Synopsys Posts Financial Results for Second Quarter Fiscal Year 2011
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Synopsys Posts Financial Results for Second Quarter Fiscal Year 2011

(PRNewswire) — Synopsys, Inc. (Nasdaq: SNPS), a world leader in software and IP for semiconductor design, verification and manufacturing, today reported results for its second quarter of fiscal year 2011.

 

For the second quarter of fiscal year 2011, Synopsys reported revenue of $393.7 million, compared to $338.1 million for the second quarter of fiscal 2010, an increase of 16.4%.  

"Synopsys delivered strong second quarter results as we continue to execute well," said Aart de Geus, chairman and CEO of Synopsys.  "Our technology pipeline, delivery and customer adoption remain strong, and we continue to see momentum in our IP and Systems products."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the second quarter of fiscal 2011 was $81.1 million, or $0.53 per share, compared to $39.5 million, or $0.26 per share, for the second quarter of fiscal 2010.  Net income for the second quarter of fiscal 2011 includes a one-time $32.8 million, or $0.21 per share, tax benefit associated with a settlement with the IRS for audits for fiscal years 2006 through 2009.

Non-GAAP Results

On a non-GAAP basis, net income for the second quarter of fiscal 2011 was $68.5 million, or $0.45 per share, compared to non-GAAP net income of $61.9 million, or $0.41 per share, for the second 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 third quarter and full fiscal year 2011.  These targets do not include future acquisition-related costs 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.  

Third Quarter of Fiscal Year 2011 Targets:

 

Full Fiscal Year 2011 Targets:

 

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 tax benefits from settlements 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 Second 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 Second Quarter Fiscal Year 2011 Results

(unaudited and in thousands, except per share amounts)










Three Months Ended


Six Months Ended


April 30,


April 30,


2011


2010


2011


2010

GAAP net income

$ 81,114


$ 39,549


$ 129,340


$ 172,335

Adjustments:








Amortization of intangible assets

18,664


11,814


35,647


22,464

Stock compensation

12,666


13,466


27,914


30,700

Acquisition-related costs (1)

(1,616)


6,120


466


7,166

Tax benefit from IRS settlement

(32,782)


-


(32,782)


(91,649)

Tax effect

(9,511)


(9,015)


(23,733)


(16,663)

Non-GAAP net income

$ 68,535


$ 61,934


$ 136,852


$ 124,353


























Three Months Ended


Six Months Ended


April 30,


April 30,


2011


2010


2011


2010

GAAP net income per share

$     0.53


$     0.26


$       0.84


$       1.14

Adjustments:








Amortization of intangible assets

0.12


0.08


0.23


0.15

Stock compensation

0.08


0.09


0.18


0.20

Acquisition-related costs (1)

(0.01)


0.04


0.00


0.05

Tax benefit from IRS settlement

(0.21)


-


(0.21)


(0.61)

Tax effect

(0.06)


(0.06)


(0.15)


(0.11)

Non-GAAP net income per share

$     0.45


$     0.41


$       0.89


$       0.82









Shares used in calculation

152,593


152,482


153,198


151,635









(1) Included changes to the fair value of contingent consideration related to a prior year acquisition.



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 Third Quarter Fiscal Year 2011 Targets

(in thousands, except per share amounts)



Range for Three Months


Ending July 31, 2011


Low


High

Target GAAP expenses

$      319,000


$      337,000

Adjustment:




      Estimated impact of amortization of intangible assets

(15,000)


(18,000)

      Estimated impact of stock compensation

(12,000)


(17,000)

Target non-GAAP expenses

$      292,000


$      302,000










Range for Three Months


Ending July 31, 2011


Low


High

Target GAAP earnings per share

$            0.25


$            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

(0.07)


(0.06)

Target non-GAAP earnings per share

$            0.41


$            0.43





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

151,000


151,000









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

$            1.33


$            1.46

Adjustment:




Estimated impact of amortization of intangible assets

0.49


0.43

Estimated impact of stock compensation

0.38


0.34

Acquisition-related costs (1)

0.00


0.00

Tax benefit from IRS settlement

(0.21)


(0.21)

Net non-GAAP tax effect

(0.29)


(0.25)

Target non-GAAP earnings per share

$            1.70


$            1.77





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

151,000


151,000





(1) Included changes to the fair value of contingent consideration related to a prior year acquisition.



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 dialing +1-800-475-6701 (+1-320-365-3844 for international callers), access code 203338, 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 third quarter fiscal 2011 in August 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 third quarter fiscal year 2011 earnings call in August 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 third 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 second quarter fiscal 2011 in its quarterly report on Form 10-Q to be filed by June 9, 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:

 

In addition, Synopsys' actual expenses, earnings per share and tax rate on a GAAP and non-GAAP basis for the fiscal quarter ending July 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, as well as changes in the fair value of contingent consideration related to prior acquisitions, (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 first fiscal quarter ended January 31, 2011.  Furthermore, Synopsys' actual tax rates applied to income for the third 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 third 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
Email Contact

SYNOPSYS, INC.

Unaudited Consolidated Statements of Operations (1)

(in thousands, except per share amounts)


















Three Months Ended April 30,


Six Months Ended April 30,


2011


2010


2011


2010

Revenue:








 Time-based license

$ 318,762


$ 288,672


$ 614,371


$ 561,147

 Upfront license

25,014


12,715


51,549


33,161

 Maintenance and service

49,894


36,719


92,394


73,965

     Total revenue

393,670


338,106


758,314


668,273

Cost of revenue:








 License

51,146


44,930


101,669


86,144

 Maintenance and service

19,974


15,268


40,521


31,778

 Amortization of intangible assets

14,908


8,829


28,143


16,686

    Total cost of revenue

86,028


69,027


170,333


134,608

Gross margin

307,642


269,079


587,981


533,665

Operating expenses:








 Research and development

123,169


113,050


243,909


214,282

 Sales and marketing

99,562


79,363


178,886


158,979

 General and administrative

29,470


28,713


59,335


54,566

 Amortization of intangible assets

3,756


2,985


7,504


5,778

    Total operating expenses

255,957


224,111


489,634


433,605

Operating income

51,685


44,968


98,347


100,060

Other income, net

5,574


8,905


11,244


11,155

Income before income taxes

57,259


53,873


109,591


111,215

(Benefit) provision for income taxes

(23,855)


14,324


(19,749)


(61,120)

Net income

$   81,114


$   39,549


$ 129,340


$ 172,335









Net income per share:








 Basic

$       0.55


$       0.27


$       0.87


$       1.17

 Diluted

$       0.53


$       0.26


$       0.84


$       1.14









Shares used in computing per share amounts:








 Basic

148,461


148,890


148,738


147,860

 Diluted

152,593


152,482


153,198


151,635











(1)

Synopsys' second quarter ended on the Saturday nearest April 30.  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)








April 30, 2011


October 31, 2010

ASSETS:





Current assets:





 Cash and cash equivalents


$       694,032


$             775,407

 Short-term investments


146,431


163,154

          Total cash, cash equivalents and short-term investments


840,463


938,561

 Accounts receivable, net


210,068


181,102

 Deferred income taxes


72,930


73,465

 Income taxes receivable


28,696


18,425

 Prepaid and other current assets


54,465


36,202

         Total current assets


1,206,622


1,247,755

Property and equipment, net


150,370


148,580

Goodwill


1,256,485


1,265,843

Intangible assets, net


220,610


249,656

Long-term deferred income taxes


262,173


268,759

Other long-term assets


113,209


105,948

          Total assets


$    3,209,469


$          3,286,541






LIABILITIES AND STOCKHOLDERS' EQUITY:





Current liabilities:





 Accounts payable and accrued liabilities


$       226,784


$             312,850

 Accrued income taxes


2,476


8,349

 Deferred revenue


578,576


600,569

          Total current liabilities


807,836


921,768

Long-term accrued income taxes


95,706


128,603

Other long-term liabilities


111,598


101,885

Long-term deferred revenue


46,931


34,103

          Total liabilities


1,062,071


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; 146,485 and





     148,479 shares outstanding, respectively


1,465


1,485

 Capital in excess of par value


1,539,833


1,541,383

 Retained earnings


883,487


770,674

 Treasury stock, at cost: 10,779 and 8,786 shares, respectively


(278,016)


(197,586)

 Accumulated other comprehensive loss


629


(15,774)

          Total stockholders' equity


2,147,398


2,100,182

          Total liabilities and stockholders' equity


$    3,209,469


$          3,286,541








(1)

Synopsys' second quarter ended on the Saturday nearest April 30.  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)






Six Months Ended April 30,


2011


2010

CASH FLOWS FROM OPERATING ACTIVITIES:




Net income

$129,340


$172,335

Adjustments to reconcile net income to net cash provided by operating




   activities:




Amortization and depreciation

64,998


50,218

Stock compensation

27,914


30,700

Allowance for doubtful accounts

723


(742)

Write-down of long-term investments

999


-

Gain on sale of investments

(50)


(2,420)

Deferred income taxes

(939)


(38,549)

Net changes in operating assets and liabilities, net of




acquired assets and liabilities:




Accounts receivable

(28,904)


(20,626)

Prepaid and other current assets

(8,848)


(7,139)

Other long-term assets

(11,658)


(3,997)

Accounts payable and other liabilities

(69,320)


(68,672)

Income taxes

(40,890)


(29,645)

Deferred revenue

(6,510)


(45,235)

Net cash provided by operating activities

56,855


36,228





CASH FLOWS FROM INVESTING ACTIVITIES:




Proceeds from sales and maturities of short-term investments

63,648


188,650

Purchases of short-term investments

(49,435)


(131,748)

Purchases of property and equipment

(20,600)


(13,793)

Cash paid for acquisitions, net of cash acquired

(3,520)


(130,872)

Capitalization of software development costs

(1,512)


(1,410)

Net cash used in investing activities

(11,419)


(89,173)





CASH FLOWS FROM FINANCING ACTIVITIES:




Principal payments on capital leases

(1,310)


(1,346)

Issuances of common stock

108,843


73,210

Purchases of treasury stock

(234,985)


(50,257)

Net cash (used in) provided by financing activities

(127,452)


21,607

Effect of exchange rate changes on cash and cash equivalents

641


(844)

Net change in cash and cash equivalents

(81,375)


(32,182)

Cash and cash equivalents, beginning of period

775,407


701,613

Cash and cash equivalents, end of period

$694,032


$669,431







(1)

Synopsys' second quarter ended on the Saturday nearest April 30.  For presentation purposes, the Unaudited Consolidated Statements of Cash Flows refer to a calendar month end.



SOURCE Synopsys, Inc.

Contact:
Synopsys, Inc.
Web: http://www.synopsys.com