UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): August 20, 2014

 

 

SYNOPSYS, INC.

(Exact name of Registrant as specified in charter)

 

 

 

Delaware   000-19807   56-1546236

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

700 East Middlefield Road

Mountain View, California 94043

(Address of principal executive offices)

Registrant’s telephone number, including area code: (650) 584-5000

N/A

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02 Results of Operations and Financial Condition.

On August 20, 2014, Synopsys, Inc. issued a press release announcing the financial results of its third fiscal quarter ended August 2, 2014. A copy of this press release is furnished and attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information in this Current Report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any registration statement or other document filed with the Securities and Exchange Commission by Synopsys, Inc. whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.

The attached press release includes measures that are not in accordance with, or an alternative for, U.S. generally accepted accounting principles (“GAAP”). The attached press release includes non-GAAP earnings per share, non-GAAP net income, targeted non-GAAP expenses, and targeted non-GAAP earnings per share.

These non-GAAP measures are not in accordance with, or an alternative for, GAAP measures and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles, and management exercises judgment in determining which items should be excluded in the calculation of non-GAAP measures. While we believe that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP, we believe that non-GAAP measures are valuable in analyzing our operations. Management analyzes current and future results on a GAAP basis as well as a non-GAAP basis and also provides GAAP and non-GAAP measures in our earnings release. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. The non-GAAP financial measures are meant to supplement, and be viewed in conjunction with, GAAP financial measures. We believe that the presentation of non-GAAP measures, when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to our financial condition and results of operations.

Synopsys’ management evaluates and makes decisions about our business operations primarily based on the revenue, orders, and direct, ongoing and recurring costs of those operations. For our internal budgeting and resource allocation process, and in reviewing our financial results, we use non-GAAP financial measures that exclude: (i) the amortization of acquired intangible assets; (ii) the impact of stock compensation; (iii) acquisition-related costs; (iv) other significant items, including facilities restructuring charges and the effect of tax and legal settlements; and (v) the income tax effect of non-GAAP pre-tax adjustments as well as unusual or infrequent tax adjustments.

We use these non-GAAP financial measures in making operating decisions because we believe the measures provide meaningful supplemental information regarding our operational performance and give us a better understanding of how we should invest in research and development and fund infrastructure and product and market strategies. We use these measures to help us make budgeting decisions, for example, among product development expenses and research and development, sales and marketing and general and administrative expenses. In addition, these non-GAAP financial measures facilitate our internal comparisons to our historical operating results, forecasted targets and comparisons to competitors’ operating results.

As described above, we exclude the following items from one or more of our non-GAAP measures:

(i) Amortization of acquired intangible assets. We incur expenses from amortization of acquired intangible assets, which include contract rights, core/developed technology, trademarks, trade names, customer relationships, covenants not to compete, and other intangibles related to acquisitions. We amortize the intangible assets over their economic lives. We exclude this item because this expense is


non-cash in nature and because we believe the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding our operational performance and liquidity and our ability to invest in research and development and fund acquisitions and capital expenditures.

(ii) Stock compensation impact. We exclude stock compensation expenses from our non-GAAP measures primarily because they are non-cash expenses. We believe that it is useful to investors to understand the impact of stock compensation to our operational performance and liquidity and our ability to invest in research and development and fund acquisitions and capital expenditures. While stock compensation expense constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results because it is not an expense that typically requires or will require cash settlement by us and because such expense is not used by us to assess the core profitability of our business operations. In addition, excluding this item from various non-GAAP measures facilitates comparisons to our competitors’ operating results.

(iii) Acquisition-related costs. In connection with our business combinations, we incur significant expenses which we would not have otherwise incurred as part our business operations. These expenses include compensation expenses, professional fees and other direct expenses, and restructuring activities, including employee severance and other exit costs, as well as changes to the fair value of contingent consideration related to the acquired company. We exclude such expenses, which we would not have otherwise incurred, as they are related to acquisitions and have no direct correlation to the operation of our business.

Additionally, business combination accounting principles require us to measure acquired inventory at fair value. The fair value of acquired inventory increases the acquired company’s cost of manufacturing to include a portion of any expected gross profit margin. The non-GAAP inventory fair value adjustment excludes the expected gross profit margin. We believe this adjustment better reflects the costs we would have expended to produce such inventory on our own.

(iv) Other significant items. From time to time, in order to control costs, we restructure our operations. Certain restructuring costs are infrequent and not ongoing and therefore we do not consider them to be part of the ongoing operation of our business. For this reason, we have excluded adjustments relating to the closure of a facility obtained through our acquisition of another company. Additionally, from time to time we are party to legal settlements. We exclude the effects of litigation settlements and benefits from tax settlements with the Internal Revenue Service and other tax authorities because we do not consider these matters to be part of the ongoing operation of our business and because of the singular nature of the claims underlying these matters.

(v) Income tax effect of non-GAAP pre-tax adjustments as well as unusual or infrequent tax adjustments. Excluding the income tax effect of non-GAAP pre-tax adjustments from the provision for income taxes assists investors in understanding the tax provision associated with those adjustments and the effect on net income. We exclude other unusual or infrequent tax adjustments because we do not consider these matters to be part of the ongoing operation of our business.

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit
Number

  

Exhibit Title

99.1    Press release dated August 20, 2014 containing Synopsys, Inc.’s results of operations for its third fiscal quarter ended August 2, 2014.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

    SYNOPSYS, INC.
Dated: August 20, 2014     By:  

/S/ JOHN F. RUNKEL, JR.

      John F. Runkel, Jr.
      General Counsel and Corporate Secretary


INDEX TO EXHIBITS

 

Exhibit
Number

  

Exhibit Title

99.1    Press release dated August 20, 2014 containing Synopsys, Inc.’s results of operations for its third fiscal quarter ended August 2, 2014.


Exhibit 99.1

PRESS RELEASE

INVESTOR CONTACT:

Lisa L. Ewbank

Synopsys, Inc.

650-584-1901

Synopsys-ir@synopsys.com

EDITORIAL CONTACT:

Yvette Huygen

Synopsys, Inc.

650-584-4547

yvetteh@synopsys.com

Synopsys Posts Financial Results for Third Quarter Fiscal Year 2014

Q3 2014 Financial Highlights

 

  Revenue: $521.8 million

 

  GAAP earnings per share: $0.42

 

  Non-GAAP earnings per share: $0.65

MOUNTAIN VIEW, Calif. Aug. 20, 2014 – Synopsys, Inc. (Nasdaq: SNPS), a global leader providing software, IP and services used to accelerate innovation in chips and electronic systems, today reported results for its third quarter of fiscal year 2014.

For the third quarter of fiscal year 2014, Synopsys reported revenue of $521.8 million, compared to $482.9 million for the third quarter of fiscal 2013, an increase of 8.0 percent.

“Synopsys delivered an excellent fiscal third quarter, solidifying the year’s financial outlook,” said Aart de Geus, chairman and co-CEO of Synopsys. “We shipped game-changing new products that are generating intense customer interest and high-impact results, and have already started a multi-year upgrade cycle. We also achieved encouraging results through Coverity, the recent acquisition that expands our total addressable market into the software quality, test and security space.”

 

1


GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the third quarter of fiscal 2014 was $65.7 million, or $0.42 per share, compared to $52.3 million, or $0.33 per share, for the third quarter of fiscal 2013.

Non-GAAP Results

On a non-GAAP basis, net income for the third quarter of fiscal 2014 was $103.2 million, or $0.65 per share, compared to non-GAAP net income of $86.5 million, or $0.55 per share, for the third quarter of fiscal 2013.

Financial Targets

Synopsys also provided its financial targets for the fourth quarter and full fiscal year 2014. These targets do not include any future acquisition-related expenses that may be incurred in fiscal 2014. 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 2014 Targets:

 

  Revenue: $537 million - $547 million

 

  GAAP expenses: $462 million - $479 million

 

  Non-GAAP expenses: $410 million - $420 million

 

  Other income and expense: ($1) million - $1 million

 

  Tax rate applied in non-GAAP net income calculations: approximately 22 percent

 

  Fully diluted outstanding shares: 155 million - 159 million

 

  GAAP earnings per share: $0.32 - $0.38

 

  Non-GAAP earnings per share: $0.59 - $0.61

Full Fiscal Year 2014 Targets:

 

  Revenue: $2.055 billion - $2.065 billion

 

  Other income and expense: $10 million - $12 million

 

  Tax rate applied in non-GAAP net income calculations: approximately 20 percent

 

  Fully diluted outstanding shares: 155 million - 159 million

 

  GAAP earnings per share: $1.57 - $1.63

 

2


  Non-GAAP earnings per share: $2.48 - $2.50

 

  Cash flow from operations: at least $500 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, including inventory fair value adjustments, (iv) other significant items, including facilities restructuring charges and the effect of tax and legal settlements, and (v) the income tax effect of non-GAAP pre-tax adjustments as well as unusual or infrequent tax adjustments; 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.

 

3


Reconciliation of Third Quarter Fiscal Year 2014 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 Third Quarter Fiscal Year 2014 Results

(Unaudited and in thousands, except per share amounts)

 

     Three Months Ended
July 31,
    Nine Months Ended
July 31,
 
     2014     2013     2014     2013  

GAAP net income

   $ 65,656      $ 52,297      $ 196,669      $ 190,910   

Adjustments:

        

Amortization of intangible assets

     32,809        32,281        92,990        96,957   

Stock compensation

     21,399        16,490        58,340        49,719   

Acquisition-related costs

     36        162        5,484        3,990   

Inventory fair value adjustment

     —          1,903        —          3,712   

Facility restructuring charges

     —          (239     —          (209

Tax and other settlements

     (2,981     (2,711     (15,288     (2,711

Tax adjustments

     (13,768 )     (13,685     (40,262 )     (49,239
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income

   $ 103,151     $ 86,498      $ 297,933     $ 293,129   
  

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended
July 31,
    Nine Months Ended
July 31,
 
     2014     2013     2014     2013  

GAAP net income per share

   $ 0.42      $ 0.33      $ 1.25      $ 1.22   

Adjustments:

        

Amortization of intangible assets

     0.21        0.21        0.59        0.62   

Stock compensation

     0.14        0.10        0.37        0.32   

Acquisition-related costs

     0.00        0.00        0.04        0.03   

Inventory fair value adjustment

     —          0.01        —          0.02   

Facility restructuring charges

     —          (0.00     —          (0.00

Tax and other settlements

     (0.03     (0.02     (0.10     (0.02

Tax adjustments

     (0.09     (0.08     (0.26     (0.31
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income per share

   $ 0.65     $ 0.55      $ 1.89     $ 1.88   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in calculation

     157,622        157,056        157,253        156,215   

 

4


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 Fourth Quarter Fiscal Year 2014 Targets

(in thousands, except per share amounts)

 

     Range for Three Months
Ending October 31, 2014 (1)
 
     Low     High  

Target GAAP expenses

   $ 462,000      $ 479,000   

Adjustments:

    

Estimated impact of amortization of intangible assets

     (31,000     (35,000

Estimated impact of stock compensation

     (21,000     (24,000
  

 

 

   

 

 

 

Target non-GAAP expenses

   $ 410,000     $ 420,000   
  

 

 

   

 

 

 
     Range for Three Months
Ending October 31, 2014 (1)
 
     Low     High  

Target GAAP earnings per share

   $ 0.32      $ 0.38   

Adjustments:

    

Estimated impact of amortization of intangible assets

     0.22        0.20   

Estimated impact of stock compensation

     0.15        0.13   

Net non-GAAP tax adjustments

     (0.10     (0.10
  

 

 

   

 

 

 

Target non-GAAP earnings per share

   $ 0.59     $ 0.61   
  

 

 

   

 

 

 

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

     157,000        157,000   

GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2014 Targets

 

     Range for Fiscal Year
Ending October 31, 2014 (1)
 
     Low     High  

Target GAAP earnings per share

   $ 1.57      $ 1.63   

Adjustments:

    

Estimated impact of amortization of intangible assets

     0.81        0.79   

Estimated impact of stock compensation

     0.52        0.50   

Acquisition-related costs

     0.04        0.04   

Tax and other settlements

     (0.10     (0.10

Net non-GAAP tax adjustments

     (0.36     (0.36
  

 

 

   

 

 

 

Target non-GAAP earnings per share

   $ 2.48     $ 2.50   
  

 

 

   

 

 

 

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

     157,000        157,000   

 

(1) Synopsys’ fourth quarter and fiscal year end on November 1, 2014. For presentation purposes, the periods refer to the closest calendar month end.

 

5


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 333616, 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 fiscal 2014 in December 2014. Synopsys will post copies of the prepared remarks of Aart de Geus, chairman and co-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 co-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 fiscal year 2014 earnings call in December 2014, 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 2014 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 fiscal 2014 in its quarterly report on Form 10-Q to be filed by Sept. 11, 2014.

About Synopsys

Synopsys, Inc. (Nasdaq: SNPS) accelerates innovation in the global electronics market. As a leader in electronic design automation (EDA) and semiconductor IP, its software, IP and services help engineers address their design, verification, system and manufacturing challenges. Since 1986, engineers around the world have been using Synopsys technology to design and create billions of chips and systems. Learn more at http://www.synopsys.com.

 

6


Forward-Looking Statements

This press release and our upcoming earnings results conference call contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Any statements that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements include but are not limited to: sections of this press release entitled “Financial Targets” and “Reconciliation of Target Non-GAAP Operating Results”; and statements regarding Synopsys’ business, acquisitions, products, technologies, business model, customer demand for our technology, and projected financial results and business objectives. These statements involve known and unknown risks, uncertainties and other factors that could cause our actual results, time frames or achievements to differ materially from those expressed or implied in our forward-looking statements. Accordingly, we caution stockholders and prospective investors not to place undue reliance on these statements. Such risks, uncertainties and factors include, but are not limited to:

 

    continued uncertainty in the global economy and its potential impact on the semiconductor and electronics industries;

 

    uncertainty in the growth of the semiconductor and electronics industry;

 

    increased competition in the market for Synopsys’ products and services including through consolidation in the industry and among our customers;

 

    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 acquisitions it completes, including its recent acquisition of Coverity, Inc., and challenges in entering new markets in which Synopsys is not experienced and in the integration of the products and operations of acquired companies or assets into Synopsys’ products and operations, including possible delays in customer orders, potential loss of customers, key employees, partners or vendors, customer demand and support obligations for product offerings, and disruption of ongoing business operations and diversion of management attention;

 

7


    adverse changes in the relationships between Synopsys and key participants in the complex semiconductor ecosystem, including major foundries and intellectual property providers;

 

    litigation;

 

    lower-than-anticipated new IC design starts;

 

    lower-than-anticipated purchases or delays in purchases of products or consulting services by Synopsys’ customers, including delays in the renewal, or non-renewal, of Synopsys’ license arrangements with major customers;

 

    changes in accounting principles or standards or in the way they are applied;

 

    changes in the mix of time-based licenses and upfront licenses;

 

    variability in the timing of revenue recognition due to factors such as payment terms and the timing and value of contract renewals and professional services projects;

 

    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 Oct. 31, 2014; actual expenses, earnings per share, tax rate, and other projections on a GAAP and non-GAAP basis for fiscal year 2014; and cash flow from operations on a GAAP basis for fiscal year 2014 could differ materially from the targets stated under “Financial Targets” above for a number of reasons, including, but not limited to, (i) integration and other acquisition-related costs, (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) a determination by Synopsys that any portion of its goodwill or intangible assets has become impaired, (iv) changes in the anticipated amount of employee stock-based compensation expense recognized in 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) fluctuations in foreign currency exchange rates, (ix) litigation, (x) general economic conditions, and (xi) other risks as detailed in Synopsys’ SEC filings, including those described in the “Risk Factors” section in its latest Quarterly Report on Form 10-Q for the fiscal quarter ended Apr. 30, 2014. Furthermore, Synopsys’ actual tax rates applied to income for the fourth quarter and fiscal year 2014 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 fourth quarter and fiscal year 2014 could differ from the targets given in this press release as a result of higher than expected employee stock plan issuances, stock option exercises, acquisitions, and the extent of Synopsys’ stock repurchase activity.

 

8


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.

###

 

9


SYNOPSYS, INC.

Unaudited Consolidated Statements of Operations (1)

(in thousands, except per share amounts)

 

     Three Months Ended July 31,      Nine Months Ended July 31,  
     2014      2013      2014      2013  

Revenue:

           

Time-based license

   $ 431,184       $ 387,088       $ 1,255,515       $ 1,186,538   

Upfront license

     31,594         39,957         101,863         95,525   

Maintenance and service

     59,034         55,900         161,082         175,276   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

     521,812         482,945         1,518,460         1,457,339   

Cost of revenue:

           

License

     68,573         69,857         198,700         195,918   

Maintenance and service

     20,685         19,253         62,065         59,074   

Amortization of intangible assets

     26,272         26,537         74,699         79,451   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cost of revenue

     115,530         115,647         335,464         334,443   
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross margin

     406,282         367,298         1,182,996         1,122,896   

Operating expenses:

           

Research and development

     182,809         166,668         528,395         494,140   

Sales and marketing

     112,271         105,381         332,847         311,069   

General and administrative

     37,438         34,510         112,246         104,702   

Amortization of intangible assets

     6,537         5,744         18,291         17,506   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     339,055         312,303         991,779         927,417   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

     67,227         54,995         191,217         195,479   

Other income (expense), net

     3,544         3,177         18,797         21,130   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     70,771         58,172         210,014         216,609   

Provision (benefit) for income taxes

     5,115         5,875         13,345         25,699   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 65,656       $ 52,297       $ 196,669       $ 190,910   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income per share:

           

Basic

   $ 0.42       $ 0.34       $ 1.27       $ 1.25   

Diluted

   $ 0.42       $ 0.33       $ 1.25       $ 1.22   

Shares used in computing per share amounts:

           

Basic

     155,194         153,915         154,611         152,969   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

     157,622         157,056         157,253         156,215   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Synopsys’ third quarter of fiscal 2014 and 2013 ended on August 2, 2014 and August 3, 2013, respectively. For presentation purposes, we refer to periods ended July 31.

 

10


SYNOPSYS, INC.

Unaudited Consolidated Balance Sheets (1)

(in thousands, except par value amounts)

 

     July 31, 2014     October 31, 2013  

ASSETS:

    

Current assets:

    

Cash and cash equivalents

   $ 903,046      $ 1,022,441   

Accounts receivable, net

     238,863        256,026   

Deferred income taxes

     99,217        92,058   

Income taxes receivable and prepaid taxes

     18,544        18,277   

Prepaid and other current assets

     55,113        59,175   
  

 

 

   

 

 

 

Total current assets

     1,314,783        1,447,977   

Property and equipment, net

     216,010        197,600   

Goodwill

     2,260,897        1,975,971   

Intangible assets, net

     367,416        335,425   

Long-term prepaid taxes

     9,952        7,935   

Long-term deferred income taxes

     204,502        243,066   

Other long-term assets

     171,369        150,961   
  

 

 

   

 

 

 

Total assets

   $ 4,544,929      $ 4,358,935   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY:

    

Current liabilities:

    

Accounts payable and accrued liabilities

   $ 319,036      $ 358,197   

Accrued income taxes

     20,716        7,168   

Deferred revenue

     857,532        827,554   

Short-term debt

     30,000        30,000   
  

 

 

   

 

 

 

Total current liabilities

     1,227,284        1,222,919   

Long-term accrued income taxes

     37,030        53,064   

Long-term deferred revenue

     67,311        54,736   

Long-term debt

     52,500        75,000   

Other long-term liabilities

     164,751        164,939   
  

 

 

   

 

 

 

Total liabilities

     1,548,876        1,570,658   

Stockholders’ equity:

    

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

     —          —     

Common stock, $0.01 par value: 400,000 shares authorized; 155,638 and 154,169 shares outstanding, respectively

     1,556        1,542   

Capital in excess of par value

     1,594,965        1,597,244   

Retained earnings

     1,501,238        1,324,854   

Treasury stock, at cost: 1,626 and 3,095 shares, respectively

     (60,194     (106,668

Accumulated other comprehensive loss

     (41,512     (28,695
  

 

 

   

 

 

 

Total stockholders’ equity

     2,996,053        2,788,277   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 4,544,929      $ 4,358,935   
  

 

 

   

 

 

 

 

(1) Synopsys’ third quarter of fiscal 2014 ended on August 2, 2014, and its fourth quarter of fiscal 2013 ended on November 2, 2013. For presentation purposes, the periods refer to the closest calendar month end.

 

11


SYNOPSYS, INC.

Unaudited Consolidated Statements of Cash Flows (1)

(in thousands)

 

     Nine Months Ended July 31,  
     2014     2013  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net income

   $ 196,669     $ 190,910   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Amortization and depreciation

     140,750       141,756   

Stock compensation

     58,341       49,719   

Allowance for doubtful accounts

     (750 )     901   

Gain on sale of investments

     (6,538 )     (101

Deferred income taxes

     7,459       7,272   

Net changes in operating assets and liabilities, net of acquired assets and liabilities:

    

Accounts receivable

     24,834       8,207   

Prepaid and other current assets

     982       (14,617

Other long-term assets

     (18,847 )     (20,292

Accounts payable and other liabilities

     (28,270 )     (48,188

Income taxes

     (18,950 )     (475

Deferred revenue

     22,361       (9,722
  

 

 

   

 

 

 

Net cash provided by operating activities

     378,041       305,370   

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Proceeds from sales of long-term investments

     7,313        222   

Purchases of property and equipment

     (58,085 )     (47,624

Proceeds from sales of property and equipment

     —          2,000   

Cash paid for acquisitions, net of cash acquired

     (373,513 )     —     

Capitalization of software development costs

     (2,812 )     (2,681

Other

     (3,000 )     —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (430,097 )     (48,083

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Proceeds from credit facility

     200,000       —     

Repayment of debt

     (223,239 )     (22,975

Acquisition of non-controlling interest

     —          (44,004

Issuances of common stock

     45,336       90,529   

Purchases of treasury stock

     (79,747 )     (69,999

Other

     (5,008     (5,781
  

 

 

   

 

 

 

Net cash used in financing activities

     (62,658 )     (52,230

Effect of exchange rate changes on cash and cash equivalents

     (4,681 )     (13,069
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     (119,395 )     191,988   

Cash and cash equivalents, beginning of the year

     1,022,441       700,382   
  

 

 

   

 

 

 

Cash and cash equivalents, end of the period

   $ 903,046     $ 892,370   
  

 

 

   

 

 

 

 

(1) Synopsys’ third quarter of fiscal 2014 and 2013 ended on August 2, 2014 and August 3, 2013, respectively. For presentation purposes, we refer to periods ended July 31.

 

12

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