Press Releases

Synopsys Posts Financial Results for Third Quarter of Fiscal 2006
PRNewswire-FirstCall
MOUNTAIN VIEW, Calif.

Synopsys, Inc. (NASDAQ: SNPS), a world leader in semiconductor design software, today reported results for its third fiscal quarter ended July 31, 2006.

For the third quarter, Synopsys reported revenue of $277.2 million, a 10 percent increase compared to $251.5 million for the third quarter of fiscal 2005.

"Our third quarter was excellent, as we again executed well on all fronts," said Aart de Geus, chairman and CEO of Synopsys. "Our momentum is visible through strong financial results, customer adoptions of our technology and the introduction of innovative new products."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the third quarter of fiscal 2006 was $7.6 million, or $0.05 per share, compared to net income of $17.3 million, or $0.12 per share, for the third quarter of fiscal 2005, which included a one-time gain associated with a litigation settlement received in connection with the acquisition of Nassda Corporation. GAAP net income for the current period includes employee stock- based compensation expense of $15.6 million due to the adoption of Statement of Financial Accounting Standards 123® (FAS 123®) in fiscal 2006. Net income prior to fiscal 2006 did not include employee stock-based compensation expense related to FAS 123®.

Non-GAAP Results

On a non-GAAP basis, net income for the third quarter of fiscal 2006 was $30.1 million, or $0.21 per share, compared to non-GAAP net income of $15.3 million, or $0.11 per share, for the third quarter of fiscal 2005.

Non-GAAP net income consists of GAAP net income excluding employee stock- based compensation expense calculated in accordance with FAS 123® 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 fourth quarter and full fiscal year 2006. 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.

  Fourth Quarter of Fiscal 2006 Targets:
  -- Revenue:  $274 million - $282 million
  -- GAAP expenses:  $265 million - $281 million
  -- Non-GAAP expenses:  $239 million - $249 million
  -- Other income and expense:  $0 million - $4 million
  -- Fully diluted outstanding shares:  140 million - 144 million
  -- Tax rate applied in non-GAAP net income calculations:  30 percent
  -- GAAP earnings per share: $ 0.01 - $0.05
  -- Non-GAAP earnings per share:  $0.17 - $0.19
  -- Revenue from backlog:  more than 90 percent

  Full-Year Fiscal Year 2006 Targets
  -- Revenue:  $1,086 million - $1,094 million
  -- Fully diluted outstanding shares:  142 million - 147 million
  -- Tax rate applied in non-GAAP net income calculations:  31 percent
  -- GAAP earnings per share:  $0.11 - $0.15
  -- Non-GAAP earnings per share:  $0.73 - $0.75
  -- GAAP cash flow from operations:  greater than $175 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® 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 Third 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 the third quarter fiscal 2006.

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

  Income Statement Reconciliation      Three Months Ended  Nine Months Ended
  (in thousands)                            July 31,            July 31,
                                       2006         2005     2006     2005
  GAAP net income (loss) (2)          $7,550      $17,294  $14,622  $(2,003)
  Adjustments:
   Amortization of intangible assets  13,354       24,018   42,980   96,759
   Stock-based compensation (1)       15,601          652   47,932    1,790
   In-process research and
    development                           --           --      800    5,700
   Litigation settlement                  --      (33,000)      --  (33,000)
   Tax effect                         (6,359)       6,381  (25,222) (26,490)
  Non-GAAP net income (2)            $30,146      $15,345  $81,112  $42,756

  (1) Stock-based compensation results from the Company's implementation of
  FAS 123® 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 Nine Months Ended
                                             July 31,          July 31,
                                          2006     2005     2006     2005
  GAAP earnings (loss) per share (2)       $0.05    $0.12    $0.10   $(0.01)
  Adjustments:
   Amortization of intangible assets        0.09     0.17     0.29     0.66
   Stock-based compensation (1)             0.11     0.01     0.33     0.01
   In-process research and development        --       --     0.01     0.04
   Litigation settlement                      --    (0.23)      --    (0.23)
   Tax effect                              (0.04)    0.04    (0.17)   (0.18)
  Non-GAAP earnings per share (2)          $0.21    $0.11    $0.56    $0.29

  Shares used in calculation             143,964  145,668  145,662  146,119

  (1) Stock-based compensation results from the Company's implementation of
  FAS 123® 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 Estimated 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 Fourth Quarter Fiscal Year 2006
                                   Targets
                    (in thousands, except per share data)

                                                  Range for Three Months
                                                  Ending October 31, 2006
                                                  Low               High
  Target GAAP expenses (2)                      $265,000          $281,000
  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)                  $239,000          $249,000

  (1) Stock-based compensation results from the Company's implementation of
  FAS 123® 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.


                                                  Range for Three Months
                                                  Ending October 31, 2006
                                                   Low               High
  Target GAAP earnings (loss) per
   share (2)                                       $0.01             $0.05
  Adjustment:
    Estimated impact of amortization of
     intangible assets                              0.10              0.09
    Estimated impact of stock-based
     compensation (1)                               0.13              0.10
    Net non-GAAP tax effect                        (0.07)            (0.05)
  Target non-GAAP earnings per
   share (2)                                       $0.17             $0.19

  Shares used in non-GAAP calculation
   (midpoint of target range)                    142,000           142,000

  (1) Stock-based compensation results from the Company's implementation of
  FAS 123® 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.


     GAAP to Non-GAAP Reconciliation of Fiscal Year 2006 Targets

                                                    Range for Fiscal Year
                                                   Ending October 31, 2006
                                                    Low               High
  Target GAAP earnings per share (2)               $0.11             $0.15
  Adjustment:
    Estimated impact of amortization of
     intangible assets                              0.40              0.39
    Estimated impact of stock-based
     compensation (1)                               0.45              0.43
    Net non-GAAP tax effect                        (0.23)            (0.22)
  Target non-GAAP earnings per share (2)           $0.73             $0.75

  Shares used in non-GAAP calculation
   (midpoint of target range)                    144,500           144,500

  (1) Stock-based compensation results from the Company's implementation of
  FAS 123® 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.


  Additional Financial Information Available on Synopsys Website

In connection with this earnings release, Synopsys is making available to investors supplemental financial information which can be found on Synopsys' website at  https://www.synopsys.com/content/dam/synopsys/company/investor-relations/earnings2006/earnings_q306.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 838366, 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 to the time Synopsys announces its results for the fourth quarter of fiscal 2006 in November 2006. 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 fourth quarter earnings call in November 2006, 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 fourth quarter of fiscal 2006 or comment to analysts or investors on, or otherwise update, the targets given in this earnings release until it releases such results in November 2006.

Availability of Final Financial Statements

Synopsys will include final financial statements for the third quarter of fiscal 2006 in its Quarterly Report on Form 10-Q to be filed in September 2006.

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 Estimated 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;
  -- 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 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 October 31, 2006 and actual earnings per share and operating cash flow on a GAAP basis for fiscal year 2006 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) increases or decreases in employee stock-based compensation expense caused by employee terminations or otherwise, (v) actual change in the fair value of the Company's non-qualified deferred compensation plan obligations, and (vi) increases or decreases to estimated capital expenditures. Furthermore, Synopsys' actual tax rates applied to non-GAAP net income for the fourth quarter and full-year fiscal 2006 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 fourth quarter and full-year fiscal 2006 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.

For further discussion of these and other factors that may cause results to differ from those projected in this release, readers are referred to the reports which Synopsys has filed with the Securities and Exchange Commission (SEC), and which are available at www.sec.gov, particularly the information contained in the section of Part I, Item 2 of Synopsys' Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2006 filed with the SEC on June 8, 2006 entitled "Factors That May Affect Future Results." 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)
                 (in thousands, except per share amounts)

                                        Three Months Ended July 31, 2006
                                                   Adjustments
                                           GAAP        (2)      Non-GAAP
  Revenue:
    Time-based license                    $224,782        $--    $224,782
    Upfront license                         14,418         --      14,418
    Maintenance and service                 38,008         --      38,008
        Total revenue                      277,208         --     277,208
  Cost of revenue:
    License                                 32,665     (1,558)     31,107
    Maintenance and service                 16,201       (778)     15,423
    Amortization of intangible assets        6,579     (6,579)         --
       Total cost of revenue                55,445     (8,915)     46,530
  Gross margin                             221,763      8,915     230,678
  Operating expenses:
    Research and development                93,972     (6,413)     87,559
    Sales and marketing                     81,171     (3,719)     77,452
    General and administrative              26,692     (2,291)     24,401
    In-process research and development         --         --          --
    Amortization of intangible assets        6,775     (6,775)         --
       Total operating expenses            208,610    (19,198)    189,412
  Operating income (loss)                   13,153     28,113      41,266
  Other income, net                          2,421        842       3,263
  Income (loss) before income taxes         15,574     28,955      44,529
  Income tax provision (benefit)             8,024      6,359      14,383
  Net income (loss)                         $7,550    $22,596     $30,146

  Net income (loss) per share:
    Basic                                    $0.05                  $0.21
    Diluted                                  $0.05                  $0.21

  Shares used in computing per share
   amounts:
    Basic                                  142,538                142,538
    Diluted                                143,964                143,964


                                        Three Months Ended July 31, 2005
                                                   Adjustments
                                           GAAP        (2)      Non-GAAP
  Revenue:
    Time-based license                    $188,742         --    $188,742
    Upfront license                         16,171         --      16,171
    Maintenance and service                 46,537         --      46,537
        Total revenue                      251,450         --     251,450
  Cost of revenue:
    License                                 25,357       (107)     25,250
    Maintenance and service                 17,837        (34)     17,803
    Amortization of intangible assets       16,214    (16,214)         --
       Total cost of revenue                59,408    (16,355)     43,053
  Gross margin                             192,042     16,355     208,397
  Operating expenses:
    Research and development                82,679       (807)     81,872
    Sales and marketing                     83,573       (452)     83,121
    General and administrative              25,602       (257)     25,345
    In-process research and development         --         --          --
    Amortization of intangible assets        7,804     (7,804)         --
       Total operating expenses            199,658     (9,320)    190,338
  Operating income (loss)                   (7,616)    25,675      18,059
  Other income, net                         37,200    (34,005)      3,195
  Income (loss) before income taxes         29,584     (8,330)     21,254
  Income tax provision (benefit)            12,290     (6,381)      5,909
  Net income (loss)                        $17,294    $(1,949)    $15,345

  Net income (loss) per share:
    Basic                                    $0.12                  $0.11
    Diluted                                  $0.12                  $0.11

  Shares used in computing per share
   amounts:
    Basic                                  143,830                143,830
    Diluted                                145,668                145,668

  (1) Synopsys' third quarter ends on the Saturday nearest to July 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®, 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
  July 31, 2006 included total stock-based compensation of $15.6 million as
  follows:  cost of revenue $2.4 million; research & development $6.8
  million; sales & marketing $4.0 million; general & administrative $2.4
  million.  For the three month period ended July 31, 2005, approximately
  $0.7 million of stock-based compensation was recorded in accordance with
  APB 25.  During the quarter ended July 31, 2006, the change in the fair
  value of the non-qualified plan obligation was a decrease of
  $0.84 million.  This resulted in decreased compensation expense of
  $0.84 million ($0.04 million cost of revenue, $0.4 million research &
  development, $0.3 million sales & marketing, $0.1 million general &
  administrative), and a corresponding decrease to other income, net.
  During the quarter ended July 31, 2005, the change in the fair value of
  the non-qualified plan obligation was an increase of $1.04 million. This
  resulted in increased compensation expense of $1.04 million ($0.04
  million cost of revenue, $0.5 million research and development, $0.3
  million sales and marketing, $0.2 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.


                              SYNOPSYS, INC.
      Unaudited Condensed Consolidated Statements of Operations (1)
                 (in thousands, except per share amounts)

                                         Nine Months Ended July 31, 2006
                                                   Adjustments
                                           GAAP        (2)      Non-GAAP
  Revenue:
    Time-based license                    $645,309         --    $645,309
    Upfront license                         48,744         --      48,744
    Maintenance and Service                118,123         --     118,123
        Total revenue                      812,176         --     812,176
  Cost of revenue:
    License                                 95,304     (4,700)     90,604
    Maintenance and service                 49,678     (2,362)     47,316
    Amortization of intangible assets       21,733    (21,733)         --
       Total cost of revenue               166,715    (28,795)    137,920
  Gross margin                             645,461     28,795     674,256
  Operating expenses:
    Research and development               275,111    (23,186)    251,925
    Sales and marketing                    245,460    (13,525)    231,935
    General and administrative              84,845     (7,813)     77,032
    In-process research and development        800       (800)         --
    Amortization of intangible assets       21,247    (21,247)         --
       Total operating expenses            627,463    (66,571)    560,892
  Operating income (loss)                   17,998     95,366     113,364
  Other income, net                          9,745     (3,654)      6,091
  Income (loss) before income taxes         27,743     91,712     119,455
  Income tax provision (benefit)            13,121     25,222      38,343
  Net income (loss)                        $14,622    $66,490     $81,112

  Net income (loss) per share:
    Basic                                    $0.10                  $0.56
    Diluted                                  $0.10                  $0.56

  Shares used in computing per share
   amounts:
    Basic                                  143,629                143,629
    Diluted                                145,662                145,662


                                         Nine Months Ended July 31, 2005
                                                   Adjustments
                                           GAAP        (2)      Non-GAAP
  Revenue:
    Time-based license                    $550,807         --    $550,807
    Upfront license                         44,152         --      44,152
    Maintenance and Service                142,134         --     142,134
        Total revenue                      737,093         --     737,093
  Cost of revenue:
    License                                 73,611       (313)     73,298
    Maintenance and service                 53,335        (80)     53,255
    Amortization of intangible assets       72,278    (72,278)         --
       Total cost of revenue               199,224    (72,671)    126,553
  Gross margin                             537,869     72,671     610,540
  Operating expenses:
    Research and development               237,658     (2,844)    234,814
    Sales and marketing                    249,462     (1,572)    247,890
    General and administrative              76,371       (742)     75,629
    In-process research and development      5,700     (5,700)         --
    Amortization of intangible assets       24,481    (24,481)         --
       Total operating expenses            593,672    (35,339)    558,333
  Operating income (loss)                  (55,803)   108,010      52,207
  Other income, net                         47,227    (36,761)     10,466
  Income (loss) before income taxes         (8,576)    71,249      62,673
  Income tax provision (benefit)            (6,573)    26,490      19,917
  Net income (loss)                        $(2,003)    44,759     $42,756

  Net income (loss) per share:
    Basic                                   $(0.01)                 $0.30
    Diluted                                 $(0.01)                 $0.29

  Shares used in computing per share
   amounts:
    Basic                                  144,899                144,899
    Diluted                                144,899                146,119

  (1) Synopsys' third quarter ends on the Saturday nearest to July 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®, 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 nine months ended
  July 31, 2006 included total stock-based compensation of $47.9 million as
  follows:  cost of revenue $6.9 million; research & development $21.4
  million; sales & marketing $12.4 million; general & administrative $7.2
  million.  For the nine month period ended July 31, 2005, approximately
  $1.8 million of stock-based compensation was recorded in accordance with
  APB 25.  During the nine months ended July 31, 2006, the change
  in the fair value of the non-qualified plan obligation was a increase of
  $3.7 million.  This resulted in increased compensation expense of
  $3.7 million ($0.2 million cost of revenue, $1.8 million research &
  development, $1.1 million sales & marketing, $0.6 million general &
  administrative), and a corresponding increase to other income, net.
  During the nine months ended July 31, 2005, the change in the fair value
  of the non-qualified plan obligation was an increase of $3.8 million. This
  resulted in increased compensation expense of $3.8 million ($0.2
  million cost of revenue, $1.9 million research and development, $1.1
  million sales and marketing, $0.6 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.


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

                                                       July 31,  October 31,
                                                         2006       2005
  ASSETS:
  Current assets:
    Cash and cash equivalents                          $269,717   $404,436
    Short-term investments                              241,557    182,070
    Total cash, cash equivalents and
     short-term investments                             511,274    586,506
    Accounts receivable, net                            110,875    100,178
    Deferred income taxes                                89,704    195,501
    Income taxes receivable                              46,254     48,370
    Prepaid expenses and other current assets            23,118     16,924
            Total current assets                        781,225    947,479
  Property and equipment, net                           164,278    170,195
  Long-term investments                                   4,616      8,092
  Goodwill                                              744,493    728,979
  Intangible assets, net                                113,595    142,519
  Long-term deferred income taxes                       188,890     82,384
  Other assets                                           68,284     61,828
             Total assets                            $2,065,381 $2,141,476

  LIABILITIES AND STOCKHOLDERS' EQUITY:
  Current liabilities:
    Accounts payable and accrued liabilities           $195,279   $231,359
    Accrued income taxes                                163,973    169,632
    Deferred revenue                                    428,607    415,689
             Total current liabilities                  787,859    816,680
  Deferred compensation and other liabilities            75,566     63,841
  Long-term deferred revenue                             45,417     42,019
             Total liabilities                          908,842    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; 140,409
     and 145,897 shares outstanding,
     respectively                                         1,404      1,459
    Capital in excess of par value                    1,307,569  1,263,327
    Retained earnings                                   175,667    171,108
    Treasury stock, at cost: 16,769 and
     11,259 shares, respectively                       (315,402)  (199,482)
    Deferred stock compensation                              --     (1,475)
    Accumulated other comprehensive loss                (12,699)   (16,001)
           Total stockholders' equity                 1,156,539  1,218,936
           Total liabilities and
            stockholders' equity                      2,065,381 $2,141,476

  (1)  The Company's third quarter and fiscal year ends on the Saturday
       nearest to July 31 and October 31, respectively.
       For presentation purposes, the Unaudited Condensed Consolidated
       Balance Sheets refer to a calendar month end.


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

                                                Nine Months Ended July 31,
                                                   2006              2005
  CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                              $14,622           $(2,003)
  Adjustments to reconcile net income
   (loss) to net cash provided
   by operating activities:
     Amortization and depreciation                85,546           138,129
     Stock-based compensation                     47,935             1,790
     In-process research and development             800             5,700
     Deferred income taxes                         3,832           (22,058)
     Write-down of long-term assets                1,336             2,564
     Provision for or (recovery) of
      doubtful accounts                             (125)           (3,594)
     Net change in deferred gains and losses
      on cash flow hedges                           (777)          (13,995)
     Gain (loss) on sale of short investment         (17)              323
     Net changes in operating assets and
      liabilities, net of acquired assets
      and liabilities:
         Accounts receivable                      (9,337)           47,825
         Income taxes receivable                      33                61
         Prepaid expenses and other
          current assets                          (5,220)            9,647
         Other assets                                 (3)           (9,317)
         Accounts payable and
          accrued liabilities                    (41,684)           (2,268)
         Accrued income taxes                     (6,086)           (5,481)
         Deferred revenue                         15,027            37,851
         Deferred compensation and
          other liabilities                          261             9,681
     Net cash provided by
      operating activities                       106,143           194,855

  CASH FLOWS FROM INVESTING ACTIVITIES:
     Cash paid for acquisitions, net of
      cash received                              (20,850)         (171,420)
     Proceeds from sales and maturities
      of short-term investments                  221,311           252,417
     Sale of long-term investments                   248                --
     Purchases of short-term investments        (281,126)         (200,256)
     Purchases of long-term investments           (1,539)               --
     Purchases of property and equipment         (34,129)          (34,728)
     Capitalization of software
      development costs                           (2,342)           (2,215)
     Net cash used in investing activities      (118,427)         (156,202)

  CASH FLOWS FROM FINANCING ACTIVITIES:
     Issuances of common stock                    43,139            24,421
     Purchases of treasury stock                (169,544)          (88,385)
     Net cash used in financing activities      (126,405)          (63,964)
  Effect of exchange rate changes on
   cash and cash equivalents                       3,970            (1,444)
  Net (decrease) increase in cash and
   cash equivalents                             (134,719)          (26,755)
  Cash and cash equivalents, beginning
   of period                                     404,436           346,709
  Cash and cash equivalents, end of
   period                                       $269,717          $319,954

  (1)  Synopsys' third quarter ends on the Saturday nearest to July 31.
       For presentation purposes, the Unaudited Condensed Consolidated
       Statements of Cash Flows refer to a calendar month end.

SOURCE: Synopsys, Inc.

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

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