Synopsys, Inc. (NASDAQ: SNPS), a world leader in semiconductor design software, today reported results for its fourth quarter and fiscal year ended October 31, 2006.
For the fourth quarter, Synopsys reported revenue of $283.4 million, an 11 percent increase compared to $254.8 million for the fourth quarter of fiscal 2005. Revenue for fiscal year 2006 was $1.096 billion, an increase of 10.4 percent from the $991.9 million in fiscal 2005.
"In 2006 we delivered strong revenue and earnings growth, solid cash flow and business that was notably above plan. As a result of our technology leadership we are seeing increased momentum in customer adoptions and new products," said Aart de Geus, chairman and CEO of Synopsys. "For fiscal 2007 we are committed to reaching a 20 percent-plus operating margin by the second half of the year. Beyond 2007, we expect to drive revenue growth and expense control to achieve our next target operating margin in the mid to high 20s."
GAAP Results
On a generally accepted accounting principles (GAAP) basis, net income for the fourth quarter of fiscal 2006 was $9.6 million, or $0.07 per share, compared to net loss of ($13.5) million, or ($0.09) per share, for the fourth quarter of fiscal 2005. GAAP net income for the current period includes employee stock-based compensation expense of $15.1 million due to the adoption of Statement of Financial Accounting Standards 123( R ) (FAS 123( R )) in fiscal 2006.
GAAP net income for the fiscal year ended October 31, 2006 was $24.3 million, or $0.17 per share, compared to net loss of ($15.5) million, or ($0.11) per share, for fiscal 2005. GAAP net income for fiscal year 2006 includes employee stock-based compensation expense of $63.0 million due to the adoption of FAS 123( R ) in fiscal 2006.
Net income prior to fiscal 2006 did not include employee stock-based compensation expense related to FAS 123( R ).
Non-GAAP Results
On a non-GAAP basis, net income for the fourth quarter of fiscal 2006 was $30.1 million, or $0.21 per share, compared to non-GAAP net income of $15.3 million, or $0.10 per share, for the fourth quarter of fiscal 2005.
Non-GAAP net income for the fiscal year ended October 31, 2006 was $111.2 million, or $0.77 per share, compared to $58.1 million, or $0.40 per share, for fiscal year 2005.
Non-GAAP net income consists of GAAP net income excluding employee stock- based compensation expense calculated in accordance with FAS 123( R ) and, to the extent incurred in a particular quarter or period, amortization of intangible assets, in-process research and development charges, integration and other acquisition-related expenses, facilities and workforce realignment charges, and other significant items which, in the opinion of management, are infrequent or non-recurring. See "GAAP Reconciliation" below.
Financial Targets
Synopsys also announced its operating model targets for the first quarter and full fiscal year 2007. These targets constitute forward-looking information and are based on current expectations. They do not include any potential impact due to adoption of Staff Accounting Bulletin No. 108, which we will be required to adopt during 2007. For a discussion of factors that could cause actual results to differ materially from these targets, see "Forward-Looking Statements" below.
First Quarter of Fiscal 2007 Targets: -- Revenue: $292 million - $300 million -- GAAP expenses: $267 million - $283 million -- Non-GAAP expenses: $241 million - $251 million -- Other income and expense: $0 million - $4 million -- Fully diluted outstanding shares: 141 million - 147 million -- Tax rate applied in non-GAAP net income calculations: 28 - 29 percent -- GAAP earnings per share: $0.10 - $0.15 -- Non-GAAP earnings per share: $0.26 - $0.28 -- Revenue from backlog: more than 90 percent Note: Q107 includes an extra fiscal week that occurs every seven years. Full-Year Fiscal Year 2007 Targets -- Revenue: $1.180 billion - $1.205 billion -- Fully diluted outstanding shares: 142 million - 148 million -- Tax rate applied in non-GAAP net income calculations: 28 - 29 percent -- GAAP earnings per share: $0.60 - $0.73 -- Non-GAAP earnings per share: $1.20 - $1.28 -- Cash flow from operations: greater than $275 million GAAP Reconciliation
Synopsys' management evaluates and makes decisions about the Company's business operations primarily based on the bookings, revenue and direct, ongoing and recurring costs of those operations. Management does not believe amortization of intangible assets, in-process research and development charges, integration and other acquisition-related expenses, facilities and workforce realignment charges and other significant infrequent items are ongoing and recurring operating costs of its core software, intellectual property and service business operations. In addition, while employee stock- based compensation expense calculated in accordance with FAS 123( R ) and change in the fair value of the Company's non-qualified deferred plan compensation plan obligations constitute ongoing and recurring expenses of the Company, such expenses are excluded from non-GAAP results because they are not expenses that require cash settlement by the Company and because such expenses are not used by management to assess the core profitability of the Company's business operations. Therefore, management excludes such costs, to the extent incurred in a particular quarter, from the following GAAP financial measures included in this earnings release: total cost of revenue, gross margin, total operating expenses, operating income (loss), income (loss) before provision (benefit) for income taxes, provision (benefit) for income taxes, net income (loss) and net income (loss) per share.
For each such measure, excluding these costs provides management with more consistent, comparable information about the Company's core profitability. For example, since the Company does not acquire businesses on a predictable cycle, management would have difficulty evaluating the Company's profitability as measured by gross margin, operating margin, income before taxes and net income on a period-to-period basis unless it excluded acquisition-related charges. Similarly, the Company does not undertake significant restructuring or realignments on a regular basis, and, as a result, excludes associated charges in order to enable better and more consistent evaluations of the Company's operating expenses before and after such actions are taken. Management also uses these measures to help it make budgeting decisions, for example, as between product development expenses (which affect cost of revenue and gross margin) and research and development, sales and marketing and general and administrative expenses (which affect operating expenses and operating margin). Finally, the availability of such information helps management track performance to both internal and externally communicated financial targets and to its competitors' operating results.
Management recognizes that the use of these non-GAAP measures has certain limitations, including the fact that management must exercise judgment in determining whether certain types of charges, such as those relating to workforce reductions executed in the ordinary course, should be excluded from non-GAAP results. However, management believes that, although it is important for investors to understand GAAP measures, providing investors with these non- GAAP measures gives them additional important information to enable them to assess, in a way management assesses, Synopsys' current and future continuing operations.
Reconciliation of Fourth Quarter and Full-Fiscal Year End Results
The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP net income and earnings per share for the fourth quarter and fiscal year 2006.
GAAP to Non-GAAP Reconciliation of Fourth Quarter and Fiscal Year Results
(in thousands, except per share amounts)
Income Statement Reconciliation
(in thousands) Three Months Ended Twelve Months Ended
October 31, October 31,
2006 2005 2006 2005
GAAP net income (loss) (2) $9,631 $(13,475) $24,253 $(15,478)
Adjustments:
Amortization of intangible
assets 13,463 16,639 56,443 113,398
Stock-based compensation (1) 15,106 4,386 63,038 6,176
In-process research and
development -- -- 800 5,700
Litigation settlement -- -- -- (33,000)
Tax effect (8,068) 7,752 (33,290) (18,738)
Non-GAAP net income (2) $30,132 $15,302 $111,244 $58,058
(1) Stock-based compensation results from the Company's adoption of
FAS 123( R ) during fiscal 2006.
(2) Expenses related to the change in the fair value of the non-qualified
deferred compensation plan obligation had no effect on net income.
Earnings Per Share Reconciliation
Three Months Ended Twelve Months Ended
October 31, October 31,
2006 2005 2006 2005
GAAP earnings (loss) per
share (2) $0.07 $(0.09) $0.17 $(0.11)
Adjustments:
Amortization of intangible
assets 0.09 0.11 0.39 0.78
Stock-based compensation (1) 0.11 0.03 0.43 0.05
In-process research and
development -- -- 0.01 0.04
Litigation settlement -- -- -- (0.23)
Tax effect (0.06) 0.05 (0.23) (0.13)
Non-GAAP earnings per share (2) $0.21 $0.10 $0.77 $0.40
Shares used in calculation 141,954 146,681 144,728 146,258
(1) Stock-based compensation results from the Company's adoption of
FAS 123( R ) during fiscal 2006.
(2) Expenses related to the change in the fair value of the non-qualified
deferred compensation plan obligation had no effect on earnings per
share.
Reconciliation of Target Operating Results
The following tables reconcile the specific items excluded from GAAP in the calculation of target non-GAAP operating results for the periods indicated below:
GAAP to Non-GAAP Reconciliation of First Quarter Fiscal Year 2007 Targets
(in thousands, except per share data)
Range for Three Months
Ending January 31, 2007
Low High
Target GAAP expenses (2) (3) $267,000 $283,000
Adjustment:
Estimated impact of amortization of
intangible assets (12,000) (14,000)
Estimated impact of stock compensation
expense (1) (14,000) (18,000)
Target non-GAAP expenses (2) (3) $241,000 $251,000
(1) Stock-based compensation results from the Company's adoption of
FAS 123( R ) during the first quarter of fiscal 2006.
(2) Expenses related to the change in the fair value of the non-qualified
deferred compensation plan obligation are dependent upon future market
fluctuations and, as such, cannot be estimated in advance.
(3) Targets do not include any potential impact of SAB 108 adoption.
Range for Three Months
Ending January 31, 2007
Low High
Target GAAP earnings (loss) per share (2) (3) $0.10 $0.15
Adjustment:
Estimated impact of amortization of
intangible assets 0.10 0.08
Estimated impact of stock-based
compensation (1) 0.12 0.10
Net non-GAAP tax effect (0.06) (0.05)
Target non-GAAP earnings per share (2) (3) $0.26 $0.28
Shares used in non-GAAP calculation
(midpoint of target range) 144,000 144,000
(1) Stock-based compensation results from the Company's adoption of
FAS 123( R ) during the first quarter of fiscal 2006.
(2) Expenses related to the change in the fair value of the non-qualified
deferred compensation plan obligation will have no effect on earnings
per share.
(3) Targets do not include any potential impact of SAB 108 adoption.
GAAP to Non-GAAP Reconciliation of Fiscal Year 2007 Targets
Range for Fiscal Year
Ending October 31, 2007
Low High
Target GAAP earnings per share (2) (3) $0.60 $0.73
Adjustment:
Estimated impact of amortization of
intangible assets 0.33 0.32
Estimated impact of stock-based
compensation (1) 0.46 0.43
Net non-GAAP tax effect (0.19) (0.20)
Target non-GAAP earnings per share (2) (3) $1.20 $1.28
Shares used in non-GAAP calculation
(midpoint of target range) 145,000 145,000
(1) Stock-based compensation results from the Company's adoption of
FAS 123( R ) during the first quarter of fiscal 2006.
(2) Expenses related to the change in the fair value of the non-qualified
deferred compensation plan obligation have no effect on earnings per
share.
(3) Targets do not include any potential impact of SAB 108 adoption.
Earnings Call Open to Investors
Synopsys will hold a conference call for financial analysts and investors today at 2:00 p.m., Pacific Time. A live webcast of the call will be available at Synopsys' corporate website at https://www.synopsys.com/company/investor-relations.html . A recording of the call will be available by calling 1-800-475-6701 (320-365-3844 for international callers), access code 847573, beginning at 5:30 p.m. Pacific Time today. A webcast replay will also be available at https://www.synopsys.com/company/investor-relations.html from approximately 5:30 p.m. Pacific Time today through the time Synopsys announces its results for the first quarter of fiscal 2007 in February 2007. In addition, Synopsys will post copies of the prepared remarks of Aart de Geus, chairman and chief executive officer, and Brian Beattie, chief financial officer, on its website following the call.
Effectiveness of Information
The targets included in this release, the statements made during the earnings conference call and the information contained in the financial supplement represent Synopsys' expectations and beliefs as of the date of this release only. Although this press release, copies of the prepared remarks of the chief executive officer and chief financial officer made during the call and the financial supplement will remain available on Synopsys' website through the date of the first quarter earnings call in February 2007, their continued availability through such date does not mean that Synopsys is reaffirming or confirming their continued validity. Synopsys does not currently intend to report on its progress during the first quarter of fiscal 2007 or comment to analysts or investors on, or otherwise update, the targets given in this earnings release until it releases such results in February 2007.
Availability of Final Financial Statements
Synopsys will include final financial statements for the fourth quarter and full year fiscal 2006 in its Annual Report on Form 10-K to be filed in January 2007.
About Synopsys
Synopsys, Inc. is a world leader in electronic design automation (EDA) software for semiconductor design. The company delivers technology-leading semiconductor design and verification platforms and IC manufacturing software products to the global electronics market, enabling the development and production of complex systems-on-chips. Synopsys also provides intellectual property and design services to simplify the design process and accelerate time-to-market for its customers. Synopsys is headquartered in Mountain View, California and has offices in more than 60 locations throughout North America, Europe, Japan and Asia. Visit Synopsys online at http://www.synopsys.com/ .
Forward-Looking Statements
The statements made in this press release regarding projected financial results in the sections entitled "Financial Targets," and "Reconciliation of Target Operating Results" and certain statements made in the earnings conference call are forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those described by these statements due to a number of uncertainties, including, but not limited to:
-- weakness or continued budgetary caution in the semiconductor or
electronics industries;
-- lower-than-expected research and development spending by semiconductor
and electronic systems companies;
-- competition in the market for Synopsys' products and services; lower-
than-anticipated new IC design starts;
-- lower-than-anticipated purchases or delays in purchases of software or
consulting services by Synopsys' customers, including delays in the
renewal, or non-renewal, of Synopsys' license arrangements with major
customers;
-- failure of customers to pay license fees as scheduled;
-- unexpected changes in the mix of time-based licenses and upfront
licenses; lower-than-expected bookings of licenses on which revenue is
recognized upfront;
-- failure of our cost control efforts, including our recent efforts to
outsource certain internal functions, to result in the anticipated
savings;
-- failure to successfully develop additional intellectual property blocks
for its IP business or to develop and integrate its design for
manufacturing products;
-- difficulties in the integration of the products and operations of
acquired companies or assets into Synopsys' products and operations;
-- downward pressure on maintenance orders, adversely affecting Synopsys'
future level of service revenue; and
-- changes in the anticipated amount of employee stock-based compensation
recognized on the Company's financial statements.
In addition, Synopsys' actual expenses and earnings per share on a GAAP basis for the fiscal quarter ending January 31, 2007 and actual earnings per share and operating cash flow on a GAAP basis for fiscal year 2007 could differ materially from the targets stated under "Financial Targets" above for a number of reasons, including (i) a determination by Synopsys that any portion of its goodwill or intangible assets have become impaired, (ii) application of the actual consolidated GAAP tax rate for such periods, (iii) integration and other acquisition-related expenses, amortization of additional intangible assets associated with future acquisitions, if any, (iv)changes in the anticipated amount of employee stock-based compensation recognized on the Company's financial statements, (v) actual change in the fair value of the Company's non-qualified deferred compensation plan obligations, (vi) increases or decreases to estimated capital expenditures, and (vii) and charges driven by adoption of Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements," which we are required to adopt during fiscal year 2007. Furthermore, Synopsys' actual tax rates applied to non-GAAP net income for the first quarter and full-year fiscal 2007 could differ from the targets given in this press release as a result of a number of factors, including the actual geographic mix of revenue during the quarter. Finally, Synopsys' targets for outstanding shares in the first quarter and full-year fiscal 2007 could differ from the targets given in this press release as a result of higher than expected employee stock plan issuances, acquisitions and the extent of the Company's stock repurchase activity.
Synopsys is under no obligation to (and expressly disclaims any such obligation to) update or alter any of the forward-looking statements made in this earnings release, the conference call or the financial supplement whether as a result of new information, future events or otherwise, unless otherwise required by law.
NOTE: Synopsys is a registered trademark of Synopsys, Inc. Any other trademarks mentioned in this release are the intellectual property of their respective owners.
INVESTOR CONTACT:
Lisa L. Ewbank
Synopsys, Inc.
650-584-1901
EDITORIAL CONTACT:
Yvette Huygen
Synopsys, Inc.
650-584-4547
yvetteh@synopsys.com
SYNOPSYS, INC.
Unaudited Condensed Consolidated Statements of Operations (1) (3)
(in thousands, except per share data)
Three Months Ended October 31, 2006
Adjustments
GAAP (2) Non-GAAP
Revenue:
Time-based license $229,553 $-- $229,553
Upfront license 14,306 -- 14,306
Maintenance and service 39,525 -- 39,525
Total revenue 283,384 -- 283,384
Cost of revenue:
License 33,748 (1,704) 32,044
Maintenance and service 16,292 (806) 15,486
Amortization of intangible assets 6,772 (6,772) --
Total cost of revenue 56,812 (9,282) 47,530
Gross margin 226,572 9,282 235,854
Operating expenses:
Research and development 95,518 (7,845) 87,673
Sales and marketing 84,901 (4,020) 80,881
General and administrative 28,840 (2,533) 26,307
In-process research and development -- -- --
Amortization of intangible assets 6,691 (6,691) --
Total operating expenses 215,950 (21,089) 194,861
Operating income (loss) 10,622 30,371 40,993
Other income, net 4,542 (1,802) 2,740
Income (loss) before income taxes 15,164 28,569 43,733
Income tax provision (benefit) 5,533 8,068 13,601
Net income (loss) $9,631 $20,501 $30,132
Net income (loss) per share:
Basic $0.07 $0.21
Diluted $0.07 $0.21
Shares used in computing per share
amounts:
Basic 140,415 140,415
Diluted 141,954 141,954
Three Months Ended October 31, 2005
Adjustments
GAAP (2) Non-GAAP
Revenue:
Time-based license $192,916 -- $192,916
Upfront license 16,314 -- 16,314
Maintenance and service 45,608 -- 45,608
Total revenue 254,838 -- 254,838
Cost of revenue:
License 28,716 (471) 28,245
Maintenance and service 17,445 (262) 17,183
Amortization of intangible assets 9,251 (9,251) --
Total cost of revenue 55,412 (9,984) 45,428
Gross margin 199,426 9,984 209,410
Operating expenses:
Research and development 83,282 (2,657) 80,625
Sales and marketing 84,180 (1,682) 82,498
General and administrative 28,618 (1,364) 27,254
In-process research and development -- -- --
Amortization of intangible assets 7,388 (7,388) --
Total operating expenses 203,468 (13,091) 190,377
Operating income (loss) (4,042) 23,075 19,033
Other income, net 4,829 (2,050) 2,779
Income (loss) before income taxes 787 21,025 21,812
Income tax provision (benefit) 14,262 (7,752) 6,510
Net income (loss) $(13,475) $28,777 $15,302
Net income (loss) per share:
Basic $(0.09) $0.11
Diluted $(0.09) $0.10
Shares used in computing per share
amounts:
Basic 145,190 145,190
Diluted 145,190 146,681
(1) Synopsys' fiscal year and fourth quarter end on the Saturday nearest
to October 31. For presentation purposes, the Unaudited Condensed
Consolidated Statements of Operations refer to a calendar month end.
(2) Adjustments consist of stock-based compensation and related tax effect
under FAS 123( R ), changes in fair value of non-qualified deferred
compensation plan obligation and to the extent incurred amortization
of intangible assets, in-process research and development charges,
integration and other significant items, which in the opinion of
management are extraordinary. Pre-tax income for the three months
ended October 31, 2006 included total stock-based compensation of
$15.1 million as follows: cost of revenue $2.3 million; research &
development $6.7 million; sales & marketing $3.8 million; general &
administrative $2.3 million. For the three month period ended
October 31, 2005, approximately $4.4 million of stock-based
compensation was recorded in accordance with APB 25. During the
quarter ended October 31, 2006, the change in the fair value of the
non-qualified plan obligation was a increase of $1.8 million. This
resulted in increased compensation expense of $1.8 million
($0.2 million cost of revenue, $1.2 million research & development,
$0.2 million sales & marketing, $0.2 million general &
administrative), and a corresponding increase to other income, net.
During the quarter ended October 31, 2005, the change in the fair
value of the non-qualified plan obligation was an increase of
$2.0 million. This resulted in increased compensation expense of
$2.0 million ($0.1 million cost of revenue, $1.0 million research and
development, $0.6 million sales and marketing, $0.3 million general
and administrative) and a corresponding increase to other income, net.
There was no net effect on income before taxes or net income for each
of the respective quarters.
(3) In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements," ("SAB 108"). SAB
108 addresses the process and diversity in practice of quantifying
misstatements and provides interpretive guidance on the consideration
of the effects of prior year errors. We will be required to adopt the
provisions of SAB 108 in fiscal 2007. We are currently evaluating the
requirements of SAB 108 and have not yet determined the impact of
adoption on our financial statements.
SYNOPSYS, INC.
Unaudited Condensed Consolidated Statements of Operations (1) (3)
(in thousands, except per share amounts)
Twelve Months Ended October 31, 2006
Adjustments
GAAP (2) Non-GAAP
Revenue:
Time-based license $874,862 -- $874,862
Upfront license 63,050 -- 63,050
Maintenance and Service 157,648 -- 157,648
Total revenue 1,095,560 -- 1,095,560
Cost of revenue:
License 129,052 (6,404) 122,648
Maintenance and service 65,970 (3,168) 62,802
Amortization of intangible assets 28,505 (28,505) --
Total cost of revenue 223,527 (38,077) 185,450
Gross margin 872,033 38,077 910,110
Operating expenses:
Research and development 370,629 (31,031) 339,598
Sales and marketing 330,361 (17,545) 312,816
General and administrative 113,685 (10,346) 103,339
In-process research and development 800 (800) --
Amortization of intangible assets 27,938 (27,938) --
Total operating expenses 843,413 (87,660) 755,753
Operating income (loss) 28,620 125,737 154,357
Other income, net 14,287 (5,456) 8,831
Income (loss) before income taxes 42,907 120,281 163,188
Income tax provision (benefit) 18,654 33,290 51,944
Net income (loss) $24,253 $86,992 $111,244
Net income (loss) per share:
Basic $0.17 $0.78
Diluted $0.17 $0.77
Shares used in computing per share
amounts:
Basic 142,830 142,830
Diluted 144,728 144,728
Twelve Months Ended October 31, 2005
Adjustments
GAAP (2) Non-GAAP
Revenue:
Time-based license $743,723 -- $743,723
Upfront license 60,466 -- 60,466
Maintenance and Service 187,742 -- 187,742
Total revenue 991,931 -- 991,931
Cost of revenue:
License 102,327 (784) 101,543
Maintenance and service 70,780 (342) 70,438
Amortization of intangible assets 81,529 (81,529) --
Total cost of revenue 254,636 (82,655) 171,981
Gross margin 737,295 82,655 819,950
Operating expenses:
Research and development 320,940 (5,501) 315,439
Sales and marketing 333,642 (3,254) 330,388
General and administrative 104,989 (2,106) 102,883
In-process research and development 5,700 (5,700) --
Amortization of intangible assets 31,869 (31,869) --
Total operating expenses 797,140 (48,430) 748,710
Operating income (loss) (59,845) 131,085 71,240
Other income, net 52,056 (38,811) 13,245
Income (loss) before income taxes (7,789) 92,274 84,485
Income tax provision (benefit) 7,689 18,738 26,427
Net income (loss) $(15,478) 73,536 $58,058
Net income (loss) per share:
Basic $(0.11) $0.40
Diluted $(0.11) $0.40
Shares used in computing per share
amounts:
Basic 144,970 144,970
Diluted 144,970 146,258
(1) Synopsys' fiscal year and fourth quarter end on the Saturday nearest
to October 31. For presentation purposes, the Unaudited Condensed
Consolidated Statements of Operations refer to a calendar month end.
(2) Adjustments consist of stock-based compensation and related tax effect
under FAS 123( R ), changes in fair value of non-qualified deferred
compensation plan obligation and to the extent incurred amortization
of intangible assets, in-process research and development charges,
integration and other significant items, which in the opinion of
management are extraordinary. Pre-tax income for the fiscal year
ended October 31, 2006 included total stock-based compensation of
$63.0 million as follows: cost of revenue $9.2 million; research &
development $28.0 million; sales & marketing $16.3 million; general &
administrative $9.5 million. For the fiscal year ended October 31,
2005, approximately $6.2 million of stock-based compensation was
recorded in accordance with APB 25. During the fiscal year ended
October 31, 2006, the change in the fair value of the non-qualified
plan obligation was a increase of $5.4 million. This resulted in
increased compensation expense of $5.4 million ($0.3 million cost of
revenue, $3.0 million research & development, $1.3 million sales &
marketing, $0.8 million general & administrative), and a corresponding
increase to other income, net. During the fiscal year ended
October 31, 2005, the change in the fair value of the non-qualified
plan obligation was an increase of $5.8 million. This resulted in
increased compensation expense of $5.8 million ($0.2 million cost of
revenue, $2.9 million research and development, $1.8 million sales and
marketing, $0.9 million general and administrative) and a
corresponding increase to other income, net. There was no net effect
on income before taxes or net income for each of the respective
quarters.
(3) In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements," ("SAB 108").
SAB 108 addresses the process and diversity in practice of quantifying
misstatements and provides interpretive guidance on the consideration
of the effects of prior year errors. We will be required to adopt the
provisions of SAB 108 in fiscal 2007. We are currently evaluating the
requirements of SAB 108 and have not yet determined the impact of
adoption on our financial statements.
SYNOPSYS, INC.
Unaudited Condensed Consolidated Balance Sheets (1) (2)
(in thousands, except par value amounts)
October 31, October 31,
2006 2005
ASSETS:
Current assets:
Cash and cash equivalents $330,759 $404,436
Short-term investments 241,963 182,070
Total cash, cash equivalents and
short-term investments 572,722 586,506
Accounts receivable, net 122,584 100,178
Deferred income taxes 112,342 195,501
Income taxes receivable 42,538 48,370
Prepaid expenses and other current assets 44,304 16,924
Total current assets 894,490 947,479
Property and equipment, net 140,660 170,195
Long-term investments 4,877 8,092
Goodwill 735,643 728,979
Intangible assets, net 106,144 142,519
Long-term deferred income taxes 214,629 82,384
Other assets 69,754 61,828
Total assets $2,166,197 $2,141,476
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued liabilities $234,961 $231,359
Accrued income taxes 191,102 169,632
Deferred revenue 445,598 415,689
Total current liabilities 871,661 816,680
Deferred compensation and other liabilities 69,889 63,841
Long-term deferred revenue 53,670 42,019
Total liabilities 995,220 922,540
Stockholders' equity:
Preferred stock, $0.01 par value:
2,000 shares authorized; none outstanding -- --
Common stock, $0.01 par value:
400,000 shares authorized; 140,568 and
145,897 shares outstanding, respectively 1,406 1,459
Capital in excess of par value 1,316,321 1,263,327
Retained earnings 178,484 171,108
Treasury stock, at cost: 16,619
and 11,259 shares, respectively (312,753) (199,482)
Deferred stock compensation -- (1,475)
Accumulated other comprehensive loss (12,481) (16,001)
Total stockholders' equity 1,170,977 1,218,936
Total liabilities and stockholders' equity $2,166,197 $2,141,476
(1) Synopsys' fiscal year and fourth quarter end on the Saturday nearest
to October 31. For presentation purposes, the Unaudited Condensed
Consolidated Balance Sheets refer to a calendar month end.
(2) In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements," ("SAB 108").
SAB 108 addresses the process and diversity in practice of quantifying
misstatements and provides interpretive guidance on the consideration
of the effects of prior year errors. We will be required to adopt the
provisions of SAB 108 in fiscal 2007. We are currently evaluating
the requirements of SAB 108 and have not yet determined the impact of
adoption on our financial statements.
SYNOPSYS, INC.
Unaudited Condensed Consolidated Statement of Cash Flows (1) (2)
(in thousands)
Twelve Months Ended October 31,
2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $24,253 $(15,478)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Amortization and depreciation 114,490 168,881
Stock-based compensation 63,040 6,176
Tax benefit associated with stock options -- 6,175
In-process research and development 800 5,700
Deferred income taxes (25,503) (14,647)
Write-down of long-term assets 1,336 3,582
(Recovery) of doubtful accounts (850) (4,094)
Net change in deferred gains and
losses on cash flow hedges (2,003) (15,982)
(Gain) loss on sale of short investment (17) 502
Net changes in operating assets and liabilities,
net of acquired assets and liabilities:
Accounts receivable (19,153) 56,842
Income taxes receivable 3,749 (1,787)
Prepaid expenses and other current assets (2,483) 13,055
Other assets 458 (11,616)
Accounts payable and accrued liabilities (11,175) 22,336
Accrued income taxes 18,565 (7,851)
Deferred revenue 39,613 45,125
Deferred compensation and other liabilities 770 12,271
Net cash provided by operating activities 205,890 269,190
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisitions, net of
cash received (41,142) (174,498)
Proceeds from sales and maturities of
short-term investments 305,450 422,523
Sale of long-term investments 248 --
Purchases of short-term investments (365,261) (372,984)
Purchases of long-term investments (1,665) --
Purchases of property and equipment (48,461) (43,563)
Capitalization of software
development costs (2,946) (2,953)
Net cash used in investing activities (153,777) (171,475)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facility -- 75,000
Payments on credit facility -- (75,000)
Issuances of common stock 69,566 48,615
Purchases of treasury stock (199,992) (88,386)
Net cash used in financing activities (130,426) (39,771)
Effect of exchange rate changes on
cash and cash equivalents 4,636 (217)
Net (decrease) increase in cash and
cash equivalents (73,677) 57,727
Cash and cash equivalents, beginning
of period 404,436 346,709
Cash and cash equivalents, end of
period $330,759 $404,436
(1) Synopsys' fiscal year and fourth quarter end on the Saturday nearest
to October 31. For presentation purposes, the Unaudited Condensed
Consolidated Balance Sheets refer to a calendar month end.
(2) In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements," ("SAB 108").
SAB 108 addresses the process and diversity in practice of quantifying
misstatements and provides interpretive guidance on the consideration
of the effects of prior year errors. We will be required to adopt the
provisions of SAB 108 in fiscal 2007. We are currently evaluating the
requirements of SAB 108 and have not yet determined the impact of
adoption on our financial statements.
SOURCE: Synopsys, Inc.
CONTACT: Investor Contact: Lisa L. Ewbank, +1-650-584-1901, or Editorial
Contact: Yvette Huygen, +1-650-584-4547, or yvetteh@synopsys.com, both of
Synopsys, Inc.
Web site: http://www.synopsys.com/