MOUNTAIN VIEW, Calif., Aug. 20 /PRNewswire-FirstCall/ -- Synopsys, Inc. (NASDAQ: SNPS), a world leader in software and IP for semiconductor design and manufacturing, today reported results for its third quarter ended July 31, 2008.

For the third quarter, Synopsys reported revenue of $344.1 million, a 13.2 percent increase compared to $304.1 million for the third quarter of fiscal 2007.

"Our technology and product pipeline are strong throughout our broad portfolio, and we are seeing good competitive momentum," said Aart de Geus, chairman and CEO of Synopsys. "Even at a time of increased customer caution around spending, Synopsys continues to perform well."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the third quarter of fiscal 2008 was $57.7 million, or $0.39 per share, compared to $24.9 million, or $0.17 per share for the third quarter of fiscal 2007. GAAP earnings per share included a $17.3 million tax benefit associated with the settlement of an IRS tax issue for fiscal years 2000 and 2001.

Non-GAAP Results

On a non-GAAP basis, net income for the third quarter of fiscal 2008 was $64.5 million, or $0.44 per share, compared to non-GAAP net income of $47.7 million, or $0.32 per share, for the third quarter of fiscal 2007.

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 (which could include in-process research and development charges), facilities realignment charges, and other significant items, including a tax benefit from a settlement with the IRS in the third quarter, and the related tax-effect of each, 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 fourth 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.

  Fourth Quarter of Fiscal Year 2008 Targets:
  --  Revenue: $348 million - $356 million
  --  GAAP expenses: $295 million - $310 million
  --  Non-GAAP expenses: $273 million - $283 million
  --  Other income and expense: $0 - $3 million
  --  Tax rate applied in non-GAAP net income calculations: approximately 27
      percent
  --  Fully diluted outstanding shares: 147 million - 152 million
  --  GAAP earnings per share: $0.23 - $0.29
  --  Non-GAAP earnings per share: $0.36 - $0.39
  --  Revenue from backlog: greater than 90 percent


  Full Fiscal Year 2008 Targets:
  --  Revenue: $1.332 billion - $1.340 billion
  --  Tax rate applied in non-GAAP net income calculations: approximately 26
      percent
  --  Fully diluted outstanding shares: 147 million - 150 million
  --  GAAP earnings per share: $1.20 - $1.26
  --  Non-GAAP earnings per share: $1.65 - $1.68
  --  Cash flow from operations: $300 million - $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 (including in-process research and development charges), facilities realignment charges and other significant infrequent items, including a tax benefit from a settlement with the IRS, 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® constitutes an ongoing and recurring expense of the Company, such expense is excluded from non-GAAP results because it is not an expense that requires cash settlement by the Company and because such expense is 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, 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 support expenses (which affect cost of revenue and gross margin) and research and development, sales and marketing and general and administrative expenses (which affect operating expenses and operating margin). Finally, the availability of such information helps management track performance to both internal and externally communicated financial targets and to its competitors' operating results.

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

Reconciliation of Third Quarter Results

The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP net income and earnings per share for periods indicated below:

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

  Income Statement Reconciliation    Three Months Ended   Nine Months Ended
                                           July 31,           July 31,
                                        2008     2007      2008      2007
  GAAP net income                      $57,749  $24,855  $143,581   $89,477
  Adjustments:
    Amortization of intangible assets   10,810   12,186    34,841    37,393
    Share-based compensation            17,321   16,110    50,806    46,674
    In-process research and development  4,800    2,100     4,800     2,100
    Litigation settlement                  -        -         -     (12,500)
    Facilities realignment charge          -        -         -        (645)
    Tax benefit from IRS settlement    (17,253)     -     (17,253)      -
    Tax effect                          (8,923)  (7,552)  (26,595)  (17,634)
  Non-GAAP net income                  $64,504  $47,699  $190,180  $144,865



                                       Three Months Ended  Nine Months Ended
                                             July 31,           July 31,
                                          2008     2007      2008      2007
  GAAP earnings per share                $0.39    $0.17     $0.97     $0.60
  Adjustments:
    Amortization of intangible assets     0.07     0.08      0.24      0.25
    Share-based compensation              0.12     0.11      0.34      0.32
    In-process research and development   0.03     0.01      0.03      0.01
    Litigation settlement                  -        -         -       (0.08)
    Facilities realignment charge          -        -         -       (0.01)
    Tax benefit from IRS settlement      (0.12)     -       (0.12)      -
    Tax effect                           (0.05)   (0.05)    (0.17)    (0.12)
  Non-GAAP earnings per share            $0.44    $0.32     $1.29     $0.97

  Shares used in calculation           147,486  149,709   147,760   149,283



  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 Fourth Quarter Fiscal Year 2008 Targets
                 (in thousands, except per share amounts)

                                                   Range for Three Months
                                                  Ending October 31, 2008
                                                   Low              High
  Target GAAP expenses                          $295,000          $310,000
  Adjustment:
    Estimated impact of amortization of
     intangible assets                            (9,000)          (12,000)
    Estimated impact of share-based
     compensation                                (13,000)          (15,000)
  Target non-GAAP expenses                      $273,000          $283,000



                                                    Range for Three Months
                                                   Ending October 31, 2008
                                                    Low               High
  Target GAAP earnings per share                   $0.23             $0.29
  Adjustment:
    Estimated impact of amortization of
     intangible assets                              0.08              0.06
    Estimated impact of share-based
     compensation                                   0.10              0.08
    Net non-GAAP tax effect                        (0.05)            (0.04)
  Target non-GAAP earnings per share               $0.36             $0.39

  Shares used in non-GAAP calculation
   (midpoint of target range)                    149,500           149,500



       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                   $1.20             $1.26
  Adjustment:
    Estimated impact of amortization of
     intangible assets                              0.32              0.30
    Estimated impact of share-based
     compensation                                   0.44              0.43
    In-process research and development             0.03              0.03
    Tax benefit from IRS settlement                (0.12)            (0.12)
    Net non-GAAP tax effect                        (0.22)            (0.22)
  Target non-GAAP earnings per share               $1.65             $1.68

  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 956118, 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 fourth quarter and full fiscal 2008 in December. Synopsys will also 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 posted at Synopsys' corporate website at http://www.synopsys.com/corporate/invest/invest.html.

Effectiveness of Information

The targets included in this release, the statements made during the earnings conference call and the information contained in the financial supplement represent Synopsys' expectations and beliefs as of the date of this release only. Although this press release, copies of the prepared remarks of the chief executive officer and chief financial officer made during the call and the financial supplement will remain available on Synopsys' website through the date of the fourth quarter earnings call in December 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 fourth 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 the third quarter of fiscal 2008 in its quarterly report on Form 10-Q to be filed by September 11, 2008.

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 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 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 bookings;
  --  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 for its IP business; 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 October 31, 2008 and actual expenses, 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 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, (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 April 30, 2008. Furthermore, Synopsys' actual tax rates applied to income for the fourth 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 fourth 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  Nine Months Ended
                                          July 31,            July 31,
                                        2008     2007      2008      2007
  Revenue:
    Time-based license               $289,250  $251,389  $835,330  $746,091
    Upfront license                    20,558    18,981    45,293    47,108
    Maintenance and service            34,320    33,728   103,523   104,037
        Total revenue                 344,128   304,098   984,146   897,236
  Cost of revenue:
    License                            44,654    37,092   126,761   107,269
    Maintenance and service            16,110    15,763    48,156    47,459
    Amortization of intangible
     assets                             6,262     5,536    17,111    17,455
       Total cost of revenue           67,026    58,391   192,028   172,183
  Gross margin                        277,102   245,707   792,118   725,053
  Operating expenses:
    Research and development          104,394    94,365   292,183   282,205
    Sales and marketing                86,816    95,417   247,073   264,237
    General and administrative         26,512    24,177    76,524    76,405
    In-process research and
     development                        4,800     2,100     4,800     2,100
    Amortization of intangible
     assets                             4,548     6,650    17,730    19,938
       Total operating expenses       227,070   222,709   638,310   644,885
  Operating income                     50,032    22,998   153,808    80,168
  Other income, net                     2,947    10,829     9,428    38,431
  Income before income taxes           52,979    33,827   163,236   118,599
  (Benefit) provision for income
   taxes                               (4,770)    8,972    19,655    29,122
  Net income                          $57,749   $24,855  $143,581   $89,477

  Net income per share:
    Basic                               $0.41     $0.17     $1.00     $0.62
    Diluted                             $0.39     $0.17     $0.97     $0.60

  Shares used in computing per share
   amounts:
    Basic                             142,536   143,820   143,450   143,626
    Diluted                           147,486   149,709   147,760   149,283

  (1) Synopsys' third quarter ended on August 2, 2008 and August 4, 2007,
      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)
                 (in thousands, except par value amounts)

                                            July 31, 2008   October 31, 2007
  ASSETS:
  Current assets:
    Cash and cash equivalents                   $545,489           $579,327
    Short-term investments                       331,598            405,126
      Total cash, cash equivalents and
       short-term investments                    877,087            984,453
    Accounts receivable, net                     143,613            123,900
    Deferred income taxes                        121,424            123,165
    Income taxes receivable                       51,233             42,525
    Prepaid expenses and other current assets     60,814             53,496
      Total current assets                     1,254,171          1,327,539
  Property and equipment, net                    130,511            131,866
  Goodwill                                       896,574            767,087
  Intangible assets, net                         123,972             78,792
  Long-term deferred income taxes                151,077            216,642
  Other assets                                   102,552             95,411
      Total assets                            $2,658,857         $2,617,337

  LIABILITIES AND STOCKHOLDERS' EQUITY:
  Current liabilities:
    Accounts payable and accrued liabilities    $240,676           $246,209
    Accrued income taxes                           1,896            207,572
    Deferred revenue                             603,525            577,295
      Total current liabilities                  846,097          1,031,076
  Deferred compensation and other liabilities    105,513             84,648
  Accrued income taxes                           123,236                  -
  Long-term deferred revenue                      53,607             65,220
    Total liabilities                          1,128,453          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; 142,844 and
     146,365 shares outstanding, respectively      1,428              1,464
    Capital in excess of par value             1,457,282          1,401,965
    Retained earnings                            395,378            263,977
    Treasury stock, at cost: 14,423 and
     10,867 shares, respectively                (323,885)          (234,918)
    Accumulated other comprehensive
     income (loss)                                   201              3,905
      Total stockholders' equity               1,530,404          1,436,393
      Total liabilities and stockholders'
       equity                                 $2,658,857         $2,617,337

  (1)  Synopsys' third quarter ended on August 2, 2008, and its 2007 fiscal
       year ended on November 3, 2007.  For presentation purposes, the
       Unaudited Condensed Consolidated Balance Sheets refer to a calendar
       month end.



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

                                                 Nine Months Ended July 31,
                                                   2008              2007
  CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                    $143,581           $89,477
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Amortization and depreciation                 73,535            77,844
    Share-based compensation                      50,807            46,674
    Allowance for doubtful accounts                  429              (330)
    (Gain) loss on sale of investments            (1,347)                8
    (Gain) on sale of land                             -            (4,284)
    Deferred income taxes                         18,852            14,966
    Net change in deferred gains and
     losses on cash flow hedges                    5,169             1,661
    In-process research and development            4,800             2,100
    Net changes in operating assets and
     liabilities, net of acquired assets
     and liabilities:
      Accounts receivable                         (8,761)          (80,511)
      Prepaid expenses and other current assets  (11,277)          (13,498)
      Other assets                                   458               317
      Accounts payable and accrued liabilities   (26,767)           (8,255)
      Accrued income taxes                       (33,974)           (3,313)
      Deferred revenue                             2,626           135,279
      Deferred compensation and other
       liabilities                                (2,928)              254
    Net cash provided by operating activities    215,203           258,389

  CASH FLOWS FROM INVESTING ACTIVITIES:
      Proceeds from sales and maturities of
       short-term investments                    512,797           209,167
      Purchases of short-term investments       (436,144)         (326,476)
      Proceeds from sales of long-term
       investments                                    77                 -
      Purchases of long-term investments          (7,694)           (4,620)
      Purchases of property and equipment        (26,500)          (36,429)
      Proceeds from sale of land                       -            26,298
      Cash paid for acquisitions and intangible
       assets, net of cash acquired             (181,018)          (34,120)
      Capitalization of software development
       costs                                      (2,114)           (2,106)
  Net cash used in investing activities         (140,596)         (168,286)

  CASH FLOWS FROM FINANCING ACTIVITIES:
      Payments on lease obligations               (1,453)                -
      Issuances of common stock                   56,600           151,653
      Purchases of common stock                 (170,052)         (140,789)
      Net cash (used in) provided by
       financing activities                     (114,905)           10,864
  Effect of exchange rate changes on cash and
   cash equivalents                                6,460             4,128
  Net change in cash and cash equivalents        (33,838)          105,095
  Cash and cash equivalents, beginning
   of period                                     579,327           330,759
  Cash and cash equivalents, end of period      $545,489          $435,854

  (1) Synopsys' third quarter ended on August 2, 2008 and August 4, 2007,
      respectively.  For presentation purposes, the Unaudited Condensed
      Consolidated Statements of Cash Flows refer to a calendar month end.

SOURCE: Synopsys, Inc.

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

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