Synopsys Posts Financial Results for Fourth Quarter and Fiscal Year 2010

Dec 01, 2010, 16:10 ET from Synopsys, Inc.

MOUNTAIN VIEW, Calif., Dec. 1, 2010 /PRNewswire-FirstCall/ -- Synopsys, Inc. (Nasdaq: SNPS), a world leader in software and IP for semiconductor design, verification and manufacturing, today reported results for its fourth quarter and fiscal year 2010.

For the fourth quarter of fiscal 2010, Synopsys reported revenue of $375.5 million, compared to $338.3 million for the fourth quarter of fiscal 2009.  Revenue for fiscal year 2010 was $1.38 billion, an increase of 1.5 percent from $1.36 billion in fiscal 2009.

"Synopsys had a strong year, relative to the industry and our expectations, and we enter fiscal 2011 with an even better outlook," said Aart de Geus, chairman and CEO of Synopsys.  "Building on significant technology and customer momentum, and an improved customer landscape, we expect to deliver growth in both traditional EDA and the adjacencies in which we've been steadily investing over the past several years."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the fourth quarter of fiscal 2010 was $25.4 million, or $0.17 per share, compared to $19.5 million, or $0.13 per share, for the fourth quarter of fiscal 2009.  GAAP net income for fiscal year 2010 was $237.1 million, or $1.56 per share, compared to $167.7 million, or $1.15 per share for fiscal 2009.  Net income for fiscal year 2010 includes a one-time $94.3 million, or $0.62 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 fourth quarter of fiscal 2010 was $59.9 million, or $0.39 per share, compared to non-GAAP net income of $49.5 million, or $0.33 per share, for the fourth quarter of fiscal 2009.  Non-GAAP net income for fiscal 2010 was $242.4 million, or $1.60 per share, compared to non-GAAP net income of $255.3 million, or $1.75 per share, for fiscal 2009.  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 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.  

First Quarter of Fiscal Year 2011 Targets:

  • Revenue: $360 million - $368 million
  • GAAP expenses: $305 million - $323 million
  • Non-GAAP expenses: $278 million - $288 million
  • Other income and expense: $0 - $2 million
  • Tax rate applied in non-GAAP net income calculations: approximately 27 percent
  • Fully diluted outstanding shares: 149 million - 154 million
  • GAAP earnings per share: $0.21 - $0.28
  • Non-GAAP earnings per share: $0.38 - $0.41
  • Revenue from backlog: greater than 90 percent

Full Fiscal Year 2011 Targets:

  • Revenue: $1.5 billion - $1.525 billion
  • Other income and expense: $2 million - $6 million
  • Tax rate applied in non-GAAP net income calculations: approximately 27 percent
  • Fully diluted outstanding shares: 149 million - 154 million
  • GAAP earnings per share: $1.06 - $1.24
  • Non-GAAP earnings per share: $1.67 - $1.77
  • Cash flow from operations: approximately $220 million - $240 million
  • Revenue from backlog: greater than 80 percent

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) in-process research and development expenses, (iv) acquisition-related costs, (v) other significant items, including the effect of a tax benefit from a settlement with the Internal Revenue Service and a facility restructuring charge, and (vi) 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 Fourth Quarter and Fiscal Year 2010 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 2010 Results

(unaudited and in thousands, except per share amounts)

Three Months Ended

Twelve Months Ended

October 31,

October 31,

2010

2009

2010

2009

GAAP net income

$ 25,401

$ 19,528

$ 237,063

$ 167,681

Adjustments:

Amortization of intangible assets

14,610

11,638

47,685

45,474

Stock compensation

14,775

14,137

59,989

56,936

In-process research and development

-

1,200

-

2,200

Acquisition-related costs

10,814

-

20,650

-

Facility restructuring charge

123

4,538

1,238

4,538

Tax benefit from IRS settlement

-

-

(94,344)

-

Tax effect

(5,870)

(1,543)

(29,892)

(21,534)

Non-GAAP net income

$ 59,853

$ 49,498

$ 242,389

$ 255,295

Three Months Ended

Twelve Months Ended

October 31,

October 31,

2010

2009

2010

2009

GAAP net income per share

$     0.17

$     0.13

$       1.56

$       1.15

Adjustments:

Amortization of intangible assets

0.09

0.08

0.31

0.31

Stock compensation

0.10

0.09

0.40

0.39

In-process research and development

-

0.01

-

0.02

Acquisition-related costs

0.07

-

0.14

-

Facility restructuring charge

0.00

0.03

0.01

0.03

Tax benefit from IRS settlement

-

-

(0.62)

-

Tax effect

(0.04)

(0.01)

(0.20)

(0.15)

Non-GAAP net income per share

$     0.39

$     0.33

$       1.60

$       1.75

Shares used in calculation

151,978

149,332

151,911

145,857

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 First Quarter Fiscal Year 2011 Targets

(in thousands, except per share amounts)

Range for Three Months

Ending January 31, 2011

Low

High

Target GAAP expenses

$ 305,000

$ 323,000

Adjustment:

      Estimated impact of amortization of intangible assets

(15,000)

(19,000)

      Estimated impact of stock compensation

(12,000)

(16,000)

Target non-GAAP expenses

$ 278,000

$ 288,000

Range for Three Months

Ending January 31, 2011

Low

High

Target GAAP earnings per share

$       0.21

$       0.28

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)

(0.05)

Target non-GAAP earnings per share

$       0.38

$       0.41

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

151,500

151,500

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

$       1.06

$       1.24

Adjustment:

Estimated impact of amortization of intangible assets

0.48

0.42

Estimated impact of stock compensation

0.36

0.30

Net non-GAAP tax effect

(0.23)

(0.19)

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 178205, 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 first quarter fiscal 2011 in February 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 first quarter fiscal year 2011 earnings call in February 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 first 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 fourth quarter and fiscal 2010 in its annual report on Form 10-K to be filed by December 29, 2010.

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;
  • 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;
  • increased competition in the market for Synopsys' products and services;
  • continued uncertainty in the global economy and the semiconductor and electronics industries;
  • lower-than-expected research and development spending by semiconductor and electronic systems companies;
  • 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 January 31, 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 Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2010.  Furthermore, Synopsys' actual tax rates applied to income for the first 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 first 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 October 31,

Twelve Months Ended October 31,

2010

2009 (2)

2010

2009 (2)

Revenue:

 Time-based license

$ 310,708

$ 289,860

$ 1,158,418

$ 1,150,473

 Upfront license

20,807

11,422

68,618

57,551

 Maintenance and service

43,944

36,996

153,625

152,021

     Total revenue

375,459

338,278

1,380,661

1,360,045

Cost of revenue:

 License

50,105

47,332

180,245

175,620

 Maintenance and service

18,271

17,331

64,746

65,368

 Amortization of intangible assets

11,367

8,509

36,103

32,662

    Total cost of revenue

79,743

73,172

281,094

273,650

Gross margin

295,716

265,106

1,099,567

1,086,395

Operating expenses:

 Research and development

129,298

114,116

449,229

419,908

 Sales and marketing

96,968

86,247

339,759

324,124

 General and administrative

32,950

35,492

114,887

119,100

 In-process research and development

-

1,200

-

2,200

 Amortization of intangible assets

3,243

3,129

11,582

12,812

    Total operating expenses

262,459

240,184

915,457

878,144

Operating income

33,257

24,922

184,110

208,251

Other income, net

6,439

6,891

14,548

24,819

Income before income taxes

39,696

31,813

198,658

233,070

Provision (benefit) for income taxes

14,295

12,285

(38,405)

65,389

Net income

$   25,401

$   19,528

$    237,063

$    167,681

Net income per share:

 Basic

$       0.17

$       0.13

$          1.60

$          1.17

 Diluted

$       0.17

$       0.13

$          1.56

$          1.15

Shares used in computing per share amounts:

 Basic

148,229

145,730

148,013

143,752

 Diluted

151,978

149,332

151,911

145,857

(1)  Synopsys' fourth quarter ended on the Saturday nearest October 31.  For presentation purposes, the Unaudited Consolidated Statements of Operations refer to a   calendar month end.

(2)  For the three and twelve months ended October 31, 2009, Synopsys reclassified $4.8 million and $11.9 million from upfront license to time-based licensed revenue to conform to the current year presentation which had no impact on total revenue.

SYNOPSYS, INC.

Unaudited Consolidated Balance Sheets (1)

(in thousands, except par value amounts)

October 31, 2010

October 31, 2009

ASSETS:

Current assets:

 Cash and cash equivalents

$                       775,407

$                       701,613

 Short-term investments

163,154

466,713

          Total cash, cash equivalents and short-term investments

938,561

1,168,326

 Accounts receivable, net

181,102

127,010

 Deferred income taxes

73,465

73,453

 Income taxes receivable

18,425

51,191

 Prepaid and other current assets

36,202

43,820

         Total current assets

1,247,755

1,463,800

Property and equipment, net

148,580

146,910

Goodwill

1,265,843

932,691

Intangible assets, net

249,656

96,810

Long-term deferred income taxes

268,759

205,396

Other long-term assets

105,948

93,247

          Total assets

$                    3,286,541

$                    2,938,854

LIABILITIES AND STOCKHOLDERS' EQUITY:

Current liabilities:

 Accounts payable and accrued liabilities

$                       312,850

$                       255,095

 Accrued income taxes

8,349

5,508

 Deferred revenue

600,569

553,990

          Total current liabilities

921,768

814,593

Long-term accrued income taxes

128,603

157,354

Other long-term liabilities

101,885

88,002

Long-term deferred revenue

34,103

34,739

          Total liabilities

1,186,359

1,094,688

Stockholders' equity:

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

-

-

 Common stock, $0.01 par value: 400,000 shares authorized; 148,479 and

     146,945 shares outstanding, respectively

1,485

1,469

 Capital in excess of par value

1,541,383

1,500,166

 Retained earnings

770,674

574,980

 Treasury stock, at cost: 8,786 and 10,326 shares, respectively

(197,586)

(228,618)

 Accumulated other comprehensive loss

(15,774)

(3,831)

          Total stockholders' equity

2,100,182

1,844,166

          Total liabilities and stockholders' equity

$                    3,286,541

$                    2,938,854

(1)  Synopsys' fourth quarter ended on the Saturday nearest October 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)

Twelve Months Ended October 31,

2010

2009

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$237,063

$167,681

Adjustments to reconcile net income to net cash provided by operating

   activities:

Amortization and depreciation

101,201

101,453

Stock compensation

59,988

56,934

Allowance for doubtful accounts

(899)

2,461

Write-down of long-term investments

468

7,158

(Gain) loss on sale of investments

(3,995)

(716)

Deferred income taxes

38,356

25,942

In-process research and development

-

2,200

Net changes in operating assets and liabilities, net of

acquired assets and liabilities:

Accounts receivable

(16,202)

22,830

Prepaid and other current assets

4,638

12,779

Other long-term assets

(5,923)

(12,248)

Accounts payable and other liabilities

10,566

(28,206)

Income taxes

(94,052)

(22,503)

Deferred revenue

9,827

(96,606)

Net cash provided by operating activities

341,036

239,159

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sales and maturities of short-term investments

547,686

290,709

Purchases of short-term investments

(243,515)

(386,431)

Purchases of long-term investments

-

(771)

Purchases of property and equipment

(39,223)

(39,199)

Cash paid for acquisitions, net of cash acquired

(500,829)

(53,358)

Capitalization of software development costs

(2,852)

(2,852)

Net cash (used in) investing activities

(238,733)

(191,902)

CASH FLOWS FROM FINANCING ACTIVITIES:

Principal payments on capital leases

(3,692)

(2,212)

Proceeds from credit facilities

-

1,279

Payment on credit facility

-

(1,533)

Issuances of common stock

145,329

71,918

Purchases of treasury stock

(184,699)

-

Net cash (used in) provided by financing activities

(43,062)

69,452

Effect of exchange rate changes on cash and cash equivalents

14,553

7,272

Net change in cash and cash equivalents

73,794

123,981

Cash and cash equivalents, beginning of period

701,613

577,632

Cash and cash equivalents, end of period

$775,407

$701,613

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

SOURCE Synopsys, Inc.



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