8-K

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

December 3, 2008

Date of Report (date of earliest event reported)

SYNOPSYS, INC.

(Exact name of Registrant as specified in charter)

Delaware	000-19807	56-1546236
(State or other jurisdiction	(Commission File Number)	(I.R.S. Employer)
of incorporation)	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:

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

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

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

o 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 December 3, 2008, Synopsys, Inc. issued a press release announcing the financial results of our fourth quarter and fiscal year ended October 31, 2008. 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 expressly set forth by specific reference in such filing.

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, U.S. generally accepted accounting principles (“GAAP”)  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 provides GAAP and non-GAAP measures in our earnings release.  The presentation of non-GAAP financial information should not 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 intended to supplement, and to 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.  We use non-GAAP financial measures that exclude: (i) the share-based compensation impact of Statement of Financial Accounting Standards No. 123—revised 2004 (“SFAS 123(R)”), “Share-Based Payment”; (ii) the amortization of acquired intangible assets and in-process research and development; (iii) facilities realignment charges; (iv) other significant items, including a tax benefit from a settlement with the Internal Revenue Service and the effect of other litigation settlements; and (v) the income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes.

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, between 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:

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(i)Share-based compensation impact of SFAS 123(R).  We exclude share-based 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 share-based compensation to our operational performance, liquidity and ability to invest in research and development and fund acquisitions and capital expenditures. While share-based 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. We further believe these measures are useful to investors in that they allow for greater transparency to certain line items in our financial statements.  In addition, excluding this item from various non-GAAP measures facilitates comparisons to our competitors’ operating results.

(ii)Amortization of acquired intangible assets and in-process research and development.  We incur amortization of acquired intangible assets which includes contract rights associated with certain executory contracts and core/developed technology, trademarks, trade names, customer relationships, covenants not to compete, and other intangibles related to acquisitions.  We amortize for accounting purposes the fair value of the intangible assets based on the pattern in which the economic benefits of the intangible assets will be consumed as revenue is generated.  Although the intangible assets generate revenue for us, 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, liquidity and ability to invest in research and development and fund acquisitions and capital expenditures.  We incur in-process research and development expenses when technological feasibility for acquired technology has not been established and no future alternative use for such technology exists.  In addition, excluding these items from various non-GAAP measures facilitates our internal comparisons to our historical operating results and comparisons to our competitors’ operating results.

(iii)Facilities realignment charges.  In fiscal 2004, we incurred a facilities realignment charge in connection with the consolidation of a facility.  In fiscal 2007, we reduced the accrued charge to reflect the receipt of sublease income.  We exclude this item because it is not reflective of ongoing operating results and we do not undertake significant facilities realignments on a regular basis.

(iv)Other Significant Items.  From time to time we are party to legal settlements.  We have excluded the effect of a tax benefit from a settlement with the Internal Revenue Service and the effect of other litigation settlements, 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 the matters.

(v)Income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes. Excluding the income tax effect of the 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.

Item 8.01. Other Events.

Our 2009 Annual Meeting of Stockholders is scheduled to be held on February 27, 2009.  Pursuant to our bylaws and Rule 14a-8 of the Securities Exchange Act of 1934, as amended, stockholder proposals, including nominations to our Board of Directors, are due a reasonable time before we print and send our proxy materials.  We currently expect to print and send our proxy materials on or about January 15, 2009. Stockholder proposals or nominations must be received by our Corporate Secretary at Synopsys, Inc., 700 East Middlefield Road, Mountain View, California 94043 no later than January 3, 2009.  Please see our bylaws and the federal proxy rules for the information required to be contained in such notices.

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Item 9.01 Financial Statements and Exhibits.

(d)	Exhibits
	99.1	Press release dated December 3, 2008 containing Synopsys, Inc.’s results of operations for the fourth quarter and fiscal year ended October 31, 2008.

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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.

Date: December 3, 2008	SYNOPSYS, INC.
	/s/ Brian E. Cabrera
	Brian E. Cabrera
	Vice President, General Counsel
	and Corporate Secretary

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Exhibit Index

Exhibit  Number	Exhibit Title
99.1	Press release dated December 3, 2008 containing Synopsys, Inc.’s results of operations for the fourth quarter and fiscal year ended October 31, 2008.

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EX-99.1

Exhibit 99.1

PRESS RELEASE

INVESTOR CONTACT:

Lisa L. Ewbank

Synopsys, Inc.

650-584-1901

EDITORIAL CONTACT:

Yvette Huygen

Synopsys, Inc.

650-584-4547

yvetteh@synopsys.com

Synopsys Posts Financial Results for Fourth Quarter and Fiscal Year 2008

MOUNTAIN VIEW, Calif. – December 3, 2008 – Synopsys, Inc. (Nasdaq:SNPS), the world leader in software and IP for semiconductor design and manufacturing, today reported results for its fourth quarter and fiscal year ended October 31, 2008.

For the fourth quarter, Synopsys reported revenue of $352.8 million, an 11.9 percent increase compared to $315.2 million for the fourth quarter of fiscal 2007.  Revenue for fiscal year 2008 was $1.337 billion, an increase of 10.3 percent from $1.212 billion in fiscal 2007.

“Synopsys delivered very good financial and operational results in Q4 and 2008, despite a marked change in the economic environment,” said Aart de Geus, chairman and CEO of Synopsys.  “While the global economic landscape is unpredictable, and leading to more conservative consumer and business practices, Synopsys is heading into 2009 with a solid financial, technical and business foundation.”

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the fourth quarter of fiscal 2008 was $46.4 million, or $0.32 per share, compared to $41.0 million, or $0.27 per share, for the fourth quarter of fiscal 2007.

GAAP net income for fiscal year 2008 was $190.0 million, or $1.29 per share, compared to $130.5 million, or $0.87 per share, for fiscal 2007.

Non-GAAP Results

On a non-GAAP basis, net income for the fourth quarter of fiscal 2008 was $62.7 million, or $0.43 per share, compared to non-GAAP net income of $60.0 million, or $0.40 per share, for the fourth quarter of fiscal 2007.

Non-GAAP net income for fiscal year 2008 was $252.9 million, or $1.71 per share, compared to non-GAAP net income of $204.9 million, or $1.37 per share, for fiscal 2007.

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 2009.  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 2009 Targets:

·Revenue: $332 million - $340 million

·GAAP expenses: $276 million - $291.5 million

·Non-GAAP expenses: $253 million - $263 million

·Other income and expense: $0 - $3 million

·Tax rate applied in non-GAAP net income calculations: approximately 27 percent

·Fully diluted outstanding shares: 145 million - 150 million

·GAAP earnings per share: $0.26 - $0.31

·Non-GAAP earnings per share: $0.40 - $0.42

·Revenue from backlog: greater than 90 percent

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Full-Year Fiscal Year 2009 Targets:

·Revenue: $1.380 billion - $1.410 billion

·Other income and expense: $4 million - $8 million

·Tax rate applied in non-GAAP net income calculations: approximately 27 percent

·Fully diluted outstanding shares: 145 million - 150 million

·GAAP earnings per share: $1.07 - $1.26

·Non-GAAP earnings per share: $1.60 - $1.72

·Cash flow from operations: $200 million - $220 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) share-based compensation; (ii) the amortization of acquired intangible assets and in-process research and development charges; (iii) facilities realignment charges; (iv) other significant items, including a tax benefit from a settlement with the Internal Revenue Service and the effect of other litigation settlements; and (v) the income tax effect of the 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 such 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.

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Reconciliation of Fourth Quarter and Fiscal Year 2008 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 2008 Results

(Unaudited and in thousands, except per share amounts)

	Three Months Ended						Twelve Months Ended
	October 31,						October 31,
	2008			2007			2008			2007
GAAP net income	$	46,397		$	41,014		$	189,978		$	130,491
Adjustments:
Amortization of intangible assets	9,250			12,703			44,091			50,096
Share-based compensation	14,666			15,336			65,472			62,010
In-process research and development	—			1,100			4,800			3,200
Litigation settlement	—			—			—			(12,500		)
Facilities realignment charge	—			—			—			(645		)
Tax benefit from IRS settlement	—			—			(17,253		)	—
Tax effect	(7,635		)	(10,112		)	(34,230		)	(27,746		)
Non-GAAP net income	$	62,678		$	60,041		$	252,858		$	204,906

	Three Months Ended						Twelve Months Ended
	October 31,						October 31,
	2008			2007			2008			2007
GAAP earnings per share	$	0.32		$	0.27		$	1.29		$	0.87
Adjustments:
Amortization of intangible assets	0.06			0.08			0.30			0.33
Share-based compensation	0.10			0.10			0.44			0.42
In-process research and development	—			0.01			0.03			0.02
Litigation settlement	—			—			—			(0.08		)
Facilities realignment charge	—			—			—			(0.01		)
Tax benefit from IRS settlement	—			—			(0.12		)	—
Tax effect	(0.05		)	(0.06		)	(0.23		)	(0.18		)
Non-GAAP earnings per share	$	0.43		$	0.40		$	1.71		$	1.37
Shares used in calculation	145,638			150,701			147,672			149,716

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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 First Quarter Fiscal Year 2009 Targets

(in thousands, except per share amounts)

	Range for Three Months
	Ending January 31, 2009
	Low			High
Target GAAP expenses	$	276,000		$	291,500
Adjustment:
Estimated impact of amortization of intangible assets	(11,500		)	(15,000		)
Estimated impact of share-based compensation	(11,500		)	(13,500		)
Target non-GAAP expenses	$	253,000		$	263,000

	Range for Three Months
	Ending January 31, 2009
	Low			High
Target GAAP earnings per share	$	0.26		$	0.31
Adjustment:
Estimated impact of amortization of intangible assets	0.10			0.08
Estimated impact of share-based compensation	0.09			0.08
Net non-GAAP tax effect	(0.05		)	(0.05		)
Target non-GAAP earnings per share	$	0.40		$	0.42
Shares used in non-GAAP calculation (midpoint of target range)	147,500			147,500

GAAP to Non-GAAP Reconciliation of Fiscal Year 2009 Targets

	Range for Fiscal Year
	Ending October 31, 2009
	Low			High
Target GAAP earnings per share	$	1.07		$	1.26
Adjustment:
Estimated impact of amortization of intangible assets	0.31			0.28
Estimated impact of share-based compensation	0.40			0.39
Net non-GAAP tax effect	(0.18		)	(0.21		)
Target non-GAAP earnings per share	$	1.60		$	1.72
Shares used in non-GAAP calculation (midpoint of target range)	147,500			147,500

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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/.  A recording of the call will be available by calling +1-800-475-6701 (+1-320-365-3844 for international callers), access code 968632, beginning at 5:30 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 2009 in February 2009.  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 earnings call in February 2009, 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 2009 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 fiscal 2008 in its Annual Report on Form 10-K to be filed by December 31, 2008.

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About Synopsys

Synopsys, Inc. (NASDAQ:SNPS) is the 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, software-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 orders; and

·difficulties in the integration of the products and operations of acquired companies or assets into Synopsys’ products and operations.

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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, 2009 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 2009 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 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 July 31, 2008.  Furthermore, Synopsys’ actual tax rates applied to income for the first quarter fiscal year 2009 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 actions by the government.  Finally, Synopsys’ targets for outstanding shares in the first quarter and fiscal year 2009 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.

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SYNOPSYS, INC.

Unaudited Consolidated Statements of Operations (1)

(in thousands, except per share amounts)

	Three Months Ended October 31,					Twelve Months Ended October 31,
	2008			2007		2008			2007
Revenue:
Time-based license	$	290,515		$	257,935	$	1,125,845		$	1,004,026
Upfront license	26,090			20,416		71,383			67,524
Maintenance and service	36,200			36,882		139,723			140,919
Total revenue	352,805			315,233		1,336,951			1,212,469
Cost of revenue:
License	45,213			39,151		171,974			146,420
Maintenance and service	15,440			16,899		63,596			64,358
Amortization of intangible assets	6,215			6,032		23,326			23,487
Total cost of revenue	66,868			62,082		258,896			234,265
Gross margin	285,937			253,151		1,078,055			978,204
Operating expenses:
Research and development	102,564			97,016		394,747			379,221
Sales and marketing	87,706			85,158		334,779			349,395
General and administrative	27,328			25,330		103,852			101,735
In-process research and development	—			1,100		4,800			3,200
Amortization of intangible assets	3,035			6,671		20,765			26,609
Total operating expenses	220,633			215,275		858,943			860,160
Operating income	65,304			37,876		219,112			118,044
Other income, net	(9,584		)	9,324		(156		)	47,755
Income before income taxes	55,720			47,200		218,956			165,799
Provision for income taxes	9,323			6,186		28,978			35,308
Net income	$	46,397		$	41,014	$	189,978		$	130,491
Net income per share:
Basic	$	0.33		$	0.28	$	1.33		$	0.91
Diluted	$	0.32		$	0.27	$	1.29		$	0.87
Shares used in computing per share amounts:
Basic	142,684			144,973		143,258			143,953
Diluted	145,638			150,701		147,672			149,716

(1)Synopsys’ fiscal years ended on November 1, 2008 and November 3, 2007, respectively.  For presentation purposes, the Unaudited Consolidated Statements of Operations refer to a calendar month end.

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SYNOPSYS, INC.

Unaudited Consolidated Balance Sheets (1)

(in thousands, except par value amounts)

	October 31, 2008			October 31, 2007
ASSETS:
Current assets:
Cash and cash equivalents	$	577,632		$	579,327
Short-term investments	373,669			405,126
Total cash, cash equivalents and short-term investments	951,301			984,453
Accounts receivable, net	147,365			123,900
Deferred income taxes	133,609			123,165
Income taxes receivable	49,859			42,525
Prepaid expenses and other current assets	40,156			53,496
Total current assets	1,322,290			1,327,539
Property and equipment, net	145,087			131,866
Goodwill	899,640			767,087
Intangible assets, net	114,760			78,792
Long-term deferred income taxes	177,386			216,642
Other assets	83,315			95,411
Total assets	$	2,742,478		$	2,617,337
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable and accrued liabilities	$	289,769		$	246,209
Accrued income taxes	14,496			207,572
Deferred revenue	604,718			577,295
Total current liabilities	908,983			1,031,076
Deferred compensation and other liabilities	76,970			84,648
Long-term accrued income taxes	152,745			—
Long-term deferred revenue	75,409			65,220
Total liabilities	1,214,107			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; 141,786 and 146,365 shares outstanding, respectively	1,418			1,464
Capital in excess of par value	1,471,031			1,401,965
Retained earnings	434,057			263,977
Treasury stock, at cost: 15,485 and 10,867 shares, respectively	(342,856		)	(234,918		)
Accumulated other comprehensive income (loss)	(35,279		)	3,905
Total stockholders’ equity	1,528,371			1,436,393
Total liabilities and stockholders’ equity	$	2,742,478		$	2,617,337

(1)Synopsys’ fiscal years ended on November 1, 2008 and November 3, 2007, respectively.  For presentation purposes, the Unaudited Consolidated Balance Sheets refer to a calendar month end.

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SYNOPSYS, INC.

Unaudited Consolidated Statements of Cash Flows (1)

(in thousands)

	Twelve Months Ended October 31,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	189,978		$	130,491
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation	97,143			105,367
Share-based compensation	65,474			62,011
Allowance for doubtful accounts	135			(330		)
(Gain) loss on sale of investments	(1,404		)	(72		)
(Gain) on sale of land	—			(4,284		)
Deferred income taxes	(12,258		)	(972		)
Net change in deferred gains and losses on cash flow hedges	(14,884		)	9,053
In-process research and development	4,800			3,200
Net changes in operating assets and liabilities, net of acquired assets and liabilities:
Accounts receivable	(8,571		)	(124		)
Prepaid expenses and other current assets	(22,484		)	(15,610		)
Other assets	647			139
Accounts payable and accrued liabilities	36,413			(590		)
Accrued income taxes	(6,960		)	2,127
Deferred revenue	6,856			142,002
Deferred compensation and other liabilities	(3,797		)	1,070
Net cash provided by operating activities	331,088			433,478
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of short-term investments	597,902			284,615
Purchases of short-term investments	(564,978		)	(447,100		)
Proceeds from sales of long-term investments	77			—
Purchases of long-term investments	(7,694		)	(4,620		)
Purchases of property and equipment	(38,869		)	(44,690		)
Proceeds from sale of land	—			26,298
Cash paid for acquisitions and intangible assets, net of cash acquired	(184,650		)	(57,473		)
Capitalization of software development costs	(2,874		)	(2,599		)
Net cash used in investing activities	(201,086		)	(245,569		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on lease obligations	(2,970		)	—
Issuances of common stock	79,181			208,484
Purchases of common stock	(220,053		)	(151,620		)
Net cash (used in) provided by financing activities	(143,842		)	56,864
Effect of exchange rate changes on cash and cash equivalents	12,145			3,795
Net change in cash and cash equivalents	(1,695		)	248,568
Cash and cash equivalents, beginning of period	579,327			330,759
Cash and cash equivalents, end of period	$	577,632		$	579,327

(1)Synopsys’ fiscal years ended on November 1, 2008 and November 3, 2007, respectively.  For presentation purposes, the Unaudited Consolidated Statements of Cash Flows refer to a calendar month end.

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