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Synopsys Posts Financial Results for First Quarter Fiscal Year 2011
Feb 16, 2011 (03:02 PM EST)


MOUNTAIN VIEW, Calif., Feb. 16, 2011 /PRNewswire/ -- Synopsys, Inc. (Nasdaq: SNPS), a world leader in software and IP for semiconductor design, verification and manufacturing, today reported results for its first quarter of fiscal year 2011.

For the first quarter of fiscal year 2011, Synopsys reported revenue of $364.6 million, compared to $330.2 million for the first quarter of fiscal 2010, an increase of 10.4%.  

"Synopsys began fiscal 2011 with a strong first quarter, putting us well on-track towards meeting our objectives for the year," said Aart de Geus, chairman and CEO of Synopsys.  "With a backdrop of a healthy semiconductor industry, we continue to deliver strong technology with our traditional EDA solutions, while achieving meaningful scale with our solutions in higher-growth adjacencies."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the first quarter of fiscal 2011 was $48.2 million, or $0.31 per share, compared to $132.8 million, or $0.88 per share, for the first quarter of fiscal 2010.  Net income for the first quarter of fiscal 2010 included a one-time $91.6 million, or $0.61 per share, tax benefit associated with the IRS settlement for fiscal years 2002-2004, announced on January 12, 2010.

Non-GAAP Results

On a non-GAAP basis, net income for the first quarter of fiscal 2011 was $68.3 million, or $0.44 per share, compared to non-GAAP net income of $62.4 million, or $0.41 per share, for the first quarter of fiscal 2010.  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 second quarter and full fiscal year 2011.  These targets do not include future acquisition-related expenses that may be incurred in fiscal 2011.  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.  

Second Quarter of Fiscal Year 2011 Targets:

  • Revenue: $386 million - $394 million
  • GAAP expenses: $319 million - $338 million
  • Non-GAAP expenses: $292 million - $302 million
  • Other income and expense: $0 - $2 million
  • Tax rate applied in non-GAAP net income calculations: 26 - 27 percent
  • Fully diluted outstanding shares: 150 million - 155 million
  • GAAP earnings per share: $0.26 - $0.31
  • Non-GAAP earnings per share: $0.43 - $0.45
  • Revenue from backlog: greater than 90 percent

Full Fiscal Year 2011 Targets:

  • Revenue: $1.5 billion - $1.525 billion
  • Other income and expense: $1 million - $5 million
  • Tax rate applied in non-GAAP net income calculations: 25 - 26 percent
  • Fully diluted outstanding shares: 149 million - 154 million
  • GAAP earnings per share: $1.03 - $1.20
  • Non-GAAP earnings per share: $1.67 - $1.77
  • Cash flow from operations: approximately $230 million - $250 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) the amortization of acquired intangible assets, (ii) the impact of stock compensation, (iii) acquisition-related costs, (iv) other significant items, including the effect of a tax benefit from a settlement with the Internal Revenue Service, and (v) the income tax effect of 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 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 First Quarter Fiscal Year 2011 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 First Quarter Fiscal Year 2011 Results

(unaudited and in thousands, except per share amounts)






Three Months Ended


January 31,


2011


2010

GAAP net income

$ 48,226


$ 132,786

Adjustments:




Amortization of intangible assets

16,983


10,650

Stock compensation

15,248


17,234

Acquisition-related costs

2,082


1,046

Tax benefit from IRS settlement

-


(91,649)

Tax effect

(14,222)


(7,648)

Non-GAAP net income

$ 68,317


$   62,419














Three Months Ended


January 31,


2011


2010

GAAP net income per share

$     0.31


$       0.88

Adjustments:




Amortization of intangible assets

0.11


0.07

Stock compensation

0.10


0.11

Acquisition-related costs

0.01


0.01

Tax benefit from IRS settlement

-


(0.61)

Tax effect

(0.09)


(0.05)

Non-GAAP net income per share

$     0.44


$       0.41





Shares used in calculation

153,640


150,788



Reconciliation of Target Non-GAAP 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 Second Quarter Fiscal Year 2011 Targets

(in thousands, except per share amounts)



Range for Three Months


Ending April 30, 2011


Low


High

Target GAAP expenses

$ 319,000


$ 338,000

Adjustment:




      Estimated impact of amortization of intangible assets

(15,000)


(19,000)

      Estimated impact of stock compensation

(12,000)


(17,000)

Target non-GAAP expenses

$ 292,000


$ 302,000






















Range for Three Months


Ending April 30, 2011


Low


High

Target GAAP earnings per share

$       0.26


$       0.31

Adjustment:




Estimated impact of amortization of intangible assets

0.12


0.10

Estimated impact of stock compensation

0.11


0.08

Net non-GAAP tax effect

(0.06)


(0.04)

Target non-GAAP earnings per share

$       0.43


$       0.45





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

152,500


152,500





















GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2011 Targets



Range for Fiscal Year


Ending October 31, 2011


Low


High

Target GAAP earnings per share

$       1.03


$       1.20

Adjustment:




Estimated impact of amortization of intangible assets

0.48


0.42

Estimated impact of stock compensation

0.37


0.31

Acquisition-related costs

0.01


0.01

Net non-GAAP tax effect

(0.22)


(0.17)

Target non-GAAP earnings per share

$       1.67


$       1.77





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

151,500


151,500



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 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 191466, beginning at 4:00 p.m. Pacific Time today.  A webcast replay will also be available on the website from approximately 5:30 p.m. Pacific Time today through the time Synopsys announces its results for the second quarter fiscal 2011 in May 2011.  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 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 second quarter fiscal year 2011 earnings call in May 2011, 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 second quarter of fiscal 2011 or comment to analysts or investors on, or otherwise update, the targets given in this earnings release.

Availability of Final Financial Statements

Synopsys will include final financial statements for the first quarter fiscal 2011 in its quarterly report on Form 10-Q to be filed by March 10, 2011.

About Synopsys

Synopsys, Inc. (Nasdaq:SNPS) is a world leader in electronic design automation (EDA), supplying the global electronics market with the software, intellectual property (IP) and services used in semiconductor design, verification and manufacturing. Synopsys' comprehensive, integrated portfolio of implementation, verification, IP, manufacturing and field-programmable gate array (FPGA) solutions helps address the key challenges designers and manufacturers face today, such as power and yield management, system-to-silicon verification and time-to-results. These technology-leading solutions help give Synopsys customers a competitive edge in bringing the best products to market quickly while reducing costs and schedule risk. Synopsys is headquartered in Mountain View, California, and has approximately 70 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 Non-GAAP Operating Results," financial objectives, 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:

  • changes in demand for Synopsys' products due to fluctuations in demand for its customers' products;
  • uncertainty in the growth of the semiconductor and electronics industry;
  • Synopsys' ability to realize the potential financial or strategic benefits of the acquisitions it completes and the difficulties in the integration of the products and operations of acquired companies or assets into Synopsys' products and operations;
  • continued uncertainty in the global economy and its potential impact on the semiconductor and electronics industries;
  • increased competition in the market for Synopsys' products and services including through  consolidation in the industry;
  • 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;
  • changes in the mix of time-based licenses and upfront licenses;  
  • lower-than-expected orders; and
  • failure of customers to pay license fees as scheduled.

In addition, Synopsys' actual expenses, earnings per share and tax rate on a GAAP and non-GAAP basis for the fiscal quarter ending April 30, 2011 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 2011 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 and settlements to increase or decrease an income tax asset or liability, (iii) integration and other acquisition-related costs including amortization of intangible assets and costs formerly capitalized but now expensed due to new accounting guidance related to business combinations, (iv) changes in the anticipated amount of employee stock 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 guidance, (viii) general economic conditions, and (ix) other risks as detailed in Synopsys' SEC filings, including those described in the "Risk Factors" section in the latest Annual Report on Form 10-K for the fiscal year ended October 31, 2010.  Furthermore, Synopsys' actual tax rates applied to income for the second quarter and fiscal year 2011 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 year, and actions by the government.  Finally, Synopsys' targets for outstanding shares in the second quarter and fiscal year 2011 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 January 31,


2011


2010

Revenue:




 Time-based license

$ 295,609


$ 272,475

 Upfront license

26,535


20,446

 Maintenance and service

42,500


37,246

     Total revenue

364,644


330,167

Cost of revenue:




 License

50,523


41,214

 Maintenance and service

20,547


16,510

 Amortization of intangible assets

13,235


7,857

    Total cost of revenue

84,305


65,581

Gross margin

280,339


264,586

Operating expenses:




 Research and development

120,740


101,232

 Sales and marketing

79,324


79,616

 General and administrative

29,865


25,853

 Amortization of intangible assets

3,748


2,793

    Total operating expenses

233,677


209,494

Operating income

46,662


55,092

Other income, net

5,670


2,250

Income before income taxes

52,332


57,342

Provision (benefit) for income taxes

4,106


(75,444)

Net income

$   48,226


$ 132,786





Net income per share:




 Basic

$       0.32


$       0.90

 Diluted

$       0.31


$       0.88





Shares used in computing per share amounts:




 Basic

149,016


146,830

 Diluted

153,640


150,788







(1)

Synopsys' first quarter ended on the Saturday nearest January 31.  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)








January 31, 2011


October 31, 2010

ASSETS:





Current assets:





 Cash and cash equivalents


$             700,612


$             775,407

 Short-term investments


166,516


163,154

          Total cash, cash equivalents and short-term investments


867,128


938,561

 Accounts receivable, net


169,165


181,102

 Deferred income taxes


72,377


73,465

 Income taxes receivable


31,358


18,425

 Prepaid and other current assets


54,249


36,202

         Total current assets


1,194,277


1,247,755

Property and equipment, net


149,554


148,580

Goodwill


1,266,524


1,265,843

Intangible assets, net


232,670


249,656

Long-term deferred income taxes


264,117


268,759

Other long-term assets


106,146


105,948

          Total assets


$          3,213,288


$          3,286,541






LIABILITIES AND STOCKHOLDERS' EQUITY:





Current liabilities:





 Accounts payable and accrued liabilities


$             216,672


$             312,850

 Accrued income taxes


2,515


8,349

 Deferred revenue


565,895


600,569

          Total current liabilities


785,082


921,768

Long-term accrued income taxes


128,698


128,603

Other long-term liabilities


105,923


101,885

Long-term deferred revenue


35,712


34,103

          Total liabilities


1,055,415


1,186,359

Stockholders' equity:





 Preferred stock, $0.01 par value: 2,000 shares authorized; none outstanding


-


-

 Common stock, $0.01 par value: 400,000 shares authorized; 149,246 and





     148,479 shares outstanding, respectively


1,492


1,485

 Capital in excess of par value


1,543,202


1,541,383

 Retained earnings


816,700


770,674

 Treasury stock, at cost: 8,018 and 8,786 shares, respectively


(190,332)


(197,586)

 Accumulated other comprehensive loss


(13,189)


(15,774)

          Total stockholders' equity


2,157,873


2,100,182

          Total liabilities and stockholders' equity


$          3,213,288


$          3,286,541








(1)

Synopsys' first quarter ended on the Saturday nearest January 31.  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)






Three Months Ended January 31,


2011


2010

CASH FLOWS FROM OPERATING ACTIVITIES:




Net income

$  48,226


$132,786

Adjustments to reconcile net income to net cash provided by operating




   activities:




Amortization and depreciation

31,676


25,652

Stock compensation

15,247


17,234

Allowance for doubtful accounts

550


(357)

Write-down of long-term investments

908


-

Gain on sale of investments

-


(112)

Deferred income taxes

3,371


(51,676)

Net changes in operating assets and liabilities, net of




acquired assets and liabilities:




Accounts receivable

10,614


(14,836)

Prepaid and other current assets

(14,786)


(6,924)

Other long-term assets

(4,920)


(1,128)

Accounts payable and other liabilities

(83,276)


(73,497)

Income taxes

(16,829)


(28,320)

Deferred revenue

(30,414)


(44,239)

Net cash used in operating activities

(39,633)


(45,417)





CASH FLOWS FROM INVESTING ACTIVITIES:




Proceeds from sales and maturities of short-term investments

19,049


57,362

Purchases of short-term investments

(23,957)


(58,638)

Purchases of property and equipment

(10,217)


(8,037)

Cash paid for acquisitions, net of cash acquired

(2,741)


(3,127)

Capitalization of software development costs

(713)


(720)

Net cash used in investing activities

(18,579)


(13,160)





CASH FLOWS FROM FINANCING ACTIVITIES:




Principal payments on capital leases

(655)


(744)

Issuances of common stock

52,464


8,133

Purchases of treasury stock

(64,997)


(25,257)

Net cash used in financing activities

(13,188)


(17,868)

Effect of exchange rate changes on cash and cash equivalents

(3,395)


1,322

Net change in cash and cash equivalents

(74,795)


(75,123)

Cash and cash equivalents, beginning of period

775,407


701,613

Cash and cash equivalents, end of period

$700,612


$626,490







(1)

Synopsys' first quarter ended on the Saturday nearest January 31.  For presentation purposes, the Unaudited Consolidated Statements of Cash Flows refer to a calendar month end.



SOURCE Synopsys, Inc.