Press Releases

Synopsys Posts Financial Results for Fourth Quarter and Fiscal Year 2008
PRNewswire-FirstCall
MOUNTAIN VIEW, Calif.
(NASDAQ-NMS:SNPS)

MOUNTAIN VIEW, Calif., Dec. 3 /PRNewswire-FirstCall/ -- Synopsys, Inc. , the world leader in software and IP for semiconductor design and manufacturing, today reported results for its fourth quarter and fiscal year ended October 31, 2008.

For the fourth quarter, Synopsys reported revenue of $352.8 million, an 11.9 percent increase compared to $315.2 million for the fourth quarter of fiscal 2007. Revenue for fiscal year 2008 was $1.337 billion, an increase of 10.3 percent from $1.212 billion in fiscal 2007.

"Synopsys delivered very good financial and operational results in Q4 and 2008, despite a marked change in the economic environment," said Aart de Geus, chairman and CEO of Synopsys. "While the global economic landscape is unpredictable, and leading to more conservative consumer and business practices, Synopsys is heading into 2009 with a solid financial, technical and business foundation."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the fourth quarter of fiscal 2008 was $46.4 million, or $0.32 per share, compared to $41.0 million, or $0.27 per share, for the fourth quarter of fiscal 2007.

GAAP net income for fiscal year 2008 was $190.0 million, or $1.29 per share, compared to $130.5 million, or $0.87 per share, for fiscal 2007.

Non-GAAP Results

On a non-GAAP basis, net income for the fourth quarter of fiscal 2008 was $62.7 million, or $0.43 per share, compared to non-GAAP net income of $60.0 million, or $0.40 per share, for the fourth quarter of fiscal 2007.

Non-GAAP net income for fiscal year 2008 was $252.9 million, or $1.71 per share, compared to non-GAAP net income of $204.9 million, or $1.37 per share, for fiscal 2007.

Reconciliation between GAAP and non-GAAP results is provided at the end of this press release.

Financial Targets

Synopsys also provided its financial targets for the first quarter and full fiscal year 2009. 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 2009 Targets:

    * Revenue: $332 million - $340 million
    * GAAP expenses: $276 million - $291.5 million
    * Non-GAAP expenses: $253 million - $263 million
    * Other income and expense: $0 - $3 million
    * Tax rate applied in non-GAAP net income calculations: approximately 27
      percent
    * Fully diluted outstanding shares: 145 million - 150 million
    * GAAP earnings per share: $0.26 - $0.31
    * Non-GAAP earnings per share: $0.40 - $0.42
    * Revenue from backlog: greater than 90 percent


    Full-Year Fiscal Year 2009 Targets:

    * Revenue: $1.380 billion - $1.410 billion
    * Other income and expense: $4 million - $8 million
    * Tax rate applied in non-GAAP net income calculations: approximately 27
      percent
    * Fully diluted outstanding shares: 145 million - 150 million
    * GAAP earnings per share: $1.07 - $1.26
    * Non-GAAP earnings per share: $1.60 - $1.72
    * Cash flow from operations: $200 million - $220 million

GAAP Reconciliation

Synopsys continues to provide all information required in accordance with GAAP, but believes evaluating its ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures. Accordingly, Synopsys presents non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate Synopsys' operating results in a manner that focuses on what Synopsys believes to be its ongoing business operations and what Synopsys uses to evaluate its ongoing operations and for internal planning and forecasting purposes. Synopsys' management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Synopsys' management believes it is useful for itself and investors to review, as applicable, both GAAP information that includes: (i) share-based compensation; (ii) the amortization of acquired intangible assets and in-process research and development charges; (iii) facilities realignment charges; (iv) other significant items, including a tax benefit from a settlement with the Internal Revenue Service and the effect of other litigation settlements; and (v) the income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes; and the non-GAAP measures that exclude such information in order to assess the performance of Synopsys' business and for planning and forecasting in subsequent periods. Whenever Synopsys uses such a non-GAAP financial measure, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed below.

Reconciliation of Fourth Quarter and Fiscal Year 2008 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 periods indicated below.



    GAAP to Non-GAAP Reconciliation of Fourth Quarter and Fiscal Year 2008
                                   Results
            (Unaudited and in thousands, except per share amounts)

                                           Three Months       Twelve Months
                                             Ended               Ended
                                           October 31,         October 31,
                                          2008     2007      2008      2007
    GAAP net income                      $46,397  $41,014  $189,978  $130,491
    Adjustments:
      Amortization of intangible assets    9,250   12,703    44,091    50,096
      Share-based compensation            14,666   15,336    65,472    62,010
      In-process research and development    -      1,100     4,800     3,200
      Litigation settlement                  -        -         -     (12,500)
      Facilities realignment charge          -        -         -        (645)
      Tax benefit from IRS settlement        -        -     (17,253)      -
      Tax effect                          (7,635) (10,112)  (34,230)  (27,746)
    Non-GAAP net income                  $62,678  $60,041  $252,858  $204,906



                                              Three Months      Twelve Months
                                                 Ended             Ended
                                               October 31,       October 31,
                                              2008     2007     2008     2007
    GAAP earnings per share                  $0.32    $0.27    $1.29    $0.87
    Adjustments:
      Amortization of intangible assets       0.06     0.08     0.30     0.33
      Share-based compensation                0.10     0.10     0.44     0.42
      In-process research and development      -       0.01     0.03     0.02
      Litigation settlement                    -        -        -      (0.08)
      Facilities realignment charge            -        -        -      (0.01)
      Tax benefit from IRS settlement          -        -      (0.12)     -
      Tax effect                             (0.05)   (0.06)   (0.23)   (0.18)
    Non-GAAP earnings per share              $0.43    $0.40    $1.71    $1.37

    Shares used in calculation             145,638  150,701  147,672  149,716


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 2009 Targets
                   (in thousands, except per share amounts)

                                                    Range for Three Months
                                                    Ending January 31, 2009
                                                    Low               High
    Target GAAP expenses                          $276,000          $291,500
    Adjustment:
           Estimated impact of amortization of
            intangible assets                      (11,500)          (15,000)
           Estimated impact of share-based
            compensation                           (11,500)          (13,500)
    Target non-GAAP expenses                      $253,000          $263,000



                                                     Range for Three Months
                                                     Ending January 31, 2009
                                                      Low               High
    Target GAAP earnings per share                   $0.26             $0.31
    Adjustment:
           Estimated impact of amortization of
            intangible assets                         0.10              0.08
           Estimated impact of share-based
            compensation                              0.09              0.08
           Net non-GAAP tax effect                   (0.05)            (0.05)
    Target non-GAAP earnings per share               $0.40             $0.42

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



         GAAP to Non-GAAP Reconciliation of Fiscal Year 2009 Targets

                                                      Range for Fiscal Year
                                                     Ending October 31, 2009
                                                      Low               High
    Target GAAP earnings per share                   $1.07             $1.26
    Adjustment:
           Estimated impact of amortization of
            intangible assets                         0.31              0.28
           Estimated impact of share-based
            compensation                              0.40              0.39
           Net non-GAAP tax effect                   (0.18)            (0.21)
    Target non-GAAP earnings per share               $1.60             $1.72

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


Earnings Call Open to Investors

Synopsys will hold a conference call for financial analysts and investors today at 2:00 p.m., Pacific Time. A live webcast of the call will be available at Synopsys' corporate website at http://www.synopsys.com/. A recording of the call will be available by calling +1-800-475-6701 (+1-320-365-3844 for international callers), access code 968632, 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 2009 in February 2009. 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. In addition, Synopsys makes additional financial information available in a financial supplement also posted on the corporate website.

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 (available in the Investor Relations section of Synopsys' website at http://www.synopsys.com) 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 2009, 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 2009 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 2008 in its Annual Report on Form 10-K to be filed by December 31, 2008.

About Synopsys

Synopsys, Inc. is the world leader in electronic design automation (EDA), supplying the global electronics market with the software, intellectual property (IP) and services used in semiconductor design and manufacturing. Synopsys' comprehensive, integrated portfolio of implementation, verification, IP, manufacturing and field-programmable gate array (FPGA) solutions helps address the key challenges designers and manufacturers face today, such as power and yield management, software-to- silicon verification and time-to-results. These technology-leading solutions help give Synopsys customers a competitive edge in bringing the best products to market quickly while reducing costs and schedule risk. Synopsys is headquartered in Mountain View, California, and has more than 60 offices located throughout North America, Europe, Japan, Asia and India. Visit Synopsys online at http://www.synopsys.com/.

Forward-Looking Statements

The statements made in this press release regarding projected financial results in the sections entitled "Financial Targets," and "Reconciliation of Target Operating Results" and certain statements made in the earnings conference call are forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those described by these statements due to a number of uncertainties, including, but not limited to:

    * weakness or continued budgetary caution in the semiconductor or
      electronics industries;
    * lower-than-expected research and development spending by semiconductor
      and electronic systems companies;
    * competition in the market for Synopsys' products and services;
    * lower-than-anticipated new IC design starts;
    * lower-than-anticipated purchases or delays in purchases of software or
      consulting services by Synopsys' customers, including delays in the
      renewal, or non-renewal, of Synopsys' license arrangements with major
      customers;
    * failure of customers to pay license fees as scheduled;
    * changes in the mix of time-based licenses and upfront licenses;
    * lower-than-expected orders; 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, earnings per share and tax rate on a GAAP and non-GAAP basis for the fiscal quarter ending January 31, 2009 and actual expenses, earnings per share, tax rate, cash flow from operations and other projections on a GAAP and non-GAAP basis for fiscal year 2009 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 to increase or decrease an income tax asset or liability, (iii) integration and other acquisition-related expenses including amortization of intangible assets associated with future acquisitions, if any, (iv) changes in the anticipated amount of employee share-based compensation expense recognized on Synopsys' financial statements, (v) actual change in the fair value of Synopsys' non-qualified deferred compensation plan obligations, (vi) increases or decreases to estimated capital expenditures, (vii) changes driven by new accounting rules, regulations, interpretations or pronouncements, (viii) general economic conditions, and (ix), other risks as detailed in our SEC filings, including those described in the "Risk Factors" section in our Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2008. Furthermore, Synopsys' actual tax rates applied to income for the first quarter fiscal year 2009 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 and actions by the government. Finally, Synopsys' targets for outstanding shares in the first quarter and fiscal year 2009 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 Consolidated Statements of Operations (1)
                   (in thousands, except per share amounts)


                                   Three Months Ended    Twelve Months Ended
                                       October 31,           October 31,
                                     2008       2007       2008        2007
    Revenue:
      Time-based license           $290,515  $257,935  $1,125,845  $1,004,026
      Upfront license                26,090    20,416      71,383      67,524
      Maintenance and service        36,200    36,882     139,723     140,919
          Total revenue             352,805   315,233   1,336,951   1,212,469
    Cost of revenue:
      License                        45,213    39,151     171,974     146,420
      Maintenance and service        15,440    16,899      63,596      64,358
      Amortization of intangible
       assets                         6,215     6,032      23,326      23,487
         Total cost of revenue       66,868    62,082     258,896     234,265
    Gross margin                    285,937   253,151   1,078,055     978,204
    Operating expenses:
      Research and development      102,564    97,016     394,747     379,221
      Sales and marketing            87,706    85,158     334,779     349,395
      General and administrative     27,328    25,330     103,852     101,735
      In-process research and
       development                      -       1,100       4,800       3,200
      Amortization of intangible
       assets                         3,035     6,671      20,765      26,609
         Total operating expenses   220,633   215,275     858,943     860,160
    Operating income                 65,304    37,876     219,112     118,044
    Other income, net                (9,584)    9,324        (156)     47,755
    Income before income taxes       55,720    47,200     218,956     165,799
    Provision for income taxes        9,323     6,186      28,978      35,308
    Net income                      $46,397   $41,014    $189,978    $130,491

    Net income per share:
      Basic                           $0.33     $0.28       $1.33       $0.91
      Diluted                         $0.32     $0.27       $1.29       $0.87

    Shares used in computing per
     share amounts:
      Basic                         142,684   144,973     143,258     143,953
      Diluted                       145,638   150,701     147,672     149,716

    (1) Synopsys' fiscal years ended on November 1, 2008 and November 3,
        2007, respectively.  For presentation purposes, the Unaudited
        Consolidated Statements of Operations refer to a calendar month end.



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

                                                  October 31,      October 31,
                                                     2008             2007
    ASSETS:
    Current assets:
      Cash and cash equivalents                   $577,632           $579,327
      Short-term investments                       373,669            405,126
               Total cash, cash equivalents and
                short-term investments             951,301            984,453
      Accounts receivable, net                     147,365            123,900
      Deferred income taxes                        133,609            123,165
      Income taxes receivable                       49,859             42,525
      Prepaid expenses and other current assets     40,156             53,496
               Total current assets              1,322,290          1,327,539
    Property and equipment, net                    145,087            131,866
    Goodwill                                       899,640            767,087
    Intangible assets, net                         114,760             78,792
    Long-term deferred income taxes                177,386            216,642
    Other assets                                    83,315             95,411
               Total assets                     $2,742,478         $2,617,337

    LIABILITIES AND STOCKHOLDERS' EQUITY:
    Current liabilities:
      Accounts payable and accrued liabilities    $289,769           $246,209
      Accrued income taxes                          14,496            207,572
      Deferred revenue                             604,718            577,295
               Total current liabilities           908,983          1,031,076
    Deferred compensation and other liabilities     76,970             84,648
    Long-term accrued income taxes                 152,745                  -
    Long-term deferred revenue                      75,409             65,220
               Total liabilities                 1,214,107          1,180,944
    Stockholders' equity:
      Preferred stock, $0.01 par value: 2,000
       shares authorized; none  outstanding              -                  -
      Common stock, $0.01 par value: 400,000
       shares authorized; 141,786 and 146,365
       shares outstanding, respectively              1,418              1,464
      Capital in excess of par value             1,471,031          1,401,965
      Retained earnings                            434,057            263,977
      Treasury stock, at cost: 15,485
       and 10,867 shares, respectively            (342,856)          (234,918)
      Accumulated other comprehensive income
       (loss)                                      (35,279)             3,905
               Total stockholders' equity        1,528,371          1,436,393
               Total liabilities and
                stockholders' equity            $2,742,478         $2,617,337

    (1) Synopsys' fiscal years ended on November 1, 2008 and November 3,
        2007, respectively.  For presentation purposes, the Unaudited
        Consolidated Balance Sheets refer to a calendar month end.



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

                                               Twelve Months Ended October 31,
                                                    2008              2007
    CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                    $189,978          $130,491
    Adjustments to reconcile net income to net
     cash provided by operating activities:
      Amortization and depreciation                 97,143           105,367
      Share-based compensation                      65,474            62,011
      Allowance for doubtful accounts                  135              (330)
      (Gain) loss on sale of investments            (1,404)              (72)
      (Gain) on sale of land                           -              (4,284)
      Deferred income taxes                        (12,258)             (972)
      Net change in deferred gains and losses on
       cash flow hedges                            (14,884)            9,053
      In-process research and development            4,800             3,200
      Net changes in operating assets and
       liabilities, net of acquired assets and
       liabilities:
        Accounts receivable                         (8,571)             (124)
        Prepaid expenses and other current assets  (22,484)          (15,610)
        Other assets                                   647               139
        Accounts payable and accrued liabilities    36,413              (590)
        Accrued income taxes                        (6,960)            2,127
        Deferred revenue                             6,856           142,002
        Deferred compensation and other liabilities (3,797)            1,070
      Net cash provided by operating activities    331,088           433,478

    CASH FLOWS FROM INVESTING ACTIVITIES:
      Proceeds from sales and maturities of
       short-term investments                      597,902           284,615
      Purchases of short-term investments         (564,978)         (447,100)
      Proceeds from sales of long-term investments      77               -
      Purchases of long-term investments            (7,694)           (4,620)
      Purchases of property and equipment          (38,869)          (44,690)
      Proceeds from sale of land                       -              26,298
      Cash paid for acquisitions and
       intangible assets, net of cash acquired    (184,650)          (57,473)
      Capitalization of software development
       costs                                        (2,874)           (2,599)
      Net cash used in investing activities       (201,086)         (245,569)

    CASH FLOWS FROM FINANCING ACTIVITIES:
      Payments on lease obligations                 (2,970)              -
      Issuances of common stock                     79,181           208,484
      Purchases of common stock                   (220,053)         (151,620)
      Net cash (used in) provided by financing
       activities                                 (143,842)           56,864
    Effect of exchange rate changes on cash and
     cash equivalents                               12,145             3,795
    Net change in cash and cash equivalents         (1,695)          248,568
    Cash and cash equivalents, beginning
     of period                                     579,327           330,759
    Cash and cash equivalents, end of period      $577,632          $579,327

    (1) Synopsys' fiscal years ended on November 1, 2008 and November 3,
        2007, respectively.  For presentation purposes, the Unaudited
        Consolidated Statements of Cash Flows refer to a calendar month end.

SOURCE: Synopsys, Inc.

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