MOUNTAIN VIEW, Calif., May 21 /PRNewswire-FirstCall/ -- Synopsys, Inc. (NASDAQ: SNPS), a world leader in software and IP for semiconductor design and manufacturing, today reported results for its second quarter ended April 30, 2008.

For the second quarter, Synopsys reported revenue of $324.6 million, a 10.8 percent increase compared to $292.9 million for the second quarter of fiscal 2007.

"Synopsys continues to deliver predictable revenue growth and solid earnings expansion," said Aart de Geus, chairman and CEO of Synopsys. "We are seeing good momentum as our leading technology, comprehensive solutions and strong field support make us a long-term, reliable partner to our customers."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the second quarter of fiscal 2008 was $39.4 million, or $0.27 per share, compared to $41.3 million, or $0.28 per share, for the second quarter of fiscal 2007, which included a $12.5 million litigation settlement received from Magma Design Automation, recorded in other income, net.

Non-GAAP Results

On a non-GAAP basis, net income for the second quarter of fiscal 2008 was $59.7 million, or $0.41 per share, compared to non-GAAP net income of $53.2 million, or $0.35 per share, for the second quarter of fiscal 2007.

Non-GAAP net income consists of GAAP net income excluding employee share-based compensation expense calculated in accordance with FAS 123® and, to the extent incurred in a particular quarter or period, amortization of intangible assets (which could include in-process research and development charges), facilities realignment charges, and other significant items, and the related tax-effect of each, which, in the opinion of management, are infrequent or non-recurring. See "GAAP Reconciliation" below.

Financial Targets

Synopsys also provided its operating model targets for the third quarter and full fiscal year 2008. These targets constitute forward-looking information and are 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.

  Third Quarter of Fiscal Year 2008 Targets:
  -- Revenue: $335 million - $343 million
  -- GAAP expenses: $290 million - $308 million
  -- Non-GAAP expenses: $260 million - $270 million
  -- Other income and expense: $0 - $3 million
  -- Tax rate applied in non-GAAP net income calculations: 26 - 27 percent
  -- Fully diluted outstanding shares: 143 million - 148 million
  -- GAAP earnings per share: $0.18 - $0.24
  -- Non-GAAP earnings per share: $0.38 - $0.40
  -- Revenue from backlog: greater than 90 percent


  Full Fiscal Year 2008 Targets:
  -- Revenue: $1.325 billion - $1.340 billion
  -- Tax rate applied in non-GAAP net income calculations: ~ 26 percent
  -- Fully diluted outstanding shares: 146 million - 149 million
  -- GAAP earnings per share: $0.99 - $1.11
  -- Non-GAAP earnings per share: $1.60 - $1.64
  -- Cash flow from operations: ~ $325 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 (including in-process research and development charges), facilities 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 share-based compensation expense calculated in accordance with FAS 123( R ) constitutes an ongoing and recurring expense of the Company, such expense is excluded from non-GAAP results because it is not an expense that requires cash settlement by the Company and because such expense is not used by management to assess the core performance of the Company's business operations. Therefore, management excludes such costs, to the extent incurred in a particular quarter, from the following historical and targeted GAAP financial measures included in this earnings release: total cost of revenue, gross margin, total operating expenses, operating income, income before provision (benefit) for income taxes, provision (benefit) for income taxes, net income and net income per share.

For each such measure, excluding these costs provides management with more consistent, comparable information about the Company's core performance. For example, 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 Second Quarter Results

The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP net income and earnings per share for periods indicated below:

        GAAP to Non-GAAP Reconciliation of Second Quarter Results
           (unaudited, in thousands, except per share amounts)

  Income Statement Reconciliation      Three Months Ended  Six Months Ended
                                            April 30,          April 30,
                                          2008     2007      2008     2007

  GAAP net income                       $39,387  $41,265   $85,832  $64,622
  Adjustments:
    Amortization of intangible assets    12,407   11,854    24,031   25,206
    Share-based compensation             17,841   14,349    33,485   30,564
    Litigation settlement                   -    (12,500)      -    (12,500)
    Facilities realignment charge           -       (645)      -       (645)
    Tax effect                           (9,975)  (1,162)  (17,672) (10,082)
  Non-GAAP net income                   $59,660  $53,161  $125,676  $97,165



                                        Three Months Ended  Six Months Ended
                                              April 30,        April 30,
                                            2008     2007     2008     2007

  GAAP earnings per share                  $0.27    $0.28    $0.58    $0.43
  Adjustments:
    Amortization of intangible assets       0.09     0.08     0.16     0.17
    Share-based compensation                0.12     0.10     0.23     0.21
    Litigation settlement                      -    (0.08)       -    (0.08)
    Facilities realignment charge              -    (0.01)       -    (0.01)
    Tax effect                             (0.07)   (0.01)   (0.12)   (0.07)
  Non-GAAP earnings per share              $0.41    $0.35    $0.85    $0.65

  Shares used in calculation             145,271  149,783  147,801  148,782



  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 Third Quarter Fiscal Year 2008 Targets
                 (in thousands, except per share amounts)

                                                    Range for Three Months
                                                     Ending July 31, 2008
                                                      Low            High

  Target GAAP expenses                              $290,000       $308,000
  Adjustment:
    Estimated impact of amortization of intangible
     assets                                          (14,000)       (20,000)
    Estimated impact of share-based compensation     (16,000)       (18,000)
  Target non-GAAP expenses                          $260,000       $270,000



                                                     Range for Three Months
                                                      Ending July 31, 2008
                                                       Low            High

  Target GAAP earnings per share                       $0.18          $0.24
  Adjustment:
    Estimated impact of amortization of intangible
     assets                                             0.14           0.10
    Estimated impact of share-based compensation        0.12           0.11
    Net non-GAAP tax effect                            (0.06)         (0.05)
  Target non-GAAP earnings per share                   $0.38          $0.40

  Shares used in non-GAAP calculation
   (midpoint of target range)                        145,500        145,500



     GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2008 Targets

                                                      Range for Fiscal Year
                                                     Ending October 31, 2008
                                                        Low          High
  Target GAAP earnings per share                       $0.99        $1.11
  Adjustment:
    Estimated impact of amortization of intangible
     assets                                             0.37         0.32
    Estimated impact of share-based compensation        0.47         0.44
    Net non-GAAP tax effect                            (0.23)       (0.23)
  Target non-GAAP earnings per share                   $1.60        $1.64

  Shares used in non-GAAP calculation
   (midpoint of target range)                        147,500      147,500



  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 (+1-320-365-3844 for international callers), access code 921713, beginning at 4:00 p.m. Pacific Time today. A webcast replay will also be available on the website from approximately 5:30 p.m. Pacific Time today through the time Synopsys announces its results for the third quarter fiscal 2008 in August. 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 third quarter earnings call in August 2008, 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 third quarter of fiscal 2008 or comment to analysts or investors on, or otherwise update, the targets given in this earnings release.

Availability of Final Financial Statements

Synopsys will include final financial statements for the second quarter of fiscal 2008 in its quarterly report on Form 10-Q to be filed by June 12, 2008.

About Synopsys

Synopsys, Inc. (NASDAQ: SNPS) is a world leader in electronic design automation (EDA), supplying the global electronics market with the software, intellectual property (IP) and services used in semiconductor design and manufacturing. Synopsys' comprehensive, integrated portfolio of implementation, verification, IP, manufacturing and field-programmable gate array (FPGA) solutions helps address the key challenges designers and manufacturers face today, such as power and yield management, system-to-silicon verification and time-to-results. These technology-leading solutions help give Synopsys customers a competitive edge in bringing the best products to market quickly while reducing costs and schedule risk. Synopsys is headquartered in Mountain View, California, and has more than 60 offices located throughout North America, Europe, Japan, Asia and India. 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;
  -- changes in the mix of time-based licenses and upfront licenses;
  -- lower-than-expected bookings;
  -- failure of Synopsys' cost control efforts, including 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; and
  -- difficulties in the integration of the products and operations of
     acquired companies or assets into Synopsys' products and operations.

In addition, Synopsys' actual expenses and earnings per share on a GAAP and non-GAAP basis for the fiscal quarter ending July 31, 2008 and actual expenses, earnings per share and operating cash flow on a GAAP and non-GAAP basis for fiscal year 2008 could differ materially from the targets stated under "Financial Targets" above for a number of reasons, including, but not limited to, (i) a determination by Synopsys that any portion of its goodwill or intangible assets have become impaired, (ii) application of the actual consolidated GAAP and non-GAAP tax rates for such periods, or judgment by management, based upon the status of pending audits or new accounting interpretations such as FASB Interpretation No. 48, to increase or decrease an income tax asset or liability, (iii) integration and other acquisition-related expenses including amortization of additional intangible assets associated with future acquisitions, if any, (iv) changes in the anticipated amount of employee share-based compensation expense recognized on Synopsys' financial statements, (v) actual change in the fair value of Synopsys' non-qualified deferred compensation plan obligations, (vi) increases or decreases to estimated capital expenditures, (vii) changes driven by new accounting rules, regulations, interpretations or pronouncements, (viii) general economic conditions, and (ix), other risks as detailed in our SEC filings, including those described in the "Risk Factors" section in our Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2008. Furthermore, Synopsys' actual tax rates applied to income for the third quarter and fiscal year 2008 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 third quarter and fiscal year 2008 could differ from the targets given in this press release as a result of higher than expected employee stock plan issuances or stock option exercises, acquisitions and the extent of Synopsys' 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.

Synopsys is a registered trademark of Synopsys, Inc. Any other trademarks mentioned in this release are the 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)
                 (in thousands, except per share amounts)

                                      Three Months Ended   Six Months Ended
                                           April 30,           April 30,
                                        2008      2007      2008      2007
  Revenue:
    Time-based license               $278,220  $243,096  $546,080  $494,702
    Upfront license                    12,214    14,624    24,735    28,127
    Maintenance and service            34,119    35,208    69,203    70,309
      Total revenue                   324,553   292,928   640,018   593,138
  Cost of revenue:
    License                            41,709    34,657    82,107    70,177
    Maintenance and service            16,167    15,550    32,046    31,696
    Amortization of intangible assets   5,816     5,210    10,849    11,919
      Total cost of revenue            63,692    55,417   125,002   113,792
  Gross margin                        260,861   237,511   515,016   479,346
  Operating expenses:
    Research and development           95,275    91,956   187,789   187,840
    Sales and marketing                82,887    79,012   160,257   168,820
    General and administrative         26,171    22,551    50,012    52,228
    Amortization of intangible assets   6,591     6,644    13,182    13,288
      Total operating expenses        210,924   200,163   411,240   422,176
  Operating income                     49,937    37,348   103,776    57,170
  Other income, net                       151    19,668     6,481    27,602
  Income before income taxes           50,088    57,016   110,257    84,772
  Provision for income taxes           10,701    15,751    24,425    20,150
  Net income                          $39,387   $41,265   $85,832   $64,622

  Net income per share:
    Basic                               $0.28     $0.29     $0.60     $0.45
    Diluted                             $0.27     $0.28     $0.58     $0.43

  Shares used in computing per share
   amounts:
    Basic                             141,844   144,370   143,926   143,527
    Diluted                           145,271   149,783   147,801   148,782

  (1) Synopsys' second quarter ends on May 3, 2008 and May 5, 2007,
      respectively.  For presentation purposes, the Unaudited Condensed
      Consolidated Statements of Operations refer to a calendar month end.



                              SYNOPSYS, INC.
           Unaudited Condensed Consolidated Balance Sheets (1)
                 (in thousands, except par value amounts)

                                            April 30, 2008  October 31, 2007
  ASSETS:
  Current assets:
    Cash and cash equivalents                   $574,889        $579,327
    Short-term investments                       242,609         405,126
      Total cash, cash equivalents and
       short-term investments                    817,498         984,453
    Accounts receivable, net                     171,993         123,900
    Deferred income taxes                        127,345         123,165
    Income taxes receivable                       42,724          42,525
    Prepaid expenses and other current assets     57,337          53,496
      Total current assets                     1,216,897       1,327,539
  Property and equipment, net                    127,223         131,866
  Goodwill                                       765,576         767,087
  Intangible assets, net                          54,778          78,792
  Long-term deferred income taxes                168,056         216,642
  Other assets                                    97,629          95,411
      Total assets                            $2,430,159      $2,617,337

  LIABILITIES AND STOCKHOLDERS' EQUITY:
  Current liabilities:
    Accounts payable and accrued liabilities    $176,746        $246,209
    Accrued income taxes                          10,280         207,572
    Deferred revenue                             522,078         577,295
      Total current liabilities                  709,104       1,031,076
  Deferred compensation and other liabilities     83,322          84,648
  Accrued income taxes                           137,597               -
  Long-term deferred revenue                      65,310          65,220
      Total liabilities                          995,333       1,180,944
  Stockholders' equity:
    Preferred stock,  $0.01 par value:
     2,000 shares authorized; none outstanding         -               -
    Common stock,  $0.01 par value:
     400,000 shares authorized; 141,756 and
     146,365 shares outstanding, respectively      1,417           1,464
    Capital in excess of par value             1,435,900       1,401,965
    Retained earnings                            342,424         263,977
    Treasury stock, at cost: 15,512
     and 10,867 shares, respectively            (348,332)       (234,918)
    Accumulated other comprehensive
     income (loss)                                 3,417           3,905
      Total stockholders' equity               1,434,826       1,436,393
      Total liabilities and stockholders'
       equity                                 $2,430,159      $2,617,337

  (1) Synopsys' second quarter ends on May 3, 2008.  For presentation
      purposes, the Unaudited Condensed Consolidated Balance Sheets refer to
      a calendar month end.



                              SYNOPSYS, INC.
      Unaudited Condensed Consolidated Statements of Cash Flows (1)
                              (in thousands)

                                                  Six Months Ended April 30,
                                                      2008           2007
  CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                         $85,832       $64,622
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Amortization and depreciation                     50,244        52,676
    Share-based compensation                          33,486        30,565
    Allowance for doubtful accounts                      429          (330)
    (Gain) on sale of investments                     (1,192)           (1)
    (Gain) on sale of land                                 -        (4,284)
    Deferred income taxes                              3,523        10,677
    Net change in deferred gains and losses on
     cash flow hedges                                  7,495         2,990
    Net changes in operating assets and
     liabilities, net of acquired assets
     and liabilities:
      Accounts receivable                            (46,982)      (43,935)
      Prepaid expenses and other current assets      (10,300)      (11,272)
      Other assets                                        26           487
      Accounts payable and accrued liabilities       (69,502)      (59,642)
      Accrued income taxes                            (2,873)       (4,592)
      Deferred revenue                               (67,309)      107,196
      Deferred compensation and other liabilities        980          (926)
    Net cash (used in) provided by operating
     activities                                      (16,143)      144,231

  CASH FLOWS FROM INVESTING ACTIVITIES:
    Proceeds from sales and maturities of
     short-term investments                          419,181       113,351
    Purchases of short-term investments             (253,699)     (178,782)
    Proceeds from sales of long-term investments          77             -
    Purchases of long-term investments                (6,694)            -
    Purchases of property and equipment              (19,498)      (24,520)
    Proceeds from sale of land                             -        26,298
    Capitalization of software development costs      (1,408)       (1,592)
    Net cash provided by (used in) investing
     activities                                      137,959       (65,245)

  CASH FLOWS FROM FINANCING ACTIVITIES:
    Payments on lease obligations                     (1,452)            -
    Issuances of common stock                         36,949       130,240
    Purchases of common stock                       (170,052)      (81,394)
    Net cash (used in) provided by financing
     activities                                     (134,555)       48,846
  Effect of exchange rate changes on cash and cash
   equivalents                                         8,301         2,483
  Net change in cash and cash equivalents             (4,438)      130,315
  Cash and cash equivalents, beginning of period     579,327       330,759
  Cash and cash equivalents, end of period          $574,889      $461,074

  (1) Synopsys' second quarter ends on May 3, 2008 and May 5, 2007,
      respectively.  For presentation purposes, the Unaudited Consolidated
      Statements of Cash Flows refer to a calendar month end.

SOURCE: Synopsys, Inc.

CONTACT: investors, Lisa L. Ewbank, +1-650-584-1901, or editorial,
Yvette Huygen, +1-650-584-4547, yvetteh@synopsys.com, both of Synopsys, Inc.

Web site: http://www.synopsys.com/