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): December 1, 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 December 1, 2010, Synopsys, Inc. issued a press release announcing the financial results of the fourth quarter and fiscal year ended October 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, 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.

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(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. In years prior to fiscal 2010, the value associated with the in-process research and development projects were expensed upon acquisition. These costs related to in-process research and development projects when technological feasibility for the acquired technology had not been established. Excluding these items from various non-GAAP measures facilitates our internal comparisons to our 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 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, 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

Exhibit Number	Exhibit Title
99.1	Press release dated December 1, 2010 containing Synopsys, Inc.’s results of operations for the fourth quarter and fiscal year ended October 31, 2010.

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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.

	SYNOPSYS, INC.
Dated: December 1, 2010	By:	/S/    BRIAN E. CABRERA
		Brian E. Cabrera
		Vice President, General Counsel and
		Corporate Secretary

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INDEX TO EXHIBITS

Exhibit Number	Exhibit Title
99.1	Press release dated December 1, 2010 containing Synopsys, Inc.’s results of operations for the fourth quarter and fiscal year ended October 31, 2010.

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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 2010

MOUNTAIN VIEW, Calif. – December 1, 2010 – Synopsys, Inc. (Nasdaq: SNPS), a world leader in software and IP for semiconductor design, verification and manufacturing, today reported results for its fourth quarter and fiscal year 2010.

For the fourth quarter of fiscal 2010, Synopsys reported revenue of $375.5 million, compared to $338.3 million for the fourth quarter of fiscal 2009. Revenue for fiscal year 2010 was $1.38 billion, an increase of 1.5 percent from $1.36 billion in fiscal 2009.

“Synopsys had a strong year, relative to the industry and our expectations, and we enter fiscal 2011 with an even better outlook,” said Aart de Geus, chairman and CEO of Synopsys. “Building on significant technology and customer momentum, and an improved customer landscape, we expect to deliver growth in both traditional EDA and the adjacencies in which we’ve been steadily investing over the past several years.”

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the fourth quarter of fiscal 2010 was $25.4 million, or $0.17 per share, compared to $19.5 million, or $0.13 per share, for the fourth quarter of fiscal 2009. GAAP net income for fiscal year 2010 was $237.1 million, or $1.56 per share, compared to $167.7 million, or $1.15 per share for fiscal 2009. Net income for fiscal year 2010 includes a one-time $94.3 million, or $0.62 per share, tax benefit associated with the IRS settlement for fiscal years 2002-2004, announced on January 12, 2010.

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Non-GAAP Results

On a non-GAAP basis, net income for the fourth quarter of fiscal 2010 was $59.9 million, or $0.39 per share, compared to non-GAAP net income of $49.5 million, or $0.33 per share, for the fourth quarter of fiscal 2009. Non-GAAP net income for fiscal 2010 was $242.4 million, or $1.60 per share, compared to non-GAAP net income of $255.3 million, or $1.75 per share, for fiscal 2009. 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 2011. These targets do not include future acquisition-related expenses that may be incurred in fiscal 2011. These targets constitute forward-looking information and are based on current expectations. For a discussion of factors that could cause actual results to differ materially from these targets, see “Forward-Looking Statements” below.

First Quarter of Fiscal Year 2011 Targets:

• Revenue: $360 million - $368 million

• GAAP expenses: $305 million - $323 million

• Non-GAAP expenses: $278 million - $288 million

• Other income and expense: $0 - $2 million

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

• Fully diluted outstanding shares: 149 million - 154 million

• GAAP earnings per share: $0.21 - $0.28

• Non-GAAP earnings per share: $0.38 - $0.41

• Revenue from backlog: greater than 90 percent

Full Fiscal Year 2011 Targets:

• Revenue: $1.5 billion - $1.525 billion

• Other income and expense: $2 million - $6 million

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

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• Fully diluted outstanding shares: 149 million - 154 million

• GAAP earnings per share: $1.06 - $1.24

• Non-GAAP earnings per share: $1.67 - $1.77

• Cash flow from operations: approximately $220 million - $240 million

• Revenue from backlog: greater than 80 percent

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 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 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 Fourth Quarter and Fiscal Year 2010 Results

(Unaudited and in thousands, except per share amounts)

	Three Months Ended						Twelve Months Ended
	October 31,						October 31,
	2010			2009			2010			2009
GAAP net income	$	25,401		$	19,528		$	237,063		$	167,681
Adjustments:
Amortization of intangible assets		14,610			11,638			47,685			45,474
Stock compensation		14,775			14,137			59,989			56,936
In-process research and development		—			1,200			—			2,200
Acquisition-related costs		10,814			—			20,650			—
Facility restructuring charge		123			4,538			1,238			4,538
Tax benefit from IRS settlement		—			—			(94,344	)		—
Tax effect		(5,870	)		(1,543	)		(29,892	)		(21,534	)
Non-GAAP net income	$	59,853		$	49,498		$	242,389		$	255,295
	Three Months Ended						Twelve Months Ended
	October 31,						October 31,
	2010			2009			2010			2009
GAAP net income per share	$	0.17		$	0.13		$	1.56		$	1.15
Adjustments:
Amortization of intangible assets		0.09			0.08			0.31			0.31
Stock compensation		0.10			0.09			0.40			0.39
In-process research and development		—			0.01			—			0.02
Acquisition-related costs		0.07			—			0.14			—
Facility restructuring charge		0.00			0.03			0.01			0.03
Tax benefit from IRS settlement		—			—			(0.62	)		—
Tax effect		(0.04	)		(0.01	)		(0.20	)		(0.15	)
Non-GAAP net income per share	$	0.39		$	0.33		$	1.60		$	1.75
Shares used in calculation		151,978			149,332			151,911			145,857

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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 First Quarter Fiscal Year 2011 Targets

(in thousands, except per share amounts)

	Range for Three Months Ending January 31, 2011
	Low			High
Target GAAP expenses	$	305,000		$	323,000
Adjustment:
Estimated impact of amortization of intangible assets		(15,000	)		(19,000	)
Estimated impact of stock compensation		(12,000	)		(16,000	)
Target non-GAAP expenses	$	278,000		$	288,000
	Range for Three Months
	Ending January 31, 2011
	Low			High
Target GAAP earnings per share	$	0.21		$	0.28
Adjustment:
Estimated impact of amortization of intangible assets		0.12			0.10
Estimated impact of stock compensation		0.11			0.08
Net non-GAAP tax effect		(0.06	)		(0.05	)
Target non-GAAP earnings per share	$	0.38		$	0.41
Shares used in non-GAAP calculation (midpoint of target range)		151,500			151,500

GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2011 Targets

	Range for Fiscal Year Ending October 31, 2011
	Low			High
Target GAAP earnings per share	$	1.06		$	1.24
Adjustment:
Estimated impact of amortization of intangible assets		0.48			0.42
Estimated impact of stock compensation		0.36			0.30
Net non-GAAP tax effect		(0.23	)		(0.19	)
Target non-GAAP earnings per share	$	1.67		$	1.77
Shares used in non-GAAP calculation (midpoint of target range)		151,500			151,500

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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 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 178205, 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 first quarter fiscal 2011 in February 2011. Synopsys will post copies of the prepared remarks of Aart de Geus, chairman and chief executive officer, and Brian Beattie, chief financial officer, on its website following the call. In addition, Synopsys makes additional financial information available in a financial supplement also posted on the corporate website.

Effectiveness of Information

The targets included in this release, the statements made during the earnings conference call and the information contained in the financial supplement (available in the Investor Relations section of Synopsys’ website at www.synopsys.com) represent Synopsys’ expectations and beliefs as of the date of this release only. Although this press release, copies of the prepared remarks of the chief executive officer and chief financial officer made during the call and the financial supplement will remain available on Synopsys’ website through the date of the first quarter fiscal year 2011 earnings call in February 2011, their continued availability through such date does not mean that Synopsys is reaffirming or confirming their continued validity. Synopsys does not currently intend to report on its progress during the first quarter of fiscal 2011 or comment to analysts or investors on, or otherwise update, the targets given in this earnings release.

Availability of Final Financial Statements

Synopsys will include final financial statements for the fourth quarter and fiscal 2010 in its annual report on Form 10-K to be filed by December 29, 2010.

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About Synopsys

Synopsys, Inc. (Nasdaq:SNPS) is a world leader in electronic design automation (EDA), supplying the global electronics market with the software, intellectual property (IP) and services used in semiconductor design, verification and manufacturing. Synopsys’ comprehensive, integrated portfolio of implementation, verification, IP, manufacturing and field-programmable gate array (FPGA) solutions helps address the key challenges designers and manufacturers face today, such as power and yield management, system-to-silicon verification and time-to-results. These technology-leading solutions help give Synopsys customers a competitive edge in bringing the best products to market quickly while reducing costs and schedule risk. Synopsys is headquartered in Mountain View, California, and has approximately 70 offices located throughout North America, Europe, Japan, Asia and India. Visit Synopsys online at http://www.synopsys.com/.

Forward-Looking Statements

The statements made in this press release regarding projected financial results in the sections entitled “Financial Targets,” and “Reconciliation of Target Non-GAAP Operating Results,” financial objectives, and certain statements made in the earnings conference call are forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those described by these statements due to a number of uncertainties, including, but not limited to:

• 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 the acquisitions it completes and the difficulties in the integration of the products and operations of acquired companies or assets into Synopsys’ products and operations;

• increased competition in the market for Synopsys’ products and services;

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

• lower-than-expected research and development spending by semiconductor and electronic systems companies;

• 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

• failure of customers to pay license fees as scheduled.

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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, 2011 and actual expenses, earnings per share, tax rate, cash flow from operations and other projections on a GAAP and non-GAAP basis for fiscal year 2011 could differ materially from the targets stated under “Financial Targets” above for a number of reasons, including, but not limited to, (i) a determination by Synopsys that any portion of its goodwill or intangible assets have become impaired, (ii) application of the actual consolidated GAAP and non-GAAP tax rates for such periods, or judgment by management, based upon the status of pending audits and settlements to increase or decrease an income tax asset or liability, (iii) integration and other acquisition-related costs including amortization of intangible assets and costs formerly capitalized but now expensed due to new accounting guidance related to business combinations, (iv) changes in the anticipated amount of employee stock compensation expense recognized on Synopsys’ financial statements, (v) actual change in the fair value of Synopsys’ non-qualified deferred compensation plan obligations, (vi) increases or decreases to estimated capital expenditures, (vii) changes driven by new accounting rules, regulations, interpretations or guidance, (viii) general economic conditions, and (ix) other risks as detailed in Synopsys’ SEC filings, including those described in the “Risk Factors” section in the latest Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2010. Furthermore, Synopsys’ actual tax rates applied to income for the first quarter and fiscal year 2011 could differ from the targets given in this press release as a result of a number of factors, including the actual geographic mix of revenue during the quarter and year, and actions by the government. Finally, Synopsys’ targets for outstanding shares in the first quarter and fiscal year 2011 could differ from the targets given in this press release as a result of higher than expected employee stock plan issuances or stock option exercises, acquisitions and the extent of Synopsys’ stock repurchase activity.

Synopsys is under no obligation to (and expressly disclaims any such obligation to) update or alter any of the forward-looking statements made in this earnings release, the conference call or the financial supplement whether as a result of new information, future events or otherwise, unless otherwise required by law.

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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,
	2010		2009 (2)		2010			2009 (2)
Revenue:
Time-based license	$	310,708	$	289,860	$	1,158,418		$	1,150,473
Upfront license		20,807		11,422		68,618			57,551
Maintenance and service		43,944		36,996		153,625			152,021
Total revenue		375,459		338,278		1,380,661			1,360,045
Cost of revenue:
License		50,105		47,332		180,245			175,620
Maintenance and service		18,271		17,331		64,746			65,368
Amortization of intangible assets		11,367		8,509		36,103			32,662
Total cost of revenue		79,743		73,172		281,094			273,650
Gross margin		295,716		265,106		1,099,567			1,086,395
Operating expenses:
Research and development		129,298		114,116		449,229			419,908
Sales and marketing		96,968		86,247		339,759			324,124
General and administrative		32,950		35,492		114,887			119,100
In-process research and development		—		1,200		—			2,200
Amortization of intangible assets		3,243		3,129		11,582			12,812
Total operating expenses		262,459		240,184		915,457			878,144
Operating income		33,257		24,922		184,110			208,251
Other income, net		6,439		6,891		14,548			24,819
Income before income taxes		39,696		31,813		198,658			233,070
Provision (benefit) for income taxes		14,295		12,285		(38,405	)		65,389
Net income	$	25,401	$	19,528	$	237,063		$	167,681
Net income per share:
Basic	$	0.17	$	0.13	$	1.60		$	1.17
Diluted	$	0.17	$	0.13	$	1.56		$	1.15
Shares used in computing per share amounts:
Basic		148,229		145,730		148,013			143,752
Diluted		151,978		149,332		151,911			145,857

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

(2) For the three and twelve months ended October 31, 2009, Synopsys reclassified $4.8 million and $11.9 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)

	October 31, 2010			October 31, 2009
ASSETS:
Current assets:
Cash and cash equivalents	$	775,407		$	701,613
Short-term investments		163,154			466,713
Total cash, cash equivalents and short-term investments		938,561			1,168,326
Accounts receivable, net		181,102			127,010
Deferred income taxes		73,465			73,453
Income taxes receivable		18,425			51,191
Prepaid and other current assets		36,202			43,820
Total current assets		1,247,755			1,463,800
Property and equipment, net		148,580			146,910
Goodwill		1,265,843			932,691
Intangible assets, net		249,656			96,810
Long-term deferred income taxes		268,759			205,396
Other long-term assets		105,948			93,247
Total assets	$	3,286,541		$	2,938,854
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable and accrued liabilities	$	312,850		$	255,095
Accrued income taxes		8,349			5,508
Deferred revenue		600,569			553,990
Total current liabilities		921,768			814,593
Long-term accrued income taxes		128,603			157,354
Other long-term liabilities		101,885			88,002
Long-term deferred revenue		34,103			34,739
Total liabilities		1,186,359			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; 148,479 and 146,945 shares outstanding, respectively		1,485			1,469
Capital in excess of par value		1,541,383			1,500,166
Retained earnings		770,674			574,980
Treasury stock, at cost: 8,786 and 10,326 shares, respectively		(197,586	)		(228,618	)
Accumulated other comprehensive loss		(15,774	)		(3,831	)
Total stockholders’ equity		2,100,182			1,844,166
Total liabilities and stockholders’ equity	$	3,286,541		$	2,938,854

(1) Synopsys’ fourth quarter ended on the Saturday nearest October 31. 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,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	237,063		$	167,681
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation		101,201			101,453
Stock compensation		59,988			56,934
Allowance for doubtful accounts		(899	)		2,461
Write-down of long-term investments		468			7,158
(Gain) loss on sale of investments		(3,995	)		(716	)
Deferred income taxes		38,356			25,942
In-process research and development		—			2,200
Net changes in operating assets and liabilities, net of acquired assets and liabilities:
Accounts receivable		(16,202	)		22,830
Prepaid and other current assets		4,638			12,779
Other long-term assets		(5,923	)		(12,248	)
Accounts payable and other liabilities		10,566			(28,206	)
Income taxes		(94,052	)		(22,503	)
Deferred revenue		9,827			(96,606	)
Net cash provided by operating activities		341,036			239,159
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of short-term investments		547,686			290,709
Purchases of short-term investments		(243,515	)		(386,431	)
Purchases of long-term investments		—			(771	)
Purchases of property and equipment		(39,223	)		(39,199	)
Cash paid for acquisitions, net of cash acquired		(500,829	)		(53,358	)
Capitalization of software development costs		(2,852	)		(2,852	)
Net cash (used in) investing activities		(238,733	)		(191,902	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital leases		(3,692	)		(2,212	)
Proceeds from credit facilities		—			1,279
Payment on credit facility		—			(1,533	)
Issuances of common stock		145,329			71,918
Purchases of treasury stock		(184,699	)		—
Net cash (used in) provided by financing activities		(43,062	)		69,452
Effect of exchange rate changes on cash and cash equivalents		14,553			7,272
Net change in cash and cash equivalents		73,794			123,981
Cash and cash equivalents, beginning of period		701,613			577,632
Cash and cash equivalents, end of period	$	775,407		$	701,613

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

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