Synopsys, Inc. (NASDAQ: SNPS), the world leader in semiconductor design software, today reported its results for the fourth quarter and fiscal year ended October 31, 2003. Per share data for the periods presented reflects the Company's 2:1 stock split completed during the quarter.
For the fourth quarter of fiscal 2003, Synopsys reported revenue of $316.5 million, a 2% increase over revenue of $309.3 million in the fourth quarter of fiscal 2002. Pro forma net income was $71.6 million, or $0.44 per share, in the quarter compared to pro forma net income of $73.7 million, or $0.48 per share, in the fourth quarter of fiscal 2002. For fiscal year 2003, Synopsys reported record annual revenue of $1.18 billion and pro forma net income of $252.1 million, or $1.59 per share, compared to pro forma net income of $155.7 million, or $1.11 per share, in fiscal 2002. Pro forma net income and net income on a generally accepted accounting principles ("GAAP") basis are reconciled under "GAAP Reconciliation" below.
On a GAAP basis, fourth quarter of fiscal 2003 net income was $44.6 million, or $0.27 per share, compared to a net loss of ($97.8) million, or ($0.65) per share, for fourth quarter fiscal 2002. Fourth quarter 2003 results include a charge of $14.9 million relating to the Company's decision to realign its workforce for fiscal 2004. For the fiscal year ended October 31, 2003, GAAP net income was $149.7 million, or $0.95 per share, compared to a net loss of ($200.0) million or ($1.50) per share, respectively, for fiscal year ended October 31, 2002. The difference in GAAP results for the fiscal 2002 and fiscal 2003 is primarily due to charges and expenses relating to the Avant! acquisition recorded in fiscal 2002.
"2003 was a milestone year for Synopsys," said Aart de Geus, chairman and CEO of Synopsys. "We were able to grow bookings in a very tough economic environment and became the world's largest EDA company. We are committed to driving growth in the future."
Financial Outlook
Synopsys also announced its operating model targets for the first quarter of fiscal 2004 and full-year fiscal 2004. These targets are forward-looking and based on current expectations. 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 2004 targets: -- Revenue: $275 - $290 million; -- Pro forma expenses: $205 million - $211 million -- Other income and expense: ($1.0) - $2.0 million -- Fully diluted outstanding shares: 159 million - 167 million -- GAAP tax rate applied to pro forma and net income calculation: 31% -- Pro forma earnings: $0.28 - $0.32 per share -- Upfront licenses as a percentage of product bookings: 28% - 33% Fiscal Year 2004 targets: -- Orders: $1.425 - $1.475 billion -- Revenue: $1.200 - $1.250 billion -- Pro forma earnings: $1.50- $1.60 per share -- Upfront licenses as a percentage of product bookings: 20% - 25% Effectiveness of Guidance
The targets set forth above represent the Company's expectations only as of the date of this release. Although this release will remain available on the Company's website, its continued availability does not indicate that the Company is reaffirming or confirming its continued validity. The Company will not report on its progress during the first quarter of fiscal 2004 or comment to analysts or investors on, or otherwise update, such targets until it releases its quarterly results in February 2004.
GAAP Reconciliation
Pro forma net income is a non-GAAP financial measure under Section 244.101 of Regulation G. This measure consists of GAAP net income excluding, as applicable, amortization of intangible assets and deferred compensation, in- process research and development charges, integration and other acquisition- related expenses, and in Q4 of fiscal year 2003, charges relating to the Company's workforce realignment. Intangible assets consist primarily of purchased technology, contract rights intangible, customer-installed base/relationships, trademarks and tradenames, covenants not to compete and customer backlog. Pro forma net income is reduced by the amount of additional taxes that the Company would accrue if it used pro forma results instead of GAAP results to calculate the Company's tax liability.
Company management evalutes and makes operating decisions based on the performance of its core software and services business operations and the direct, ongoing and recurring costs of those operations such as bookings, revenues, cost of revenues, and research and development, sales and marketing and general and administrative expenses. Management does not believe amortization of intangible assets and deferred compensation, in-progress research and development charges, integration and other acquisition-related expenses and workforce realignment charges are ordinary, ongoing and recurring operating charges for the Company's core software and services business operations. Therefore, management calculates the non-GAAP financial measures used in this earnings release excluding these charges, and uses these non-GAAP financial measures to enable it to analyze better and more consistently the period-to-period financial performance of its core business operations. Management believes that though it is important for investors to understand GAAP measures, providing investors with these non-GAAP measures provides investors additional important information to enable them to assess, in a way management assesses, Synopsys' current and future continuing operations.
The following table reconciles the specific items excluded from GAAP in the calculation of pro forma net income for the periods shown below:
Income Statement Reconciliation Three Months Ended Twelve Months Ended
October 31, October 31,
(in thousands, except per share
data) 2003 2002 2003 2002
Net income on a GAAP basis 44,575 (97,836) 149,724 (199,993)
Amortization of intangible assets
and deferred compensation 32,836 31,999 128,174 62,585
In-process research and development -- 5,200 19,850 87,700
Integration costs -- 11,262 -- 128,528
Insurance premium -- 240,781 -- 240,781
Work force realignment charges 14,856 -- 14,856 --
Collection of Avant! acquired
accounts receivable originally
assumed uncollectible -- -- (3,000) --
Pre-merger liabilities resolved at a
lower cost than estimated (4,714) -- (5,330) --
Tax effect (15,956) (117,733) (52,135) (163,858)
Net income on a pro forma basis 71,597 73,673 252,139 155,743
Income Statement Reconciliation Per
Share
Diluted earnings per share on a GAAP
basis 0.27 (0.65) 0.95 (1.50)
Amortization of intangible assets
and deferred
compensation per share 0.20 0.21 0.81 0.47
In-process research and development
per share -- 0.03 0.13 0.66
Integration costs per share -- 0.08 -- 0.96
Insurance premium per share -- 1.61 -- 1.80
Work force realignment charges per
share 0.09 -- 0.09 --
Collection of Avant! acquired
accounts receivable
originally assumed uncollectible
per share -- -- (0.02) --
Pre-merger liabilities resolved at a
lower cost than
estimated per share (0.03) -- (0.03) --
Tax effect per share and effect of
dilutive shares (0.09) (0.80) (0.34) (1.28)
Earnings per share on a pro forma
basis 0.44 0.48 1.59 1.11
The specific items excluded from GAAP in calculating the first quarter and full year fiscal 2004 targets are shown below:
Target Operating Expenses Reconciliation Range for Three Months
Ending January 31, 2004
(in thousands, except per share data) Low High
Total target expenses on a GAAP basis 239,000 248,000
Estimated amortization of intangible
assets and deferred compensation 31,000 33,000
Estimated work force realignment
charges 3,000 4,000
Target expenses on an pro forma basis 205,000 211,000
Low High Low High
Target earnings per share on a GAAP
basis $0.15 $0.18 $1.10 $1.18
Estimated amortization of intangible
assets and
deferred compensation per share,
net of tax effect $0.12 $0.12 $0.39 $0.40
Estimated work force realignment
charges per share, net of tax effect $0.01 $0.02 $0.01 $0.02
Target earnings per share on a pro
forma basis $0.28 $0.32 $1.50 $1.60
The Company will include final financial statements for the fourth quarter and full year fiscal 2003 with its Annual Report on Form 10-K to be filed in January 2004.
Additional Financial Information Available on Synopsys Website
In connection with the issuance of this earnings release, Synopsys is making available to investors supplemental financial information, which can be found on Synopsys' website at http://www.synopsys.com/corporate/invest/finsupp/supldis_q403.pdf . Synopsys currently intends to provide this information on a quarterly basis.
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 http://www.synopsys.com/corporate/invest/invest.html. A recording of the call will be available by calling 1-800-475-6701 (320-365-3844 for international callers), access code 705786, beginning at 5:30 p.m. Pacific Time today. A webcast replay will also be available at http://www.synopsys.com/corporate/invest/invest.html from approximately 5:30 p.m. Pacific Time today through the time of the announcement of the Company's results for the first quarter of fiscal 2004 in February 2004. Finally, Synopsys will post copies of the prepared remarks of Aart de Geus, Chairman and Chief Executive Officer of Synopsys, and Steve Shevick, Chief Financial Officer, on its website at http://www.synopsys.com/corporate/invest/invest.html following the call.
About Synopsys
Synopsys, Inc. is the world leader in electronic design automation (EDA) software for semiconductor design. The Company delivers technology-leading semiconductor design and verification platforms to the global electronics market, enabling the development of complex systems-on-chips (SoCs). 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 more than 60 offices located throughout North America, Europe, Japan and Asia. Visit Synopsys online at http://www.synopsys.com/.
Forward-Looking Statements
The sections of this earnings release entitled "Financial Outlook" and "GAAP Reconciliation" contain forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Our actual results could differ materially from those described by these statements due to a number of factors, including but not limited to:
-- continued or increased weakness in the semiconductor or electronic
systems industries;
-- lower-than-expected research and development spending by semiconductor
and electronic systems companies;
-- lower-than-anticipated purchases of software or consulting services by
the Company's customers;
-- difficulties in the ongoing integration of the products and operations
of acquired companies into Synopsys' products and operations;
-- failure to timely complete scheduled new product development or product
update releases incorporating new functionality;
-- changes in the expected mix of time-based licenses and upfront
licenses;
-- variations from currently projected customer payment terms;
-- continued downward pressure on maintenance orders, adversely affecting
the Company's future level of services revenue;
-- increasing competition in the market for the Company's products and
services;
-- fluctuations in foreign currency exchange rates; and
-- the effect of international political conflicts or hostilities on
customer purchases.
In addition, the Company's actual expenses and earnings per share on a GAAP basis for the fiscal quarter ending January 31, 2004 and earnings per share for the fiscal year ending October 31, 2004 could differ materially from the targets stated under "Financial Outlook" above for a number of reasons, including a determination by the Company that any portion of its intangible assets have become impaired, changes in deferred compensation expenses caused by employee terminations, changes to the size or scope of the work force realignment described above, and integrated and other acquisition-related expenses, amortization of additional intangible assets and deferred compensation associated with future acquisitions, if any.
For further discussion of these and other factors that may cause results to differ from those projected in this release, readers are referred to documents Synopsys has filed with the Securities and Exchange Commission, specifically the section contained in Synopsys' quarterly report on Form 10-Q filed with the SEC on September 15, 2003 entitled "Factors That May Affect Future Results." Synopsys is under no obligation to (and expressly disclaims any such obligation to) update or alter these forward-looking statements whether as a result of new information, future events or otherwise.
NOTE: Synopsys is a registered trademark of Synopsys, Inc. All other trademarks mentioned in this release are the intellectual property of their respective owners.
SYNOPSYS, INC.
Pro Forma Unaudited Condensed Consolidated Statements of Operations (1)
Impact of Pro Forma Adjustments on Reported Net Income (Loss)
Three Months Ended October 31, 2003(2)
GAAP Adjustments Pro Forma
Revenue:
Product $87,051 -- $87,051
Service 61,543 -- 61,543
Ratable license 167,859 -- 167,859
Total revenue 316,453 -- 316,453
Cost of revenue:
Product 4,816 -- 4,816
Service 21,252 (2,620) 18,632
Ratable license 13,465 -- 13,465
Amortization of intangible assets
and deferred stock compensation 23,897 (23,897) --
Total cost of revenue 63,430 (26,517) 36,913
Gross margin 253,023 26,517 279,540
Operating expenses:
Research and development 79,283 (6,172) 73,111
Sales and marketing 80,295 (4,637) 75,658
General and administrative 23,467 3,287 26,754
In-process research and development -- -- --
Amortization of intangible assets
and deferred stock compensation 8,939 (8,939) --
Integration -- -- --
Total operating expenses 191,984 (16,461) 175,523
Operating income (loss) 61,039 42,978 104,017
Other income (expense), net 2,052 -- 2,052
Income before provision (benefit)
for income taxes 63,091 42,978 106,069
Provision (benefit) for income taxes 18,516 15,956 34,472
Net income (loss) $44,575 $27,022 $71,597
Basic earnings per share:
Net income (loss) $0.29 $0.46
Weighted average common shares 155,018 155,018
Diluted earnings per share:
Net income (loss) $0.27 $0.44
Weighted average common shares
and equivalents 164,381 164,381
Three Months Ended October 31, 2002(2)
GAAP Adjustments Pro Forma
Revenue:
Product $93,249 -- $93,249
Service 78,965 -- 78,965
Ratable license 137,042 -- 137,042
Total revenue 309,256 -- 309,256
Cost of revenue:
Product 3,632 -- 3,632
Service 20,273 -- 20,273
Ratable license 11,416 -- 11,416
Amortization of intangible assets
and deferred stock compensation 20,570 (20,570) --
Total cost of revenue 55,891 (20,570) 35,321
Gross margin 253,365 20,570 273,935
Operating expenses:
Research and development 68,609 -- 68,609
Sales and marketing 72,687 -- 72,687
General and administrative 20,308 -- 20,308
In-process research and development 5,200 (5,200) --
Amortization of intangible assets
and deferred stock compensation 11,429 (11,429) --
Integration 11,262 (11,262) --
Total operating expenses 189,495 (27,891) 161,604
Operating income (loss) 63,870 48,461 112,331
Other income (expense), net (242,325) 240,781 (1,544)
Income before provision (benefit)
for income taxes (178,455) 289,242 110,787
Provision (benefit) for income taxes (80,619) 117,733 37,114
Net income (loss) $(97,836) $171,509 $73,673
Basic earnings per share:
Net income (loss) $(0.65) $0.49
Weighted average common shares 149,640 149,640
Diluted earnings per share:
Net income (loss) $(0.65) $0.48
Weighted average common shares
and equivalents 149,640 152,814
(1) The Company's fiscal year ends on the Saturday nearest to October 31.
For presentation purposes, the unaudited condensed consolidated
financial statements refer to a calendar month end.
(2) All common share and per share data for all periods presented are
adjusted to reflect he Company's stock split completed on September
23, 2003.
SYNOPSYS, INC.
Pro Forma Unaudited Condensed Consolidated Statements of Operations (1)
Impact of Pro Forma Adjustments on Reported Net Income (Loss)
(in thousands, except per share data)
Twelve Months Ended October 31, 2003(2)
GAAP Adjustments Pro Forma
Revenue:
Product $298,280 -- $298,280
Service 260,679 -- 260,679
Ratable license 618,024 -- 618,024
Total revenue 1,176,983 -- 1,176,983
Cost of revenue:
Product 15,950 -- 15,950
Service 77,996 (2,620) 75,376
Ratable license 53,515 -- 53,515
Amortization of intangible assets
and deferred stock compensation 92,856 (92,856) --
Total cost of revenue 240,317 (95,476) 144,841
Gross margin 936,666 95,476 1,032,142
Operating expenses:
Research and development 285,880 (6,172) 279,708
Sales and marketing 310,692 (4,637) 306,055
General and administrative 90,021 6,287 96,308
In-process research and development 19,850 (19,850) --
Amortization of intangible assets
and deferred stock compensation 35,318 (35,318) --
Integration -- -- --
Total operating expenses 741,761 (59,690) 682,071
Operating income (loss) 194,905 155,166 350,071
Other income (expense), net 24,084 (616) 23,468
Income before provision (benefit)
for income taxes 218,989 154,550 373,539
Provision (benefit) for income taxes 69,265 52,135 121,400
Net income (loss) $149,724 $102,415 $252,139
Basic earnings per share:
Net income (loss) $0.99 $1.67
Weighted average common shares 151,251 151,251
Diluted earnings per share:
Net income (loss) $0.95 $1.59
Weighted average common shares
and equivalents 158,326 158,326
Twelve Months Ended October 31, 2002(2)
GAAP Adjustments Pro Forma
Revenue:
Product $245,193 -- $245,193
Service 287,747 -- 287,747
Ratable license 373,594 -- 373,594
Total revenue 906,534 -- 906,534
Cost of revenue:
Product 15,319 -- 15,319
Service 78,167 -- 78,167
Ratable license 45,737 -- 45,737
Amortization of intangible assets
and deferred stock compensation 33,936 (33,936) --
Total cost of revenue 173,159 (33,936) 139,223
Gross margin 733,375 33,936 767,311
Operating expenses:
Research and development 225,545 -- 225,545
Sales and marketing 264,809 -- 264,809
General and administrative 78,461 -- 78,461
In-process research and development 87,700 (87,700) --
Amortization of intangible assets
and deferred stock compensation 28,649 (28,649) --
Integration 128,528 (128,528) --
Total operating expenses 813,692 (244,877) 568,815
Operating income (loss) (80,317) 278,813 198,496
Other income (expense), net (208,623) 240,781 32,158
Income before provision (benefit)
for income taxes (288,940) 519,594 230,654
Provision (benefit) for income taxes (88,947) 163,858 74,911
Net income (loss) $(199,993) $355,736 $155,743
Basic earnings per share:
Net income (loss) $(1.50) $1.17
Weighted average common shares 133,616 133,616
Diluted earnings per share:
Net income (loss) $(1.50) $1.11
Weighted average common shares
and equivalents 133,616 140,308
(1) The Company's fiscal year ends on the Saturday nearest to October 31.
For presentation purposes, the unaudited condensed consolidated
financial statements refer to a calendar month end.
(2) All common share and per share data for all periods presented are
adjusted to reflect he Company's stock split completed on September
23, 2003.
SYNOPSYS, INC.
Unaudited Condensed Consolidated Balance Sheets (1)
(in thousands, except per share data)
October 31, October 31,
2003 2002
ASSETS:
Current assets:
Cash and cash equivalents $524,308 $312,580
Short-term investments 174,049 102,153
Cash, cash equivalents and short-
term investments 698,357 414,733
Accounts receivable, net of
allowances of $8,295 and $11,565,
respectively 200,998 207,206
Deferred income taxes 248,425 282,867
Prepaid expenses and other 91,426 24,509
Total current assets 1,239,206 929,315
Property and equipment, net 184,313 185,040
Long-term investments 8,595 39,386
Goodwill, net 550,732 434,554
Intangible assets, net 285,583 355,334
Other assets 38,924 35,085
Total assets $2,307,353 $1,978,714
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable, accrued
liabilities and current portion of
long-term debt $204,226 $248,212
Accrued income taxes 201,855 169,912
Deferred revenue 398,878 359,245
Total current liabilities 804,959 777,369
Deferred compensation and other
liabilities 47,390 36,387
Long-term deferred revenue 21,594 51,477
Stockholders' equity
Common stock, $.01 par value;
400,000 shares authorized;
155,837 and 147,124 shares
outstanding, respectively 780 735
Additional paid-in capital 1,199,201 1,039,386
Retained earnings 251,979 198,863
Treasury stock, at cost (20,733) (116,499)
Deferred stock compensation (7,170) (8,858)
Accumulated other comprehensive
income (loss) 9,353 (146)
Total stockholders' equity 1,433,410 1,113,481
Total liabilities and
stockholders' equity $2,307,353 $1,978,714
(1) The Company's fiscal year ends on the Saturday nearest to October 31.
For presentation purposes, the unaudited condensed consolidated
financial statements refer to a calendar month end.
SOURCE: Synopsys, Inc.
CONTACT: INVESTOR CONTACT: Jessica Kourakos, +1-650-584-4289, or
EDITORIAL CONTACT: Craig Cochran, +1-650-584-4230, both of Synopsys, Inc.
Web site: http://www.synopsys.com/