Press Releases

Synopsys Posts Financial Results for First Quarter of Fiscal 2004
PRNewswire-FirstCall
MOUNTAIN VIEW, Calif.

Synopsys, Inc. (NASDAQ: SNPS), the world leader in semiconductor design software, today reported its results for the first quarter ended January 31, 2004.

For the quarter, Synopsys reported revenue of $285.3 million, a 6% increase over revenue of $268.1 million in the first quarter of fiscal 2003. Pro forma net income was $54.3 million, or $0.33 per share, in the quarter compared to pro forma net income of $52.5 million, or $0.34 per share, in the first quarter of fiscal 2003.

On a generally accepted accounting principles (GAAP) basis, for the first quarter of fiscal 2004 net income was $32.2 million, or $0.19 per share, compared to net income of $34.4 million, or $0.22 per share, for the first quarter of fiscal 2003.

Per share data for the periods presented reflects the Company's two-for- one stock split completed on September 23, 2003. Pro forma net income and net income on a GAAP basis are reconciled under "GAAP Reconciliation" below.

"Against an economic backdrop that is showing promise for the second half of the year," said Aart de Geus, Chairman and Chief Executive Officer of Synopsys, "we have forcefully moved the ball forward in our core technologies, as well as in our new growth areas. We feel confident that Synopsys is positioned first in line with customers as spending continues to pick up."

Financial Outlook

Synopsys also announced its operating model targets for the second quarter of fiscal 2004 and revised targets for the full-year, assuming the timely closing of the pending acquisition of Monolithic System Technology, Inc., (MoSys) announced today, and the pending acquisition of assets of Analog Design Automation, Inc., and taking into account the acquisitions of Accelerant Networks, Inc., and certain test-related assets of iRoC Technologies S.A., increased investment by Synopsys in certain business initiatives and the full-year impact of adverse changes in the dollar-Euro exchange rate. The MoSys and Accelerant acquisitions are discussed in a separate press release issued today.

The following 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.

  Second Quarter of Fiscal 2004 Targets:

  -- Revenue:  $285 million - $300 million
  -- Pro forma expenses: $214 million - $221 million
  -- Other income and expense: ($1.0) million - $2.0 million
  -- Fully diluted outstanding shares: 160 million - 168 million
  -- GAAP tax rate applied to pro forma and net income calculation: 31%
  -- Pro forma earnings:  $0.31 - $0.35 per share
  -- Upfront licenses as a percentage of product bookings: 30%, plus or
     minus 5%

  Fiscal Year 2004 targets:

  -- Orders: Greater than $1.4 billion
  -- Revenue:  $1.200 billion - $1.250 billion
  -- Pro forma earnings: $1.30- $1.40 per share
  -- Upfront licenses as a percentage of product bookings:  25%, plus or
     minus 5%

  Effectiveness of Guidance

The targets set forth above represent the Company's expectations only as of the date of this release and assume the timely completion of the acquisitions of MoSys and Analog Design Automation. 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 does not currently intend to report on its progress during the second quarter of fiscal 2004 or comment to analysts or investors on, or otherwise update, such targets until it releases its quarterly results in May 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 stock compensation, in-process research and development charges, integration and other acquisition-related expenses, facilities realignment charges and continuing charges relating to the Company's workforce realignment announced in the fourth quarter of fiscal 2003. 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.

The Company's management evaluates and makes operating decisions primarily based on the bookings and revenues of its core software and services business operations and the direct, ongoing and recurring costs of those operations such as 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 stock compensation, in-process 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, although it is important for investors to understand GAAP measures, providing investors with these non-GAAP measures gives investors additional important information to enable them to assess, in a way management assesses, Synopsys' current and future continuing operations.

Reconciliation of First Quarter Results

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
                                                        January 31,
  (in thousands)                                   2004              2003

  Net income on a GAAP basis                     $32,152           $34,385
  Amortization of intangible assets and
   deferred stock compensation                    34,484            28,783
  Work force realignment charges
   resolved at a lower cost than
   estimated                                      (1,141)               --
  Facilities realignment charges                   1,772                --
  Tax effect                                     (12,947)          (10,701)
  Net income on a pro forma basis                $54,320           $52,467


  Income Statement Reconciliation per Share
                                                     Three Months Ended
                                                          January 31,
  (in thousands, except per share data)             2004              2003

  Diluted earnings per share on a GAAP
   basis                                           $0.19             $0.22
  Amortization of intangible assets and
   deferred stock
   compensation per share                           0.21              0.19
  Work force realignment charges
   resolved at a lower cost than
   estimated per share                             (0.01)               --
  Facilities realignment charges per
   share                                            0.01                --
  Tax effect per share                             (0.07)            (0.07)
  Earnings per share on a pro forma
   basis                                           $0.33             $0.34

  Shares used in calculation -- GAAP             165,864           153,278
  Shares used in calculation -- pro forma        165,864           153,278


  Reconciliation of Target Operating Results

The Company completed the acquisition of Accelerant Networks on February 20, 2004 and the acquisition of certain assets of iRoC Technologies on February 23, 2004. The acquisitions of Analog Design Automation and MoSys are pending with the completion of these transactions being subject to regulatory and other conditions. At this time certain acquisition-related charges and expenses, such as amortization of intangible assets and deferred stock compensation, in-process research and development and integration and other acquisition-related expenses, which are included in GAAP expenses but which the Company would normally exclude from its pro forma expense and earnings calculations, cannot reasonably be estimated. As a result and as permitted by Regulation G, the Company has not included a reconciliation of the target pro forma expenses and earnings per share to their GAAP equivalents for either the second quarter or full-year fiscal 2004 in this release. However, the Company is including in the following tables the impact on the pro forma expense and earnings targets of known charges and expenses that have been excluded from these targets. Investors should be aware that actual GAAP expenses will be higher, and GAAP earnings lower, than the amounts shown below because the currently unknown acquisition-related charges and expenses for the transactions mentioned in this release, when determined, will be included in GAAP expenses.

  Information regarding Target Expenses           Range for Three Months
  (in thousands)                                  Ending April 30, 2004
                                                   Low               High

  Target expenses on a pro forma basis          $214,000          $221,000
  Estimated impact of known
   amortization of intangible
     assets and deferred stock
     compensation                                 31,000            33,000
  Estimated impact of known facility
   realignment charges                             1,000             2,000
  Target expenses on an adjusted basis          $246,000          $256,000


  Information regarding Target Earnings Per Share
                                                   Range for Three Months
                                                    Ending April 30, 2004
                                                    Low               High

  Target earnings per share on a pro
   forma basis                                     $0.31             $0.35
  Estimated impact of known amortization of
   intangible assets and deferred stock
   compensation per share, net of tax effect       (0.14)            (0.15)
  Estimated impact of known facility realignment
   charges per share, net of tax effect            (0.01)            (0.01)
  Target earnings per share on an
   adjusted basis                                  $0.16             $0.19


  Information regarding Target Earnings Per Share
                                                   Range for Fiscal Year
                                                  Ending October 31, 2004
                                                   Low               High

  Target earnings per share on a pro
   forma basis                                     $1.30             $1.40
  Estimated impact of known
   amortization of intangible assets
     and deferred stock compensation
      per share, net of tax effect                 (0.47)            (0.48)
  Estimated impact of known facility
   realignment charges
     per share, net of tax effect                  (0.01)            (0.01)
  Target earnings per share on an
   adjusted basis                                  $0.82             $0.91

The Company will include final financial statements for the first quarter of fiscal 2004 with its Quarterly Report on Form 10-Q to be filed in March 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_q104.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 720419, 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 second quarter of fiscal 2004 in May 2004. Finally, Synopsys will post copies of the prepared remarks of Aart de Geus, Chairman and Chief Executive Officer, 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 and IC manufacturing software products to the global electronics market, enabling the development and production 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. Actual results could differ materially from those described by these statements due to a number of factors, including but not limited to:

  -- weakness or continued budgetary caution in the semiconductor or
     electronic systems industries;
  -- lower-than-expected research and development spending by semiconductor
     and electronic systems companies;
  -- lower-than-anticipated purchases or delays in purchases of software or
     consulting services by the Company's customers;
  -- lower-than-anticipated new IC design starts;
  -- increasing competition in the market for the Company's products and
     services;
  -- failure to continue to improve the Company's existing products,
     including continued integration of its products in the Galaxy Design
     and Discovery Verification platforms, which could cause the Company to
     lose sales or could reduce the Company's operating margins;
  -- failure of pending acquisitions to close for any reason;
  -- difficulties in the ongoing integration of the products and operations
     of acquired companies or assets, including Numerical Technologies,
     Inc., Accelerant Networks, iRoC Technologies and, if closed, MoSys and
     Analog Design Automation, into the Company's products and operations;
  -- lower-than-expected sales or greater-than-expected expenses relating to
     the Analog Design Automation, Accelerant Networks, iRoC Technologies
     and MoSys  acquisitions;
  -- unexpected changes in the mix of time-based licenses and upfront
     licenses;
  -- adverse variations from currently projected customer payment terms; and
  -- continued downward pressure on maintenance orders, adversely affecting
     the Company's future level of services revenue.

In addition, the Company's actual expenses on a GAAP basis will be higher, and GAAP earnings will be lower, for the second quarter and full-year fiscal 2004 following the Company's determination of charges and expenses relating to amortization of intangible assets and deferred stock compensation, in-process research and development and integration and other acquisition-related expenses for the Accelerant Networks and iRoC Technologies acquisitions and the contemplated MoSys and Analog Design Automation acquisitions. Finally, the Company's actual expenses and earnings per share on a GAAP basis for the second quarter and full-year fiscal 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 stock compensation expenses caused by employee terminations, and integration and other acquisition-related expenses, amortization of additional intangible assets and deferred stock compensation associated with additional 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 Part III, Item 7 of Synopsys' Annual Report on Form 10-K for the fiscal year ended October 31, 2003 filed with the SEC on January 29, 2004 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 Income (1)
          Impact of Pro Forma Adjustments on Reported Net Income
                  (in thousands, except per share data)

                         Three Months Ended          Three Months Ended
                         January 31, 2004 (2)        January 31, 2003 (2)
                                           Pro                         Pro
                        GAAP  Adjustments Forma    GAAP  Adjustments  Forma
  Revenue:
    Upfront license    $59,490       --  $59,490  $54,520       --  $54,520
    Service             55,176       --   55,176   72,387       --   72,387
    Time-based license 170,598       --  170,598  141,229       --  141,229
        Total revenue  285,264       --  285,264  268,136       --  268,136
  Cost of revenue:
    Upfront license      7,426      197    7,623    3,753       --    3,753
    Service             23,573       --   23,573   22,020       --   22,020
    Time-based license   4,883       --    4,883   12,786       --   12,786
    Amortization of
     intangible assets
     and deferred
     stock
     compensation       25,240  (25,240)      --   19,903  (19,903)      --
       Total cost of
        revenue         61,122  (25,043)  36,079   58,462  (19,903)  38,559
  Gross margin         224,142   25,043  249,185  209,674   19,903  229,577
  Operating expenses:
    Research and
     development        70,337      483   70,820   67,269       --   67,269
    Sales and
     marketing          70,746      371   71,117   71,238       --   71,238
    General and
     administrative     29,137   (1,682)  27,455   22,551       --   22,551
    Amortization of
     intangible assets
     and deferred
     stock
     compensation        9,244   (9,244)      --    8,880   (8,880)      --
       Total operating
        expenses       179,464  (10,072) 169,392  169,938   (8,880) 161,058
  Operating income      44,678   35,115   79,793   39,736   28,783   68,519
  Other (expense)
   income, net          (1,069)      --   (1,069)   9,210       --    9,210
  Income before
   provision for
    income taxes        43,609   35,115   78,724   48,946   28,783   77,729
  Provision for income
   taxes                11,457   12,947   24,404   14,561   10,701   25,262
  Net income           $32,152  $22,168  $54,320  $34,385  $18,082  $52,467
  Basic earnings per
   share:
    Net income per
     share               $0.21             $0.35    $0.23             $0.35
    Weighted-average
     common shares     156,316           156,316  148,130           148,130
  Diluted earnings per
   share:
    Net income per
     share               $0.19             $0.33    $0.22             $0.34
    Weighted-average
     common shares
     and equivalents   165,864           165,864  153,278           153,278

  (1)  The Company's fiscal year and first quarter ends on the Saturday
       nearest to October 31 and January 31, respectively. 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 the Company's two-for-one stock split completed
       on September 23, 2003.


                              SYNOPSYS, INC.
           Unaudited Condensed Consolidated Balance Sheets (1)
                  (in thousands, except per share data)

                                           January 31, 2004 October 31, 2003
  ASSETS:
  Current assets:
    Cash and cash equivalents                   $412,728          $524,308
    Short-term investments                       205,040           174,049
      Total cash, cash equivalents and
       short-term investments                    617,768           698,357
    Accounts receivable, net of
     allowances of $9,896 and $8,295,
     respectively                                194,386           200,998
    Deferred income taxes                        271,739           248,425
    Income taxes receivable                       71,471            72,124
    Prepaid expenses and other current
     assets                                       29,419            19,302
            Total current assets               1,184,783         1,239,206
  Property and equipment, net                    186,530           184,313
  Long-term investments                            8,316             8,595
  Goodwill, net                                  550,912           550,732
  Intangible assets, net                         252,401           285,583
  Other assets                                    48,469            38,924
             Total assets                     $2,231,411        $2,307,353

  LIABILITIES AND STOCKHOLDERS' EQUITY:
  Current liabilities:
    Accounts payable, accrued
     liabilities and current portion of
     long-term debt                             $149,388          $204,226
    Accrued income taxes                         179,635           201,855
    Deferred revenue                             415,803           398,878
             Total current liabilities           744,826           804,959
  Deferred compensation and other
   liabilities                                    55,565            47,390
  Long-term deferred revenue                      18,284            21,594
  Stockholders' equity (2):
    Common stock,  $0.01 par value;
     400,000 shares authorized;
        155,684 and 155,837 shares
         outstanding, respectively                 1,560             1,560
    Additional paid-in capital                 1,232,577         1,198,421
    Retained earnings                            228,961           251,979
    Treasury stock, at cost; 1,433 and
     662 shares, respectively                    (52,634)          (20,733)
    Deferred stock compensation                   (5,645)           (7,170)
    Accumulated other comprehensive
     income                                        7,917             9,353
           Total stockholders' equity          1,412,736         1,433,410
           Total liabilities and
            stockholders' equity              $2,231,411        $2,307,353

  (1)  The Company's fiscal year and first quarter ends on the Saturday
       nearest to October 31 and January 31, respectively.  For presentation
       purposes, the unaudited condensed consolidated financial statements
       refer to a calendar month end.
  (2)  All common share data for all periods presented are adjusted to
       reflect the Company's two-for-one stock split completed on September
       23, 2003.

SOURCE: Synopsys, Inc.

CONTACT: INVESTORS, Jessica Kourakos, +1-650-584-1901, or EDITORIAL,
Yvette Huygen, +1-650-584-4547, both of Synopsys, Inc.

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