	commissions,	subject	to	a	limit	in	any	calendar	year	of	$8,000.	During	fiscal	2018,	Cadence's stockholders	approved	an	amendment	to	Cadence's	Employee	Stock	Purchase	Plan	to	increase	the	number	of	shares	of	common	stock	authorized	for	issuance	by 4.0	million.	As	of	December	29,	2018,	the	total	number	of	shares	available	for	future	issuance	under	the	ESPP	was	7.0	million.

Compensation	expense	is	calculated	using	the	fair	value	of	the	employees'	purchase	rights	under	the	Black-Scholes	option	pricing	model.	The	weighted- average	grant	date	fair	value	of	purchase	rights	granted	under	the	ESPP	and	the	weighted-average	assumptions	used	in	the	model	for	fiscal	2018,	2017	and	2016 were	as	follows:

|  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| Dividend\tyield | None | None | None |
| Expected\tvolatility | 21.1% | 20.4% | 24.4% |
| Risk-free\tinterest\trate | 2.05% | 0.92% | 0.43% |
| Expected\tterm\t(in\tyears) | 0.5 | 0.5 | 0.5 |
| Weighted-average\tfair\tvalue\tof\toptions\tgranted | $9.24 | $6.64 | $4.85 |

Shares	of	common	stock	issued	under	the	ESPP	for	fiscal	2018,	2017	and	2016	were	as	follows:

|  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
|  |  | (In\tthousands,\texcept\tper\tshare\tamounts) | (In\tthousands,\texcept\tper\tshare\tamounts) |
| Cadence\tshares\tpurchased\tunder\tthe\tESPP | 892 | 1,270 | 1,471 |
| Cash\treceived\tfor\tthe\tpurchase\tof\tshares\tunder\tthe\tESPP | $29,160 | $26,709 | $24,450 |
| Weighted-average\tpurchase\tprice\tper\tshare | $32.69 | $21.04 | $16.62 |

# Reserved	for	Future	Issuance

As	of	December	29,	2018,	Cadence	had	reserved	the	following	shares	of	authorized	but	unissued	common	stock	for	future	issuance:

|  | Shares |
| :--- | :--- |
|  | (In\tthousands) |
| Employee\tequity\tincentive\tplans* | 16,819 |
| Employee\tstock\tpurchase\tplans | 7,027 |
| Directors\tstock\tplans* | 1,138 |
| \t\t\t\tTotal | 24,984 |

*Includes	shares	reserved	for:	(i)	issuance	upon	exercise	of	future	option	grants,	(ii)	issuance	upon	vesting	of	future	restricted	stock	grants,	(iii)	outstanding	but	unexercised options	to	purchase	common	stock,	or	(iv)	unvested	restricted	stock	units.

# NOTE	11.	STOCK	REPURCHASE	PROGRAMS

In	January	2017,	Cadence's	Board	of	Directors	authorized	the	repurchase	of	shares	of	Cadence	common	stock	with	a	value	of	up	to	$525.0	million	in	the aggregate.	 The	 actual	 timing	 and	 amount	 of	 repurchases	 are	 subject	 to	 business	 and	 market	 conditions,	 corporate	 and	 regulatory	 requirements,	 stock	 price, acquisition	opportunities	and	other	factors.	As	of	December	29,	2018,	$175.0	million	remained	available	to	repurchase	shares	of	Cadence	common	stock	under	the current	authorization.

The	shares	repurchased	under	Cadence's	repurchase	authorizations	and	the	total	cost	of	repurchased	shares,	including	commissions,	during	fiscal	2018,	2017 and	2016	were	as	follows:

|  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
|  |  | (In\tthousands) |  |
| Shares\trepurchased | 5,934 | 2,495 | 40,493 |
| Total\tcost\tof\trepurchased\tshares | $250,059 | $100,025 | $960,289 |

# NOTE	12.	RESTRUCTURING	AND	OTHER	CHARGES

Cadence	has	initiated	restructuring	plans	in	an	effort	to	better	align	its	resources	with	its	business	strategy.	These	restructuring	plans	have	primarily	been comprised	of	severance	payments	and	termination	benefits	related	to	headcount	reductions,	estimated	lease	losses	related	to	facilities	vacated	and	charges	related	to abandoned	assets.	During	the	fourth	quarter	of	fiscal	2018,	Cadence	initiated	a	restructuring	plan	(the	"2018	Restructuring	Plan")	and	recorded	restructuring	and	other charges	of	$13.8	million	related	to	severance	payments,	termination	benefits	and	estimated	lease	losses	related	to	vacated	facilities.	As	of	December	29,	2018,	total liabilities	related	to	the	2018	Restructuring	Plan	were	$11.5	million.

Cadence	also	initiated	restructuring	plans	during	both	fiscal	2017	and	fiscal	2016	(the	"prior	restructuring	plans").	During	fiscal	2018,	Cadence	revised	certain estimates	made	in	connection	with	the	prior	restructuring	plans	and	recorded	credits	of	$2.7	million.	As	of	December	29,	2018,	total	liabilities	related	to	the	prior restructuring	plans	were	$0.5	million.

# The	following	table	presents	activity	for	Cadence's	restructuring	plans	during	fiscal	2018,	2017	and	2016:

|  | Severance<br>and<br>Benefits | Excess<br>Facilities | Total |
| :--- | :--- | :--- | :--- |
|  |  | (In\tthousands) |  |
| Balance,\tJanuary\t2,\t2016 | $751 | $386 | $1,137 |
| Restructuring\tand\tother\tcharges,\tnet | 40,411 | 544 | 40,955 |
| Non-cash\tcharges | — | (159) | (159) |
| Cash\tpayments | (16,890) | (679) | (17,569) |
| Effect\tof\tforeign\tcurrency\ttranslation | 130 | (34) | 96 |
| Balance,\tDecember\t31,\t2016 | $24,402 | $58 | $24,460 |
| Restructuring\tand\tother\tcharges,\tnet | 9,027 | 379 | 9,406 |
| Cash\tpayments | (20,170) | (186) | (20,356) |
| Effect\tof\tforeign\tcurrency\ttranslation | 276 | (2) | 274 |
| Balance,\tDecember\t30,\t2017 | $13,535 | $249 | $13,784 |
| Restructuring\tand\tother\tcharges,\tnet | 10,268 | 821 | 11,089 |
| Cash\tpayments | (12,688) | (192) | (12,880) |
| Effect\tof\tforeign\tcurrency\ttranslation | 61 | (30) | 31 |
| Balance,\tDecember\t29,\t2018 | $11,176 | $848 | $12,024 |

The	remaining	liability	for	Cadence's	restructuring	plans	is	recorded	in	the	consolidated	balance	sheet	as	follows:

|  | As	of |
| :--- | :--- |
|  | December\t29,\t2018 |
|  | (In\tthousands) |
| Accounts\tpayable\tand\taccrued\tliabilities | $11,597 |
| Other\tlong-term\tliabilities | 427 |
| Total\tliabilities | $12,024 |

All	liabilities	for	severance	and	related	benefits	under	Cadence's	restructuring	plans	are	included	in	accounts	payable	and	accrued	liabilities	on	Cadence's consolidated	balance	sheet	as	of	December	29,	2018.	Restructuring	liabilities	included	in	other	long-term	liabilities	represent	liabilities	from	vacated	facilities,	and Cadence	expects	to	make	cash	payments	to	settle	these	liabilities	through	fiscal	2022.

# NOTE	13.	OTHER	INCOME,	NET

| Interest	income | $8,070 | $3,879 | $2,917 |
| :--- | :--- | :--- | :--- |
| Gains\t(losses)\ton\tmarketable\tequity\tinvestments | (551) | 520 | 263 |
| Gains\ton\tnon-marketable\tequity\tinvestments | 3,300 | 8,934 | 2,668 |
| Gains\t(losses)\ton\tsecurities\tin\tNQDC\ttrust | (1,471) | 6,145 | 1,741 |
| Gains\t(losses)\ton\tforeign\texchange | (5,557) | (2,920) | 6,879 |
| Gain\ton\tsale\tof\tproperty,\tplant\tand\tequipment | — | — | 923 |
| Other\tincome\t(loss),\tnet | (471) | 197 | 531 |
| Total\tother\tincome,\tnet | $3,320 | $16,755 | $15,922 |

# NOTE	14.	NET	INCOME	PER	SHARE

Basic	net	income	per	share	is	computed	by	dividing	net	income	during	the	period	by	the	weighted-average	number	of	shares	of	common	stock	outstanding during	that	period,	less	unvested	restricted	stock	awards.	Diluted	net	income	per	share	is	impacted	by	equity	instruments	considered	to	be	potential	common	shares, if	dilutive,	computed	using	the	treasury	stock	method	of	accounting.

The	calculations	for	basic	and	diluted	net	income	per	share	for	fiscal	2018,	2017	and	2016	are	as	follows:

|  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
|  |  | (In\tthousands,\texcept\tper\tshare\tamounts) | (In\tthousands,\texcept\tper\tshare\tamounts) |
| Net\tincome | $345,777 | $204,101 | $203,086 |
| Weighted-average\tcommon\tshares\tused\tto\tcalculate\tbasic\tnet\tincome\tper\tshare | 273,729 | 272,097 | 284,502 |
| Stock-based\tawards | 7,415 | 8,124 | 6,754 |
| Weighted-average\tcommon\tshares\tused\tto\tcalculate\tdiluted\tnet\tincome\tper\tshare | 281,144 | 280,221 | 291,256 |
| Net\tincome\tper\tshare\t-\tbasic | $1.26 | $0.75 | $0.71 |
| Net\tincome\tper\tshare\t-\tdiluted | $1.23 | $0.73 | $0.70 |

The	following	table	presents	shares	of	Cadence's	common	stock	outstanding	for	fiscal	2018,	2017	and	2016	that	were	excluded	from	the	computation	of	diluted net	income	per	share	because	the	effect	of	including	these	shares	in	the	computation	of	diluted	net	income	per	share	would	have	been	anti-dilutive:

|  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
|  |  | (In\tthousands) |  |
| Long-term\tperformance-based\tawards | 50 | 152 | 1,069 |
| Options\tto\tpurchase\tshares\tof\tcommon\tstock | 637 | 303 | 581 |
| Non-vested\tshares\tof\trestricted\tstock | 290 | 77 | 27 |
| Total\tpotential\tcommon\tshares\texcluded | 977 | 532 | 1,677 |

# NOTE	15.	BALANCE	SHEET	COMPONENTS

A	summary	of	certain	balance	sheet	components	as	of	December	29,	2018	and	December	30,	2017	is	as	follows:

| Raw	materials | $16,392 | $17,491 |
| :--- | :--- | :--- |
| Finished\tgoods | 11,770 | 15,718 |
| Inventories | $28,162 | $33,209 |
| Property,\tplant\tand\tequipment: |  |  |
| Computer\tequipment\tand\trelated\tsoftware | $574,333 | $537,144 |
| Buildings | 126,927 | 127,478 |
| Land | 55,802 | 55,840 |
| Leasehold,\tbuilding\tand\tland\timprovements | 108,529 | 106,173 |
| Furniture\tand\tfixtures | 27,087 | 27,590 |
| Equipment | 52,088 | 50,340 |
| In-process\tcapital\tassets | 6,357 | 5,154 |
| Total\tcost | 951,123 | 909,719 |
| Less:\tAccumulated\tdepreciation\tand\tamortization | (698,493) | (658,377) |
| Property,\tplant\tand\tequipment,\tnet | $252,630 | $251,342 |
| Other\tassets: |  |  |
| Deferred\tincome\ttaxes | $154,894 | $152,501 |
| Non-marketable\tinvestments | 118,734 | 2,992 |
| Other\tlong-term\tassets | 97,603 | 74,808 |
| Other\tassets | $371,231 | $230,301 |
| Accounts\tpayable\tand\taccrued\tliabilities: |  |  |
| Payroll\tand\tpayroll-related\taccruals | $192,466 | $164,310 |
| Accounts\tpayable | 5,484 | 4,825 |
| Accrued\toperating\tliabilities | 58,576 | 51,966 |
| Accounts\tpayable\tand\taccrued\tliabilities | $256,526 | $221,101 |

# NOTE	16.	FAIR	VALUE

Inputs	to	valuation	techniques	are	observable	or	unobservable.	Observable	inputs	reflect	market	data	obtained	from	independent	sources,	while	unobservable inputs	reflect	Cadence's	market	assumptions.	These	two	types	of	inputs	have	created	the	following	fair	value	hierarchy:

•Level	1	–	Quoted	prices	for	identical	instruments	in	active

markets;

•Level	2	–	Quoted	prices	for	similar	instruments	in	active	markets,	quoted	prices	for	identical	or	similar	instruments	in	markets	that	are	not	active,	and model-derived	valuations	in	which	all	significant	inputs	and	significant	value	drivers	are	observable	in	active	markets;	and

•Level	3	–	Valuations	derived	from	valuation	techniques	in	which	one	or	more	significant	inputs	or	significant	value	drivers	are unobservable.

This	hierarchy	requires	Cadence	to	minimize	the	use	of	unobservable	inputs	and	to	use	observable	market	data,	if	available,	when	determining	fair	value. Cadence	recognizes	transfers	between	levels	of	the	hierarchy	based	on	the	fair	values	of	the	respective	financial	instruments	at	the	end	of	the	reporting	period	in which	the	transfer	occurred.	There	were	no	transfers	between	levels	of	the	fair	value	hierarchy	during	fiscal	2018.

The	valuation	techniques	used	to	determine	the	fair	value	of	Cadence's	2024	Notes	are	classified	within	Level	2	of	the	fair	value	hierarchy.	For	additional information	relating	to	our	debt	arrangements,	see	Note	3	in	the	notes	to	consolidated	financial	statements.

On	a	quarterly	basis,	Cadence	measures	at	fair	value	certain	financial	assets	and	liabilities.	The	fair	value	of	financial	assets	and	liabilities	was	determined	using the	following	levels	of	inputs	as	of	December	29,	2018	and	December	30,	2017:

| Money	market	funds | $327,841 | $327,841 | $— | $— |
| :--- | :--- | :--- | :--- | :--- |
| Marketable\tequity\tsecurities | 3,887 | 3,887 | — | — |
| Securities\theld\tin\tNQDC\ttrust | 27,767 | 27,767 | — | — |
| Foreign\tcurrency\texchange\tcontracts | 101 | — | 101 | — |
| Total\tAssets | $359,596 | $359,495 | $101 | $— |

As	of	December	29,	2018,	Cadence	did	not	have	any	financial	liabilities	requiring	a	recurring	fair	value	measurement.

| Money	market	funds | $503,934 | $503,934 | $— | $— |
| :--- | :--- | :--- | :--- | :--- |
| Marketable\tequity\tsecurities | 4,455 | 4,455 | — | — |
| Securities\theld\tin\tNQDC\ttrust | 31,473 | 31,473 | — | — |
| Foreign\tcurrency\texchange\tcontracts | 2,937 | — | 2,937 | — |
| Total\tAssets | $542,799 | $539,862 | $2,937 | $— |

As	of	December	30,	2017,	Cadence	did	not	have	any	financial	liabilities	requiring	a	recurring	fair	value	measurement.

# NOTE	17.	COMMITMENTS	AND	CONTINGENCIES

# Lease	Commitments

Facilities,	equipment	and	vehicles	are	leased	under	various	operating	leases	expiring	at	various	dates	through	2030.	Certain	of	these	leases	contain	renewal options	and	escalating	rent	payments.	Rental	expense	is	recognized	on	a	straight-line	basis	and	was	as	follows	during	fiscal	2018,	2017	and	2016:

| follows: |  |
| :--- | :--- |
|  | Operating |
|  | \tLeases |
|  | (In\tthousands) |
| 2019 | $26,252 |
| 2020 | 23,130 |
| 2021 | 19,778 |
| 2022 | 14,243 |
| 2023 | 11,510 |
| Thereafter | 17,100 |
| Total\tlease\tpayments | $112,013 |

# Purchase	Obligations

Cadence	had	purchase	obligations	of	$24.7	million	as	of	December	29,	2018	that	were	associated	with	agreements	or	commitments	for	purchases	of	goods	or services.

# Legal	Proceedings

From	time	to	time,	Cadence	is	involved	in	various	disputes	and	litigation	that	arise	in	the	ordinary	course	of	business.	These	include	disputes	and	lawsuits related	to	intellectual	property,	indemnification	obligations,	mergers	and	acquisitions,	licensing,	contracts,	distribution	arrangements	and	employee	relations	matters. At	least	quarterly,	Cadence	reviews	the	status	of	each	significant	matter	and	assesses	its	potential	financial	exposure.	If	the	potential	loss	from	any	claim	or	legal proceeding	is	considered	probable	and	the	amount	or	the	range	of	loss	can	be	estimated,	Cadence	accrues	a	liability	for	the	estimated	loss.	Legal	proceedings	are subject	 to	 uncertainties,	 and	 the	 outcomes	 are	 difficult	 to	 predict.	 Because	 of	 such	 uncertainties,	 accruals	 are	 based	 on	 Cadence's	 judgments	 using	 the	 best information	available	at	the	time.	As	additional	information	becomes	available,	Cadence	reassesses	the	potential	liability	related	to	pending	claims	and	litigation matters	and	may	revise	estimates.

# Other	Contingencies

Cadence	provides	its	customers	with	a	warranty	on	sales	of	hardware	products,	generally	for	a	90-day	period.	Cadence	did	not	incur	any	significant	costs related	to	warranty	obligations	during	fiscal	2018,	2017	or	2016.

Cadence's	product	license	and	services	agreements	typically	include	a	limited	indemnification	provision	for	claims	from	third	parties	relating	to	Cadence's intellectual	property.	If	the	potential	loss	from	any	indemnification	claim	is	considered	probable	and	the	amount	or	the	range	of	loss	can	be	estimated,	Cadence accrues	a	liability	for	the	estimated	loss.	The	indemnification	is	generally	limited	to	the	amount	paid	by	the	customer.	Cadence	did	not	incur	any	significant	losses	from indemnification	claims	during	fiscal	2018,	2017	or	2016.

# NOTE	18.	EMPLOYEE	AND	DIRECTOR	BENEFIT	PLANS

Cadence	maintains	various	defined	contribution	plans	for	its	eligible	U.S.	and	non-U.S.	employees.	For	employees	in	the	United	States,	Cadence	maintains	a 401(k)	savings	plan	to	provide	retirement	benefits	through	tax-deferred	salary	deductions	and	may	make	discretionary	contributions,	as	determined	by	the	Board	of Directors,	which	cannot	exceed	a	specified	percentage	of	the	annual	aggregate	salaries	of	those	employees	eligible	to	participate.	Cadence's	total	contributions	made to	these	plans	during	fiscal	2018,	2017	and	2016	were	as	follows:

Executive	Officers	and	Directors	may	also	elect	to	defer	compensation	payable	to	them	under	Cadence's	NQDC.	Deferred	compensation	payments	are	held	in investment	accounts	and	the	values	of	the	accounts	are	adjusted	each	quarter	based	on	the	fair	value	of	the	investments	held	in	the	NQDC.	These	investments	are classified	in	other	assets	in	the	consolidated	balance	sheets	and	gains	and	losses	are	recognized	as	other	income,	net	in	the	consolidated	income	statements.	Net recognized	gains	(losses)	of	these	securities	during	fiscal	2018,	2017	and	2016	were	as	follows:

Certain	of	Cadence's	 international	subsidiaries	sponsor	defined	benefit	retirement	plans.	The	unfunded	projected	benefit	obligation	 for	Cadence's	defined benefit	retirement	plans	is	recorded	in	other	long-term	liabilities	in	the	consolidated	balance	sheets.	The	unfunded	projected	benefit	obligation	for	these	retirement plans	as	of	December	29,	2018,	December	30,	2017	and	December	31,	2016	was	as	follows:

|  | December	29,<br>2018 | December	30,<br>2017 | December	31,<br>2016 |
| :--- | :--- | :--- | :--- |
|  |  | (In\tthousands) |  |
| Unfunded\tprojected\tbenefit\tobligation\t-\tdefined\tbenefit\tretirement\tplans | $7,990 | $6,976 | $6,164 |

# NOTE	19.	ACCUMULATED	OTHER	COMPREHENSIVE	LOSS

Cadence's	accumulated	other	comprehensive	loss	is	comprised	of	the	aggregate	impact	of	foreign	currency	translation	gains	and	losses	and	changes	in defined	benefit	plan	liabilities	and	is	presented	in	Cadence's	consolidated	statements	of	comprehensive	income.	Aggregate	changes	in	unrealized	holding	gains	on available-for-sale	securities	net	of	reclassifications	for	realized	gains	and	losses	were	also	included	through	December	30,	2017.

On	 the	 first	day	of	 fiscal	2018,	Cadence	reclassified	unrealized	holding	gains	on	available-for-sale	securities	 to	retained	earnings	 in	connection	with	 the adoption	 of	ASU	 2016-01,	 "Financial	 Instruments—Overall	 (Subtopic	 825-10):	 Recognition	 and	 Measurement	 of	 Financial	Assets	 and	 Financial	 Liabilities."	 For additional	information	regarding	the	adoption	of	this	accounting	standard,	refer	to	Note	2	under	the	heading	"Recently	Adopted	Accounting	Standards."

Accumulated	other	comprehensive	loss	was	comprised	of	the	following	as	of	December	29,	2018,	and	December	30,	2017:

|  | December	29,<br>2018 | December	30,<br>2017 |
| :--- | :--- | :--- |
|  | (In\tthousands) |  |
| Foreign\tcurrency\ttranslation\tloss | $(20,861) | $(2,976) |
| Changes\tin\tdefined\tbenefit\tplan\tliabilities | (3,919) | (3,292) |
| Unrealized\tholding\tgains\ton\tavailable-for-sale\tsecurities | — | 2,638 |
| Total\taccumulated\tother\tcomprehensive\tloss | $(24,780) | $(3,630) |

For	 fiscal	2018,	2017	 and	2016,	there	were	no	significant	amounts	related	to	foreign	currency	translation	loss	or	changes	in	defined	benefit	plan	liabilities reclassified	to	net	income	from	accumulated	other	comprehensive	loss.

# NOTE	20.	SEGMENT	REPORTING

Segment	reporting	is	based	on	the	"management	approach,"	following	the	method	that	management	organizes	the	company's	operating	segments	for	which separate	 financial	 information	 is	 made	 available	 to,	 and	 evaluated	 regularly	 by,	 the	 chief	 operating	 decision	 maker	 in	 allocating	 resources	 and	 in	 assessing performance.	Cadence's	chief	operating	decision	maker	is	its	CEO,	who	reviews	Cadence's	consolidated	results	as	one	operating	segment.	In	making	operating decisions,	the	CEO	primarily	considers	consolidated	financial	information,	accompanied	by	disaggregated	information	about	revenues	by	geographic	region.

Outside	the	United	States,	Cadence	markets	and	supports	its	products	and	services	primarily	through	its	subsidiaries.	Revenue	is	attributed	to	geography	based upon	the	country	in	which	the	product	is	used	or	services	are	delivered.	Long-lived	assets	are	attributed	to	geography	based	on	the	country	where	the	assets	are located.

The	following	table	presents	a	summary	of	revenue	by	geography	for	fiscal	2018,	2017	and	2016:

|  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
|  |  | (In\tthousands) |  |
| Americas: |  |  |  |
| United\tStates | $924,644 | $829,436 | $832,583 |
| Other\tAmericas | 32,531 | 35,067 | 31,296 |
| Total\tAmericas | 957,175 | 864,503 | 863,879 |
| Asia | 605,415 | 526,201 | 445,500 |
| Europe,\tMiddle\tEast\tand\tAfrica | 406,877 | 385,705 | 346,701 |
| Japan | 168,555 | 166,623 | 160,003 |
| Total | $2,138,022 | $1,943,032 | $1,816,083 |

The	following	table	presents	a	summary	of	long-lived	assets	by	geography	as	of	December	29,	2018,	December	30,	2017	and	December	31,	2016:

|  |  | As	of |  |
| :--- | :--- | :--- | :--- |
|  | December\t29,\n2018 | December\t30,\n2017 | December\t31,\n2016 |
|  |  | (In\tthousands) |  |
| Americas: |  |  |  |
| United\tStates | $200,025 | $198,744 | $193,750 |
| Other\tAmericas | 475 | 611 | 757 |
| Total\tAmericas | 200,500 | 199,355 | 194,507 |
| Asia | 39,629 | 37,678 | 30,564 |
| Europe,\tMiddle\tEast\tand\tAfrica | 11,784 | 13,615 | 12,692 |
| Japan | 717 | 694 | 844 |
| Total | $252,630 | $251,342 | $238,607 |

# NOTE	21.	SUBSEQUENT	EVENTS

In	 January	 2019,	 Cadence	 made	 an	 additional	 minority	 equity	 investment	 in	 a	 private	 company	 for	 approximately	$34	 million,	 bringing	 Cadence's total investment	to	approximately	$149	million.	For	additional	information	regarding	Cadence's	investments,	see	Note	7	to	the	consolidated	financial	statements.

# Stock	Repurchase	Authorization

In	February	2019,	Cadence's	Board	of	Directors	authorized	the	additional	repurchase	of	shares	of	Cadence's	common	stock	with	a	value	of	up	to	$500	million	in the	aggregate.	The	actual	timing	and	amount	of	future	repurchases	are	subject	to	business	and	market	conditions,	corporate	and	regulatory	requirements,	stock	price, acquisition	opportunities	and	other	factors.

# EXHIBIT	INDEX

| Number | Exhibit	Title | Form | File	No. | No. | Date | Herewith |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| 3.01 | Restated\tCertificate\tof\tIncorporation,\tas\tfiled\twith\tthe | 10-Q | 001-10606 | 3.01(j) | 8/18/1998 |  |
| 3.02 | Certificate\tof\tDesignation\tfor\tthe\tSeries\tA\tJunior\tParticipating | 10-K | 001-10606 | 4.02 | 3/27/2000 |  |
|  | Preferred\tStock,\tas\tamended\ton\tFebruary\t1,\t2000. |  |  |  |  |  |
| 3.03 | The\tRegistrant's\tAmended\tand\tRestated\tBylaws,\teffective\tas | 8-K | 000-15867 | 3.01 | 2/8/2019 |  |
|  | of\tFebruary\t6,\t2019. |  |  |  |  |  |
| 4.01 | Specimen\tCertificate\tof\tthe\tRegistrant's\tCommon\tStock. | S-4 | 033-43400 | 4.01 | 10/17/1991 |  |
| 4.02 | Base\tIndenture,\tdated\tOctober\t9,\t2014,\tbetween\tthe | 8-K | 000-15867 | 4.01 | 10/9/2014 |  |
|  | Registrant\tand\tWells\tFargo\tBank,\tN.A.,\tas\ttrustee. |  |  |  |  |  |
| 4.03 | First\tSupplemental\tIndenture,\tdated\tOctober\t9,\t2014, | 8-K | 000-15867 | 4.02 | 10/9/2014 |  |
|  | between\tthe\tRegistrant\tand\tWells\tFargo\tBank,\tN.A.,\tas |  |  |  |  |  |
|  | trustee\t(including\tthe\tForm\tof\t4.375%\tSenior\tNotes\tdue |  |  |  |  |  |
|  | 2024). |  |  |  |  |  |
| 10.01* | The\tRegistrant's\tAmended\tand\tRestated\t1987\tStock | S-8 | 333-174201 | 99.1 | 5/13/2011 |  |
|  | Incentive\tPlan. |  |  |  |  |  |
| 10.02* | Form\tof\tStock\tOption\tAgreement\tand\tForm\tof\tStock\tOption | 10-Q | 001-10606 | 10.02 | 8/10/2004 |  |
|  | Exercise\tRequest\tunder\tthe\tRegistrant's\t1987\tStock\tIncentive |  |  |  |  |  |
|  | Plan,\tas\tamended\tand\trestated. |  |  |  |  |  |
| 10.03* | Form\tof\tNonstatutory\tIncentive\tStock\tAward\tAgreement\tunder | 10-K | 001-10606 | 10.03 | 3/16/2005 |  |
|  | the\tRegistrant's\t1987\tStock\tIncentive\tPlan,\tas\tamended\tand |  |  |  |  |  |
|  | restated. |  |  |  |  |  |
| 10.04* | Form\tof\tIncentive\tStock\tAward\tAgreement\tfor\tperformance- | 10-Q | 001-10606 | 10.02 | 12/11/2008 |  |
|  | based\tIncentive\tStock\tAwards\tgranted\tprior\tto\tJuly\t29,\t2008, |  |  |  |  |  |
|  | as\tamended\tand\trestated,\tunder\tthe\tRegistrant's\t1987\tStock |  |  |  |  |  |
|  | Incentive\tPlan,\tas\tamended\tand\trestated. |  |  |  |  |  |
| 10.05* | Form\tof\tIncentive\tStock\tAward\tAgreement\tfor\tperformance- | 10-Q | 001-10606 | 10.03 | 12/11/2008 |  |
|  | based\tIncentive\tStock\tAwards\tto\tbe\tgranted\tsubsequent\tto |  |  |  |  |  |
|  | July\t29,\t2008\tunder\tthe\tRegistrant's\t1987\tStock\tIncentive |  |  |  |  |  |
|  | Plan,\tas\tamended\tand\trestated. |  |  |  |  |  |
| 10.06* | Form\tof\tStock\tOption\tAgreement\tunder\tthe\tRegistrant's\t1987 | 10-Q | 001-10606 | 10.01 | 5/1/2009 |  |
|  | Stock\tIncentive\tPlan,\tas\tamended\tand\trestated. |  |  |  |  |  |
| 10.07* | Form\tof\tIncentive\tStock\tAward\tAgreement\tfor\tperformance- | 10-Q | 001-10606 | 10.02 | 5/1/2009 |  |
|  | based\tIncentive\tStock\tAwards\tunder\tthe\tRegistrant's\t1987 |  |  |  |  |  |
|  | Stock\tIncentive\tPlan,\tas\tamended\tand\trestated. |  |  |  |  |  |
| 10.08* | The\tRegistrant's\t1995\tDirectors\tStock\tIncentive\tPlan. | 10-Q | 001-15867 | 10.01 | 7/26/2012 |  |
| 10.09* | Form\tof\tStock\tOption\tAgreement,\tas\tcurrently\tin\teffect\tunder | 10-K | 000-15867 | 10.76 | 2/21/2013 |  |
|  | the\tRegistrant's\t1995\tDirectors\tStock\tIncentive\tPlan. |  |  |  |  |  |
| 10.10* | Form\tof\tIncentive\tStock\tAward\tAgreement,\tas\tcurrently\tin | 10-K | 000-15867 | 10.77 | 2/21/2013 |  |
|  | effect\tunder\tthe\tRegistrant's\t1995\tDirectors\tStock\tIncentive |  |  |  |  |  |
|  | Plan. |  |  |  |  |  |
| 10.11* | The\tRegistrant's\tAmended\tand\tRestated\t2000\tEquity | S-8 | 333-174200 | 99.1 | 5/13/2011 |  |

| 10.12* | Form	of	Incentive	Stock	Award	Agreement	under	the | 10-Q | 001-10606 | 10.02 | 10/28/2011 |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Registrant's\tAmended\tand\tRestated\t2000\tEquity\tIncentive |  |  |  |  |
|  | Plan. |  |  |  |  |
| 10.13* | Form\tof\tRestricted\tStock\tUnit\tAward\tAgreement\tunder\tthe | 10-Q | 001-10606 | 10.03 | 10/28/2011 |
|  | Registrant's\tAmended\tand\tRestated\t2000\tEquity\tIncentive |  |  |  |  |
|  | Plan. |  |  |  |  |
| 10.14* | Form\tof\tStock\tOption\tAgreement\tunder\tthe\tRegistrant's | 10-Q | 001-10606 | 10.04 | 10/28/2011 |
|  | Amended\tand\tRestated\t2000\tEquity\tIncentive\tPlan. |  |  |  |  |
| 10.15* | The\tRegistrant's\tOmnibus\tEquity\tIncentive\tPlan,\tas\tamended | S-8 | 333-226292 | 99.01 | 7/23/2018 |
|  | and\trestated. |  |  |  |  |
| 10.16* | Form\tof\tIncentive\tStock\tAward\tAgreement\tfor\tNon-Executive | S-8 | 333-195771 | 99.02 | 5/7/2014 |
|  | Employees\tand\tConsultants,\tas\tcurrently\tin\teffect\tunder\tthe |  |  |  |  |
|  | Registrant's\tOmnibus\tEquity\tIncentive\tPlan. |  |  |  |  |
| 10.17* | Form\tof\tRestricted\tStock\tUnit\tAgreement\tfor\tNon-Executive | S-8 | 333-195771 | 99.03 | 5/7/2014 |
|  | Employees\tand\tConsultants,\tas\tcurrently\tin\teffect\tunder\tthe |  |  |  |  |
|  | Registrant's\tOmnibus\tEquity\tIncentive\tPlan. |  |  |  |  |
| 10.18* | Form\tof\tStock\tOption\tAgreement\tfor\tNon-Executive | S-8 | 333-195771 | 99.04 | 5/7/2014 |
|  | Employees\tand\tConsultants,\tas\tcurrently\tin\teffect\tunder\tthe |  |  |  |  |
|  | Registrant's\tOmnibus\tEquity\tIncentive\tPlan. |  |  |  |  |
| 10.19* | Form\tof\tIncentive\tStock\tAward\tAgreement\tfor\tExecutives,\tas | S-8 | 333-195771 | 99.05 | 5/7/2014 |
|  | currently\tin\teffect\tunder\tthe\tRegistrant's\tOmnibus\tEquity |  |  |  |  |
|  | Incentive\tPlan. |  |  |  |  |
| 10.20* | Form\tof\tRestricted\tStock\tUnit\tAgreement\tfor\tExecutives,\tas | S-8 | 333-195771 | 99.06 | 5/7/2014 |
|  | currently\tin\teffect\tunder\tthe\tRegistrant's\tOmnibus\tEquity |  |  |  |  |
|  | Incentive\tPlan. |  |  |  |  |
| 10.21* | Form\tof\tStock\tOption\tAgreement\tfor\tExecutives,\tas\tcurrently | S-8 | 333-195771 | 99.07 | 5/7/2014 |
|  | in\teffect\tunder\tthe\tRegistrant's\tOmnibus\tEquity\tIncentive |  |  |  |  |
|  | Plan. |  |  |  |  |
| 10.22* | The\tRegistrant's\tAmended\tand\tRestated\tEmployee\tStock | S-8 | 333-226293 | 99.01 | 7/23/2018 |
|  | Purchase\tPlan. |  |  |  |  |
| 10.23* | The\tRegistrant's\t1996\tDeferred\tCompensation\tVenture | 10-K | 001-10606 | 10.09 | 3/12/2002 |
|  | Investment\tPlan,\tas\tamended\tand\trestated\teffective |  |  |  |  |
|  | January\t1,\t2001. |  |  |  |  |
| 10.24* | The\tRegistrant's\t2002\tDeferred\tCompensation\tVenture | 10-Q | 001-10606 | 10.32 | 8/10/2004 |
|  | Investment\tPlan,\tas\tamended. |  |  |  |  |
| 10.25* | The\tRegistrant's\t1994\tDeferred\tCompensation\tPlan,\tas | 10-K | 001-10606 | 10.10 | 2/26/2008 |
|  | amended\tand\trestated\teffective\tNovember\t20,\t2003\t(409A |  |  |  |  |
|  | Grandfathered\tPlan). |  |  |  |  |
| 10.26* | The\tRegistrant's\t2009\tDeferred\tCompensation\tPlan. | 10-K | 001-10606 | 10.13 | 2/26/2008 |
| 10.27* | Amendments\tNumber\tOne,\tTwo,\tThree\tand\tFour\tof\tthe | 10-K | 000-15867 | 10.27 | 2/20/2018 |
|  | Registrant's\t2009\tDeferred\tCompensation\tPlan. |  |  |  |  |
| 10.28* | The\tSenior\tExecutive\tBonus\tPlan. | 8-K | 000-15867 | 10.01 | 2/8/2019 |
| 10.29* | The\tRegistrant's\tExecutive\tSeverance\tPlan. | 8-K | 001-15867 | 10.01 | 5/11/2016 |
| 10.30* | Director\tMedical\tand\tPrescription\tBenefits\tCoverage | 10-Q | 001-10606 | 10.02 | 4/29/2011 |
|  | Reimbursement\tPlan. |  |  |  |  |
| 10.31 | Altos\tDesign\tAutomation,\tInc.\t2006\tStock\tPlan,\tas\tamended | S-8 | 333-174202 | 99.1 | 5/13/2011 |
|  | December\t23,\t2009. |  |  |  |  |
| 10.32 | Tensilica,\tInc.\t2007\tStock\tIncentive\tPlan. | S-8 | 333-188452 | 99.01 | 5/8/2013 |
| 10.33 | C2\tDesign\tAutomation\t(d/b/a/\tForte\tDesign\tSystems)\t2010 | S-8 | 333-194102 | 99.01 | 2/24/2014 |

| 10.34* | Form	of	Indemnity	Agreement	between	the	Registrant	and	its | 10-Q | 000-15867 | 10.01 | 7/25/2016 |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | directors\tand\texecutive\tofficers,\tas\tamended\tand\trestated. |  |  |  |  |
| 10.35* | Employment\tAgreement,\teffective\tas\tof\tJuly\t29,\t2008, | 10-K | 001-10606 | 10.92 | 3/2/2009 |
|  | between\tthe\tRegistrant\tand\tJames\tJ.\tCowie. |  |  |  |  |
| 10.36* | Employment\tAgreement,\teffective\tas\tof\tJanuary\t8,\t2009, | 10-K | 001-10606 | 10.93 | 3/2/2009 |
|  | between\tthe\tRegistrant\tand\tLip-Bu\tTan. |  |  |  |  |
| 10.37* | Employment\tAgreement,\teffective\tas\tof\tFebruary\t23,\t2009, | 10-K | 001-10606 | 10.96 | 3/2/2009 |
|  | between\tthe\tRegistrant\tand\tNimish\tH.\tModi. |  |  |  |  |
| 10.38* | Form\tof\tFirst\tAmendment\tto\tEmployment\tAgreement\tbetween | 10-Q | 001-10606 | 10.02 | 7/31/2009 |
|  | the\tRegistrant\tand\tthe\tRegistrant's\tnamed\texecutive\tofficers. |  |  |  |  |
| 10.39* | Form\tof\tSecond\tAmendment\tto\tEmployment\tAgreement | 10-K | 001-10606 | 10.94 | 2/26/2010 |
|  | between\tthe\tRegistrant\tand\tthe\tRegistrant's\tnamed\texecutive |  |  |  |  |
|  | officers. |  |  |  |  |
| 10.40* | Second\tAmendment\tto\tEmployment\tAgreement,\teffective\tas | 10-K | 001-10606 | 10.95 | 2/26/2010 |
|  | of\tMarch\t1,\t2010,\tbetween\tthe\tRegistrant\tand\tLip-Bu\tTan. |  |  |  |  |
| 10.41* | Employment\tAgreement,\teffective\tas\tof\tOctober\t21,\t2011, | 10-K | 001-10606 | 10.77 | 2/24/2012 |
|  | between\tthe\tRegistrant\tand\tGeoffrey\tG.\tRibar. |  |  |  |  |
| 10.42* | Employment\tAgreement,\teffective\tas\tof\tSeptember\t20,\t2012, | 10-K | 000-15867 | 10.44 | 2/20/2014 |
|  | between\tthe\tRegistrant\tand\tThomas\tP.\tBeckley. |  |  |  |  |
| 10.43* | Employment\tAgreement,\teffective\tas\tof\tMarch\t16,\t2015, | 10-Q | 000-15867 | 10.01 | 4/27/2015 |
|  | between\tthe\tRegistrant\tand\tAnirudh\tDevgan. |  |  |  |  |
| 10.44* | Letter,\tdated\tSeptember\t1,\t2015,\tbetween\tthe\tRegistrant\tand | 10-K | 000-15867 | 10.49 | 2/18/2016 |
|  | Neil\tZaman. |  |  |  |  |
| 10.45* | Offer\tLetter,\tdated\tJanuary\t12,\t2017,\tbetween\tthe\tRegistrant | 10-K | 000-15867 | 10.51 | 2/10/2017 |
|  | and\tSurendra\tBabu\tMandava. |  |  |  |  |
| 10.46* | First\tAmendment\tto\tEmployment\tAgreement,\teffective | 8-K | 000-15867 | 10.01 | 11/17/2017 |
|  | November\t16,\t2017,\tbetween\tthe\tRegistrant\tand\tAnirudh |  |  |  |  |
|  | Devgan. |  |  |  |  |
| 10.47* | Credit\tAgreement,\tdated\tas\tof\tJanuary\t30,\t2017,\tby\tand | 8-K | 000-15867 | 10.01 | 2/1/2017 |
|  | among\tthe\tRegistrant,\tJPMorgan\tChase\tBank,\tN.A.\tand\tother |  |  |  |  |
|  | lenders\tparty\tthereto. |  |  |  |  |
| 10.48* | Term\tLoan\tAgreement,\tdated\tas\tof\tJanuary\t28,\t2016,\tby\tand | 8-K | 000-15867 | 10.01 | 2/3/2016 |
|  | among\tthe\tRegistrant,\tJ.P.\tMorgan\tSecurities\tLLC,\tMerrill |  |  |  |  |
|  | Lynch,\tPierce,\tFenner\t&amp;\tSmith\tIncorporated,\tJPMorgan |  |  |  |  |
|  | Chase\tBank,\tN.A.,\tand\tother\tlenders\tparty\tthereto. |  |  |  |  |
| 10.49* | Amendment\tNo.\t1\tto\tLoan\tAgreement,\tdated\tas\tof\tJanuary | 8-K | 000-15867 | 10.02 | 2/1/2017 |
|  | 30,\t2017,\tby\tand\tamong\tthe\tRegistrant,\tJPMorgan\tChase |  |  |  |  |
|  | Bank,\tN.A.\tand\tother\tlenders\tparty\tthereto. |  |  |  |  |
| 10.50* | Third\tAmendment\tto\tEmployment\tAgreement,\teffective\tas\tof | 10-Q | 000-15867 | 10.01 | 4/25/2018 |
|  | March\t22,\t2018,\tbetween\tthe\tRegistrant\tand\tLip-Bu\tTan. |  |  |  |  |
| 10.51* | nusemi\tinc.\t2015\tEquity\tIncentive\tPlan. | S-8 | 333-226294 | 99.01 | 7/23/2018 |

*	Indicates	management	contract	or	compensatory	plan	or	arrangement	covering	executive	officers	or	directors	of	the	Registrant.

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	the	registrant	has	duly	caused	this	report	to	be	signed	on	its	behalf by	the	undersigned,	thereunto	duly	authorized.

Lip-Bu	Tan

# Chief	Executive	Officer	and	Director

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	below	by	the	following	persons	on	behalf	of	the	registrant	and in	the	capacities	and	on	the	dates	indicated.

Senior	Vice	President	and	Chief	Financial	Officer

# POWER	OF	ATTORNEY

KNOW	ALL	PERSONS	BY	THESE	PRESENTS,	that	each	person	whose	signature	appears	below	constitutes	and	appoints	Lip-Bu	Tan,	John	M.	Wall	and James	J.	Cowie,	and	each	of	them,	as	his	or	her	true	and	lawful	attorneys-in-fact	and	agents,	with	full	power	of	substitution	and	resubstitution,	for	him	or	her	and	in	his or	her	name,	place	and	stead,	in	any	and	all	capacities,	to	sign	any	and	all	amendments	(including	post-effective	amendments)	to	this	Report	on	Form	10-K,	and	to file	the	same,	with	all	exhibits	thereto,	and	other	documents	in	connection	therewith,	with	the	Securities	and	Exchange	Commission,	granting	unto	said	attorneys-in- fact	and	agents,	and	each	of	them,	full	power	and	authority	to	do	and	perform	each	and	every	act	and	thing	requisite	and	necessary	to	be	done	in	connection therewith,	as	fully	to	all	intents	and	purposes	as	he	or	she	might	or	could	do	in	person,	hereby	ratifying	and	confirming	all	that	said	attorneys-in-fact	and	agents,	or	any of	them,	or	their,	his	or	her	substitute	or	substitutes,	may	lawfully	do	or	cause	to	be	done	by	virtue	hereof.

Mary	Agnes	Wilderotter,	Director



Question: what is the percentage change in the balance of retained earnings during 2018 after adjustments?
Calculation: balance_2018 = 772709
balance_2017 = 426932
percent_change = (balance_2018 - balance_2017) / balance_2017
answer = percent_change * 100
Answer: 81.0%