Press Releases

Synopsys Posts Financial Results for Fourth Quarter and Fiscal Year 2007
PRNewswire-FirstCall
MOUNTAIN VIEW, Calif.
(NASDAQ:SNPS)

MOUNTAIN VIEW, Calif., Dec. 6 /PRNewswire-FirstCall/ -- Synopsys, Inc. (NASDAQ: SNPS), a world leader in software and IP for semiconductor design and manufacturing, today reported results for its fourth quarter and fiscal year ended October 31, 2007.

For the fourth quarter, Synopsys reported revenue of $315.2 million, an 11.2 percent increase compared to $283.4 million for the fourth quarter of fiscal 2006. Revenue for fiscal year 2007 was $1.212 billion, an increase of 10.7 percent from $1.096 billion in fiscal 2006.

"We finished out the fourth quarter and fiscal 2007 with very strong financial and operating results," said Aart de Geus, chairman and CEO of Synopsys. "With unparalleled revenue visibility in the industry, a promising technology pipeline of new products and capabilities, and a favorable customer landscape, we have a solid outlook for 2008."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the fourth quarter of fiscal 2007 was $41.0 million, or $0.27 per share, compared to $10.1 million, or $0.07 per share, for the fourth quarter of fiscal 2006.

GAAP net income for fiscal year 2007 was $130.5 million, or $0.87 per share, compared to $24.7 million or $0.17 per share, for fiscal 2006.

Non-GAAP Results

On a non-GAAP basis, net income for the fourth quarter of fiscal 2007 was $60.0 million, or $0.40 per share, compared to non-GAAP net income of $30.7 million, or $0.22 per share, for the fourth quarter of fiscal 2006.

Non-GAAP net income for fiscal year 2007 was $204.9 million, or $1.37 per share, compared to non-GAAP net income of $111.8 million, or $0.77 per share, for fiscal 2006.

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, 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 provided its operating model targets for the first 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.

  First Quarter of Fiscal Year 2008 Targets:
  --  Revenue: $308 million - $316 million
  --  GAAP expenses: $262 million - $278 million
  --  Non-GAAP expenses: $236 million - $246 million
  --  Other income and expense: $3 million - $6 million
  --  Tax rate applied in non-GAAP net income calculations: 27 - 28 percent
  --  Fully diluted outstanding shares: 146 million - 151 million
  --  GAAP earnings per share: $0.20 - $0.28
  --  Non-GAAP earnings per share: $0.37 - $0.39
  --  Revenue from backlog: greater than 90 percent


  Full-Year Fiscal Year 2008 Targets:
  --  Revenue: $1.300 billion - $1.315 billion
  --  Tax rate applied in non-GAAP net income calculations: 27 - 28 percent
  --  Fully diluted outstanding shares: 146 million - 151 million
  --  GAAP earnings per share: $0.94 - $1.11
  --  Non-GAAP earnings per share: $1.54 - $1.60
  --  Cash flow from operations: greater than $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, 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 share-based compensation expense calculated in accordance with FAS 123® and change in the fair value of the Company's non-qualified deferred 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 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, since the Company does not acquire businesses on a predictable cycle, management would have difficulty evaluating the Company's performance as measured by gross margin, operating margin, income before taxes and net income on a period-to-period basis unless it excluded acquisition-related charges. Similarly, the Company does not undertake significant restructuring or realignments on a regular basis, and, as a result, excludes associated charges in order to enable better and more consistent evaluations of the Company's operating expenses before and after such actions are taken. Management also uses these measures to help it make budgeting decisions, for example, as between product development expenses (which affect cost of revenue and gross margin) and research and development, sales and marketing and general and administrative expenses (which affect operating expenses and operating margin). Finally, the availability of such information helps management track performance to both internal and externally communicated financial targets and to its competitors' operating results.

Management recognizes that the use of these non-GAAP measures has certain limitations, including the fact that management must exercise judgment in determining whether certain types of charges, such as those relating to workforce reductions executed in the ordinary course, should be excluded from non-GAAP results. However, management believes that, although it is important for investors to understand GAAP measures, providing investors with these non-GAAP measures gives them additional important information to enable them to assess, in a way management assesses, Synopsys' current and future continuing operations.

Reconciliation of Fourth Quarter Results

The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP net income and earnings per share for the fourth quarter and full fiscal 2007.

GAAP to Non-GAAP Reconciliation of Fourth Quarter and Fiscal Year 2007 Results

           (unaudited, in thousands, except per share amounts)

  Income Statement Reconciliation     Three Months Ended Twelve Months Ended
                                          October 31,        October 31,
                                         2007     2006      2007      2006
  GAAP net income                      $41,014  $10,120  $130,491   $24,742
  Adjustments:
    Amortization of intangible assets   12,703   13,463    50,096    56,443
    Share-based compensation            15,336   15,106    62,010    63,038
    In-process research and development  1,100      -       3,200       800
    Litigation settlement                  -        -     (12,500)      -
    Facilities realignment charge          -        -        (645)      -
    Tax effect                         (10,112)  (7,997)  (27,746)  (33,219)
  Non-GAAP net income                  $60,041  $30,692  $204,906  $111,804



                                      Three Months Ended Twelve Months Ended
                                           October 31,        October 31,
                                          2007     2006      2007      2006
  GAAP earnings per share                $0.27    $0.07     $0.87     $0.17
  Adjustments:
    Amortization of intangible assets     0.08     0.09      0.33      0.39
    Share-based compensation              0.10     0.11      0.42      0.43
    In-process research and development   0.01      -        0.02      0.01
    Litigation settlement                  -        -       (0.08)      -
    Facilities realignment charge          -        -       (0.01)      -
    Tax effect                           (0.06)   (0.05)    (0.18)    (0.23)
  Non-GAAP earnings per share            $0.40    $0.22     $1.37     $0.77

  Shares used in calculation           150,701  141,954   149,716   144,728



  Reconciliation of Target Operating Results

The following tables reconcile the specific items excluded from GAAP in the calculation of target non-GAAP operating results for the periods indicated below:

GAAP to Non-GAAP Reconciliation of First Quarter Fiscal Year 2008 Targets
                 (in thousands, except per share amounts)

                                                  Range for Three Months
                                                 Ending January 31, 2008
                                                  Low               High
  Target GAAP expenses                          $262,000          $278,000
  Adjustment:
      Estimated impact of amortization of
       intangible assets                         (11,000)          (13,000)
      Estimated impact of share-based
       compensation                              (15,000)          (19,000)
  Target non-GAAP expenses                      $236,000          $246,000



                                                   Range for Three Months
                                                  Ending January 31, 2008
                                                    Low              High
  Target GAAP earnings per share                   $0.20             $0.28
  Adjustment:
      Estimated impact of amortization of
       intangible assets                            0.09              0.07
      Estimated impact of share-based
       compensation                                 0.13              0.10
      Net non-GAAP tax effect                      (0.05)            (0.06)
  Target non-GAAP earnings per share               $0.37             $0.39

  Shares used in non-GAAP calculation
   (midpoint of target range)                    148,500           148,500



       GAAP to Non-GAAP Reconciliation of Fiscal Year 2008 Targets

                                                    Range for Fiscal Year
                                                   Ending October 31, 2008
                                                    Low               High
  Target GAAP earnings per share                   $0.94             $1.11
  Adjustment:
      Estimated impact of amortization of
       intangible assets                            0.27              0.24
      Estimated impact of share-based
       compensation                                 0.51              0.47
      Net non-GAAP tax effect                      (0.18)            (0.22)
  Target non-GAAP earnings per share               $1.54             $1.60

  Shares used in non-GAAP calculation
   (midpoint of target range)                    148,500           148,500



  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 893911, beginning at 5:30 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 first quarter fiscal 2008 in February 2008. In addition, Synopsys will post copies of the prepared remarks of Aart de Geus, chairman and chief executive officer, and Brian Beattie, chief financial officer, on its website following the call.

Effectiveness of Information

The targets included in this release, the statements made during the earnings conference call and the information contained in the financial supplement represent Synopsys' expectations and beliefs as of the date of this release only. Although this press release, copies of the prepared remarks of the chief executive officer and chief financial officer made during the call and the financial supplement will remain available on Synopsys' website through the date of the first quarter earnings call in February 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 first 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 fiscal 2007 in its Annual Report on Form 10-K to be filed by January 2, 2008.

About Synopsys

Synopsys, Inc. (NASDAQ: SNPS) is a world leader in electronic design automation (EDA) software for semiconductor design. The company delivers technology-leading system and semiconductor design and verification platforms, IC manufacturing and yield optimization solutions, semiconductor intellectual property and design services to the global electronics market. These solutions enable the development and production of complex integrated circuits and electronic systems. Through its comprehensive solutions, Synopsys addresses the key challenges designers and manufacturers face today, including power management, accelerated time to yield and system-to-silicon verification. 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 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 of licenses on which revenue is
      recognized upfront;
  --  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 or to develop and integrate Synopsys' design for manufacturing
      and yield management products; 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 January 31, 2008 and actual 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, and (vii) other risks as detailed in our SEC filings, including those described in the "Risk Factors" section in our most recent Quarterly Report on Form 10-Q. Furthermore, Synopsys' actual tax rates applied to non-GAAP net income for the first 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 first 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    Twelve Months Ended
                                     October 31,           October 31,
                                    2007      2006       2007       2006
  Revenue:
    Time-based license            $257,935  $229,553  $1,004,026   $874,862
    Upfront license                 20,416    14,306      67,524     63,050
    Maintenance and service         36,882    39,525     140,919    157,648
        Total revenue              315,233   283,384   1,212,469  1,095,560
  Cost of revenue:
    License                         39,151    33,748     146,420    129,052
    Maintenance and service         16,899    16,292      64,358     65,970
    Amortization of intangible
     assets                          6,032     6,772      23,487     28,505
       Total cost of revenue        62,082    56,812     234,265    223,527
  Gross margin                     253,151   226,572     978,204    872,033
  Operating expenses:
    Research and development        97,016    95,518     379,221    370,629
    Sales and marketing             85,158    84,901     349,395    330,361
    General and administrative      25,330    28,028     101,735    112,873
    In-process research and
     development                     1,100       -         3,200        800
    Amortization of intangible
     assets                          6,671     6,691      26,609     27,938
       Total operating expenses    215,275   215,138     860,160    842,601
  Operating income                  37,876    11,434     118,044     29,432
  Other income, net                  9,324     4,542      47,755     14,287
  Income before income taxes        47,200    15,976     165,799     43,719
  Provision for income taxes         6,186     5,856      35,308     18,977
  Net income                       $41,014   $10,120    $130,491    $24,742

  Net income per share:
    Basic                            $0.28     $0.07       $0.91      $0.17
    Diluted                          $0.27     $0.07       $0.87      $0.17

  Shares used in computing per
   share amounts:
    Basic                          144,973   140,415     143,953    142,830
    Diluted                        150,701   141,954     149,716    144,728

  (1)  Synopsys' fourth quarter ends on November 3, 2007 and October 29,
       2006, 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) (2) (3)
                 (in thousands, except par value amounts)

                                               October 31,       October 31,
  ASSETS:                                         2007               2006
  Current assets:
    Cash and cash equivalents                   $579,327           $330,759
    Short-term investments                       405,126            241,963
    Total cash, cash equivalents and
     short-term investments                      984,453            572,722
    Accounts receivable, net                     123,900            122,584
    Deferred income taxes                        123,165            112,342
    Income taxes receivable                       42,525             42,538
    Prepaid expenses and other current assets     53,496             44,304
             Total current assets              1,327,539            894,490
  Property and equipment, net                    131,866            140,660
  Goodwill                                       767,087            735,643
  Intangible assets, net                          78,792            106,144
  Long-term deferred income taxes                216,465            206,254
  Other assets                                    95,411             74,631
             Total assets                     $2,617,160         $2,157,822

  LIABILITIES AND STOCKHOLDERS' EQUITY:
  Current liabilities:
    Accounts payable and accrued liabilities    $246,209           $234,149
    Accrued income taxes                         207,572            191,349
    Deferred revenue                             577,295            445,598
             Total current liabilities         1,031,076            871,096
  Deferred compensation and other liabilities     84,648             69,889
  Long-term deferred revenue                      65,220             53,670
             Total liabilities                 1,180,944            994,655
  Stockholders' equity:
    Preferred stock,  $0.01 par value:
     2,000 shares authorized; none outstanding      -                  -
    Common stock, $0.01 par value:
     400,000 shares authorized; 146,365 and
     140,568 shares outstanding, respectively      1,464              1,406
    Capital in excess of par value             1,401,368          1,316,252
    Retained earnings                            264,397            170,743
    Treasury stock, at cost: 10,867
     and 16,619 shares, respectively            (234,918)          (312,753)
    Accumulated other comprehensive
     income (loss)                                 3,905            (12,481)
             Total stockholders' equity        1,436,216          1,163,167
             Total liabilities and
              stockholders' equity            $2,617,160         $2,157,822

  (1)  Synopsys' fourth quarter ends on November 3, 2007 and October 29,
       2006, respectively.  For presentation purposes, the Unaudited
       Condensed Consolidated Balance Sheets refer to a calendar month end.

  (2)  Synopsys adopted the provisions of Staff Accounting Bulletin (SAB)
       No. 108 in the fourth quarter of fiscal 2007 and recorded an
       adjustment to its opening fiscal 2007 retained earnings balance of
       approximately $15 million and related balance sheet accounts
       (property and equipment, net, long-term deferred income taxes, and
       capital in excess of par value).

  (3)  The prior year tax provision and related balance sheet accounts
       (long-term deferred income taxes, capital in excess of par value and
       retained earnings accounts) have been revised to reflect immaterial
       adjustments originating in years prior to fiscal 2006.



                              SYNOPSYS, INC.
     Unaudited Condensed Consolidated Statement of Cash Flows (1) (2)
                              (in thousands)

                                             Twelve Months Ended October 31,
                                                  2007              2006
  CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                    $130,491           $24,742
  Adjustments to reconcile net income to
   net cash provided by operating activities:
      Amortization and depreciation              105,367           114,490
      Share-based compensation                    62,011            63,040
      In-process research and development          3,200               800
      Deferred income taxes                         (972)          (25,180)
      Provision for doubtful accounts               (330)             (850)
      Net change in deferred gains and losses on
       cash flow hedges                            4,087             1,432
      Write-down of long-term investments            -               1,336
      (Gain) on sale of land                      (4,284)              -
      (Gain) loss on sale of short and long-term
       investment                                    (72)              (17)
      Net changes in operating assets and
       liabilities, net of acquired assets
       and liabilities:
        Accounts receivable                         (124)          (19,153)
        Prepaid expenses and other current
         assets                                  (10,644)            1,266
        Other assets                                 139               458
        Accounts payable and accrued liabilities    (590)          (15,422)
        Accrued income taxes                       2,127            18,565
        Deferred revenue                         142,002            39,613
        Deferred compensation and other
         liabilities                               1,070               770
      Net cash provided by operating activities  433,478           205,890

  CASH FLOWS FROM INVESTING ACTIVITIES:
      Proceeds from sales and maturities of
       short-term investments                    284,615           305,450
      Proceeds from sales of long-term
       investments                                  -                  248
      Purchases of short-term investments       (447,100)         (365,261)
      Purchases of long-term investments          (4,620)           (1,665)
      Purchases of property and equipment        (44,690)          (48,461)
      Cash paid for acquisitions and intangible
       assets, net of cash acquired              (57,473)          (41,142)
      Proceeds from sale of land                  26,298               -
      Capitalization of software development
       costs                                      (2,599)           (2,946)
      Net cash used in investing activities     (245,569)         (153,777)

  CASH FLOWS FROM FINANCING ACTIVITIES:
      Issuances of common stock                  208,484            69,566
      Repurchases of common stock               (151,620)         (199,992)
      Net cash provided by (used in) financing
       activities                                 56,864          (130,426)
  Effect of exchange rate changes on cash and
   cash equivalents                                3,795             4,636
  Net change in cash and cash equivalents        248,568           (73,677)
  Cash and cash equivalents, beginning of
   period                                        330,759           404,436
  Cash and cash equivalents, end of period      $579,327          $330,759

  (1)  Synopsys' fourth quarter ends on November 3, 2007 and October 29,
       2006, respectively.  For presentation purposes, the Unaudited
       Condensed Consolidated Statements of Cash Flows refer to a calendar
       month end.

  (2)  The prior year tax provision and related balance sheet accounts
       (long-term deferred income taxes, capital in excess of par value
       and retained earnings accounts) have been revised to reflect
       immaterial adjustments originating in years prior to fiscal 2006.

SOURCE: Synopsys, Inc.

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

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