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

Date of Report (date of earliest event reported): August 18, 2010

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 18, 2010, Synopsys, Inc. issued a press release announcing the financial results of the third fiscal quarter ended July 31, 2010. 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 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 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) in-process research and development expenses; (iv) acquisition-related costs; (v) other significant items, including the effect of a tax benefit from a settlement with the Internal Revenue Service and a facility restructuring charge; and (vi) the income tax effect of non-GAAP pre-tax adjustments from the provision for income taxes.

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:

(i) Amortization of acquired intangible assets. We incur expenses from amortization of acquired intangible assets which include 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 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, liquidity and 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, liquidity and 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) In-process research and development expenses. We incurred costs relating to in-process research and development projects when technological feasibility for the acquired technology had not been established and no future alternative use for such technology existed. For accounting purposes in the prior years, such costs were expensed as incurred. Excluding these items from various non-GAAP measures facilitates our internal comparisons to our historical operating results and comparisons to our competitors’ operating results.

(iv) Acquisition-related costs. In connection with our business combinations, we incur compensation expenses, professional fees and other direct expenses related to restructuring activities of the acquired company. We exclude such expenses as they are primarily related to acquisitions and have no direct correlation to the operation of our business.

(v) Legal settlements. 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 because we do not consider this matter to be part of the ongoing operation of our business and because of the singular nature of the claim underlying this matter.

(vi) Restructuring costs. 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 a loss on the closure of a facility obtained through our acquisition of another company.

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

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

99.1 Press release dated August 18, 2010 containing Synopsys, Inc.’s results of operations for the third fiscal quarter ended July 31, 2010.

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: August 18, 2010	SYNOPSYS, INC.
	/S/    BRIAN E. CABRERA
	Brian E. Cabrera
	Vice President, General Counsel
	and Corporate Secretary

Exhibit Index

Exhibit Number	Exhibit Title
99.1	Press release dated August 18, 2010 containing Synopsys, Inc.’s results of operations for the third fiscal quarter ended July 31, 2010.

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 Third Quarter Fiscal Year 2010

MOUNTAIN VIEW, Calif. – August 18, 2010 – Synopsys, Inc. (Nasdaq: SNPS), a world leader in software and IP for semiconductor design, verification and manufacturing, today reported results for its third quarter of fiscal year 2010.

For the third quarter of fiscal 2010, Synopsys reported revenue of $336.9 million, compared to $345.2 million for the third quarter of fiscal 2009.

“Synopsys delivered strong results in Q3, and we are well on-track to meeting or beating the targets we set at the beginning of the year,” said Aart de Geus, chairman and CEO of Synopsys. “During the downturn over the past two years, we invested to strengthen our technology portfolio, gained customer momentum, and expanded our total addressable market through several acquisitions. Looking forward, our objective is to sustainably grow earnings per share primarily by growing revenue, controlling expenses and focusing efforts on value-added projects.”

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the third quarter of fiscal 2010 was $39.3 million, or $0.26 per share, compared to $47.4 million, or $0.32 per share, for the third quarter of fiscal 2009.

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Non-GAAP Results

On a non-GAAP basis, net income for the third quarter of fiscal 2010 was $58.2 million, or $0.39 per share, compared to non-GAAP net income of $68.3 million, or $0.47 per share, for the third quarter of fiscal 2009.

Financial Targets

Synopsys also provided its financial targets for the fourth quarter and full fiscal year 2010. These targets do not include future acquisition-related expenses that may be incurred in fiscal 2010. 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 2010 Targets:

• Revenue: $349 million - $357 million

• GAAP expenses: $291 million - $310 million

• Non-GAAP expenses: $267 million - $277 million

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

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

• Fully diluted outstanding shares: 149 million - 153 million

• GAAP earnings per share: $0.21 - $0.27

• Non-GAAP earnings per share: $0.37 - $0.39

• Revenue from backlog: greater than 90 percent

Full-Year Fiscal Year 2010 Targets:

• Revenue: $1.354 billion - $1.362 billion

• Other income and expense: $4 million - $7 million

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

• Fully diluted outstanding shares: 149 million - 153 million

• GAAP earnings per share: $1.61 - $1.67

• Non-GAAP earnings per share: $1.58 - $1.60

• Cash flow from operations: approximately $300 million

2

GAAP Reconciliation

Synopsys continues to provide all information required in accordance with GAAP, but believes evaluating its ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures. Accordingly, Synopsys presents non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate Synopsys’ operating results in a manner that focuses on what Synopsys believes to be its ongoing business operations and what Synopsys uses to evaluate its ongoing operations and for internal planning and forecasting purposes. Synopsys’ management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Synopsys’ management believes it is useful for itself and investors to review, as applicable, both GAAP information that includes: (i) the amortization of acquired intangible assets; (ii) the impact of stock compensation; (iii) in-process research and development expenses, (iv) acquisition-related costs; (v) other significant items, including the effect of a tax benefit from a settlement with the Internal Revenue Service and a facility restructuring charge, and (vi) the income tax effect of non-GAAP pre-tax adjustments from the provision for income taxes; and the non-GAAP measures that exclude such information in order to assess the performance of Synopsys’ business and for planning and forecasting in subsequent periods. Whenever Synopsys uses 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 Third Quarter Fiscal Year 2010 Results

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

GAAP to Non-GAAP Reconciliation of Third Quarter Fiscal Year 2010 Results

(Unaudited and in thousands, except per share amounts)

	Three Months Ended July 31,						Nine Months Ended July 31,
	2010			2009			2010			2009
GAAP net income	$	39,327		$	47,436		$	211,662		$	148,153
Adjustments:
Amortization of intangible assets		10,611			11,408			33,075			33,836
Stock compensation		14,514			13,995			45,214			42,799
In-process research and development		—			400			—			1,000
Acquisition-related costs		2,670			—			9,836			—
Facility restructuring charge		1,115			—			1,115			—
Tax benefit from IRS settlement		(2,695	)		—			(94,344	)		—
Tax effect		(7,359	)		(4,941	)		(24,023	)		(19,991	)
Non-GAAP net income	$	58,183		$	68,298		$	182,535		$	205,797
	Three Months Ended July 31,						Nine Months Ended July 31,
	2010			2009			2010			2009
GAAP net income per share	$	0.26		$	0.32		$	1.40		$	1.02
Adjustments:
Amortization of intangible assets		0.07			0.08			0.22			0.23
Stock compensation		0.10			0.10			0.30			0.30
In-process research and development		—			—			—			0.01
Acquisition-related costs		0.02			—			0.07			—
Facility restructuring charge		0.01			—			0.01			—
Tax benefit from IRS settlement		(0.02	)		—			(0.62	)		—
Tax effect		(0.05	)		(0.03	)		(0.17	)		(0.14	)
Non-GAAP net income per share	$	0.39		$	0.47		$	1.21		$	1.42
Shares used in calculation		151,106			146,063			151,459			144,699

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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 Fourth Quarter Fiscal Year 2010 Targets

(in thousands, except per share amounts)

	Range for Three Months Ending October 31, 2010
	Low			High
Target GAAP expenses	$	291,000		$	310,000
Adjustment:
Estimated impact of amortization of intangible assets		(10,000	)		(13,000	)
Estimated impact of stock compensation		(14,000	)		(20,000	)
Target non-GAAP expenses	$	267,000		$	277,000
	Range for Three Months Ending October 31, 2010
	Low			High
Target GAAP earnings per share	$	0.21		$	0.27
Adjustment:
Estimated impact of amortization of intangible assets		0.09			0.07
Estimated impact of stock compensation		0.13			0.09
Net non-GAAP tax effect		(0.06	)		(0.04	)
Target non-GAAP earnings per share	$	0.37		$	0.39
Shares used in non-GAAP calculation (midpoint of target range)		151,000			151,000
GAAP to Non-GAAP Reconciliation of Fiscal Year 2010 Targets
	Range for Fiscal Year Ending October 31, 2010
	Low			High
Target GAAP earnings per share	$	1.61		$	1.67
Adjustment:
Estimated impact of amortization of intangible assets		0.31			0.28
Estimated impact of stock compensation		0.40			0.38
Acquisition-related costs		0.07			0.07
Impact of facility restructuring charge		0.01			0.01
Tax benefit from IRS settlement		(0.62	)		(0.62	)
Net non-GAAP tax effect		(0.20	)		(0.19	)
Target non-GAAP earnings per share	$	1.58		$	1.60
Shares used in non-GAAP calculation (midpoint of target range)		151,000			151,000

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 166466, 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 fiscal year 2010 in December 2010. 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 fourth quarter and fiscal year 2010 earnings call in December 2010, 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 2010 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 2010 in its quarterly report on Form 10-Q to be filed by September 9, 2010.

6

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 more than 65 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,” 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:

• continued uncertainty in the global economy and the semiconductor and electronics industries;

• failure of customers to pay license fees as scheduled;

• 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;

• 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 October 31, 2010 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 2010 could differ materially from the targets stated under “Financial Targets” above for a number of reasons, including, but not limited to, (i) a determination by Synopsys that any portion of its goodwill or intangible assets have become impaired, (ii) application of the actual consolidated GAAP and non-GAAP tax rates for such periods, or judgment by management, based upon the status of pending audits and settlements to increase or decrease an income tax asset or liability, (iii) integration and other acquisition-related costs including amortization of intangible assets and costs formerly capitalized but now expensed due to new accounting guidance related to business combinations, (iv) changes in the anticipated amount of employee stock compensation expense recognized on Synopsys’ financial statements, (v) actual change in the fair value of Synopsys’ non-qualified deferred compensation plan obligations, (vi) increases or decreases to estimated capital expenditures, (vii) changes driven by new accounting rules, regulations, interpretations or guidance, (viii) general economic conditions, and (ix) other risks as detailed in our SEC filings, including those described in the “Risk Factors” section in our latest Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2010. Furthermore, Synopsys’ actual tax rates applied to income for the fourth quarter and fiscal year 2010 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 2010 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.

8

SYNOPSYS, INC.

Unaudited Consolidated Statements of Operations (1)

(in thousands, except per share amounts)

	Three Months Ended July 31,					Nine Months Ended July 31,
	2010			2009 (2)		2010			2009 (2)
Revenue:
Time-based license	$	286,563		$	285,622	$	847,710		$	860,613
Upfront license		14,650			17,751		47,811			46,129
Maintenance and service		35,716			41,804		109,681			115,025
Total revenue		336,929			345,177		1,005,202			1,021,767
Cost of revenue:
License		43,996			44,173		130,140			128,288
Maintenance and service		14,697			17,410		46,475			48,037
Amortization of intangible assets		8,050			8,452		24,736			24,153
Total cost of revenue		66,743			70,035		201,351			200,478
Gross margin		270,186			275,142		803,851			821,289
Operating expenses:
Research and development		105,649			104,989		319,931			305,792
Sales and marketing		83,812			77,973		242,791			237,877
General and administrative		27,371			27,735		81,937			83,608
In-process research and development		—			400		—			1,000
Amortization of intangible assets		2,561			2,956		8,339			9,683
Total operating expenses		219,393			214,053		652,998			637,960
Operating income		50,793			61,089		150,853			183,329
Other (expense) income, net		(3,046	)		5,384		8,109			17,928
Income before income taxes		47,747			66,473		158,962			201,257
Provision (benefit) for income taxes		8,420			19,037		(52,700	)		53,104
Net income	$	39,327		$	47,436	$	211,662		$	148,153
Net income per share:
Basic	$	0.27		$	0.33	$	1.43		$	1.04
Diluted	$	0.26		$	0.32	$	1.40		$	1.02
Shares used in computing per share amounts:
Basic		148,006			144,138		147,909			143,093
Diluted		151,106			146,063		151,459			144,699

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

(2) For the three and nine months ended July 31, 2009, Synopsys reclassified $1.2 million and $7.2 million from upfront license to time-based licensed revenue to conform to the current year presentation which had no impact on total revenue.

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SYNOPSYS, INC.

Unaudited Consolidated Balance Sheets (1)

(in thousands, except par value amounts)

	July 31, 2010			October 31, 2009
ASSETS:
Current assets:
Cash and cash equivalents	$	883,441		$	701,613
Short-term investments		326,384			466,713
Total cash, cash equivalents and short-term investments		1,209,825			1,168,326
Accounts receivable, net		148,582			127,010
Deferred income taxes		72,022			73,453
Income taxes receivable		26,568			51,191
Prepaid and other current assets		38,977			43,820
Total current assets		1,495,974			1,463,800
Property and equipment, net		139,102			146,910
Goodwill		1,002,531			932,691
Intangible assets, net		118,061			96,810
Long-term deferred income taxes		264,874			205,396
Other long-term assets		94,107			93,247
Total assets	$	3,114,649		$	2,938,854
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable and accrued liabilities	$	240,407		$	255,095
Accrued income taxes		2,736			5,508
Deferred revenue		593,911			553,990
Total current liabilities		837,054			814,593
Long-term accrued income taxes		101,731			157,354
Other long-term liabilities		92,082			88,002
Long-term deferred revenue		33,972			34,739
Total liabilities		1,064,839			1,094,688
Stockholders’ equity:
Preferred stock, $0.01 par value: 2,000 shares authorized; none outstanding		—			—
Common stock, $0.01 par value: 400,000 shares authorized; 147,537 and 146,945 shares outstanding, respectively		1,475			1,469
Capital in excess of par value		1,527,034			1,500,166
Retained earnings		758,727			574,980
Treasury stock, at cost: 9,728 and 10,326 shares, respectively		(213,637	)		(228,618	)
Accumulated other comprehensive loss		(23,789	)		(3,831	)
Total stockholders’ equity		2,049,810			1,844,166
Total liabilities and stockholders’ equity	$	3,114,649		$	2,938,854

(1) Synopsys’ fiscal quarter ended on the Saturday nearest July 31. For presentation purposes, the Unaudited Consolidated Balance Sheets refer to a calendar month end.

10

SYNOPSYS, INC.

Unaudited Consolidated Statements of Cash Flows (1)

(in thousands)

	Nine Months Ended July 31,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	211,662		$	148,153
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation		71,772			74,581
Stock compensation		45,214			42,799
Allowance for doubtful accounts		(851	)		2,735
Write-down of long-term investments		468			6,333
Gain on sale of investments		(3,114	)		(610	)
Deferred income taxes		(31,297	)		15,801
In-process research and development		—			1,000
Net changes in operating assets and liabilities, net of acquired assets and liabilities:
Accounts receivable		(19,181	)		10,690
Prepaid and other current assets		(7,497	)		4,915
Other long-term assets		(2,470	)		(7,071	)
Accounts payable and other liabilities		(21,270	)		(62,358	)
Income taxes		(31,445	)		1,004
Deferred revenue		32,153			(62,723	)
Net cash provided by operating activities		244,144			175,249
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of short-term investments		352,124			223,994
Purchases of short-term investments		(209,564	)		(310,323	)
Purchases of long-term investments		—			(671	)
Purchases of property and equipment		(27,593	)		(24,634	)
Cash paid for acquisitions, net of cash acquired		(137,681	)		(48,248	)
Capitalization of software development costs		(2,116	)		(2,228	)
Net cash used in investing activities		(24,830	)		(162,110	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital leases		(3,609	)		(1,675	)
Proceeds from credit facilities		—			1,279
Payment on credit facility		—			(260	)
Issuances of common stock		87,241			28,237
Purchases of treasury stock		(125,257	)		—
Net cash (used in) provided by financing activities		(41,625	)		27,581
Effect of exchange rate changes on cash and cash equivalents		4,139			3,929
Net change in cash and cash equivalents		181,828			44,649
Cash and cash equivalents, beginning of period		701,613			577,632
Cash and cash equivalents, end of period	$	883,441		$	622,281

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

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