Synopsys (SNPS) 10-K risk factor changes: FY2016 vs FY2015

For the fiscal year ended October 31, [removed: 2015][added: 2016]

[removed: ][added: ]

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately [removed: $5.0] [added: $4.8] billion.

Aggregate market value excludes an aggregate of approximately [removed: 56.9] [added: 51.7] million shares of common stock held by the registrant’s executive officers and directors and by each person known by the registrant to own 5% or more of the outstanding common stock on such date.

On December [removed: 10, 2015, 151,452,864] [added: 7, 2016, 150,101,203] shares of the registrant’s Common Stock, $0.01 par value, were outstanding.

Portions of the registrant’s Proxy Statement relating to the registrant’s [removed: 2016] [added: 2017] Annual Meeting of Stockholders, scheduled to be held on [removed: March 29, 2016,] [added: April 6, 2017,] are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.

Fiscal year ended October 31, [removed: 2015][added: 2016]

| Item 1. | | [removed: [Business](#s1F092F572AC05513AF605EA31DD2B1F3)] [added: [Business](#s4DDD29AAFE9151B183FAD29436DC52CE)] | | [removed: [2](#s1F092F572AC05513AF605EA31DD2B1F3)] [added: [2](#s4DDD29AAFE9151B183FAD29436DC52CE)] |

| Item 1A. | | [Risk [removed: Factors](#s0035B78271F25BB8A24B0D2E12301AF1)] [added: Factors](#sFE359E0F88BC5BA892A3FADAB436FDB4)] | | [removed: [11](#s0035B78271F25BB8A24B0D2E12301AF1)] [added: [12](#sFE359E0F88BC5BA892A3FADAB436FDB4)] |

| Item 1B. | | [Unresolved Staff [removed: Comments](#s9302B5B28987555EB4D6400B6A45BC8F)] [added: Comments](#sD114B0CEEB7C582C8BC8348C7B53733E)] | | [removed: [20](#s9302B5B28987555EB4D6400B6A45BC8F)] [added: [22](#sD114B0CEEB7C582C8BC8348C7B53733E)] |

| Item 2. | | [removed: [Properties](#s9ECFDA51AD3A57EE98BD034617B9993C)] [added: [Properties](#sCD2B8DD7403C579A984576BCDF6B51E7)] | | [removed: [20](#s9ECFDA51AD3A57EE98BD034617B9993C)] [added: [23](#sCD2B8DD7403C579A984576BCDF6B51E7)] |

| Item 3. | | [Legal [removed: Proceedings](#s23890F0B95A95903A283FE88F0DA1586)] [added: Proceedings](#s7C3123B8488B51B4A858A1304351297F)] | | [removed: [21](#s23890F0B95A95903A283FE88F0DA1586)] [added: [23](#s7C3123B8488B51B4A858A1304351297F)] |

| Item 4. | | [Mine Safety [removed: Disclosures](#s33FD2E26E19D5A2C8DB27A02E24ED61F)] [added: Disclosures](#s2DDE4A7F7AB459948B27025701835F7E)] | | [removed: [22](#s33FD2E26E19D5A2C8DB27A02E24ED61F)] [added: [24](#s2DDE4A7F7AB459948B27025701835F7E)] |

| Item 5. | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s1FCCDED96D935396A8786EDB3B530548)] [added: Securities](#s0A7E14ACEFA1557B8FD9369C6BCD0587)] | | [removed: [23](#s1FCCDED96D935396A8786EDB3B530548)] [added: [25](#s0A7E14ACEFA1557B8FD9369C6BCD0587)] |

| Item 6. | | [Selected Financial [removed: Data](#s62B1E2593B225F2AA7A96E0DF90EBC5D)] [added: Data](#sBDD42C44DF3A53DBA727B1D825FC102E)] | | [removed: [26](#s62B1E2593B225F2AA7A96E0DF90EBC5D)] [added: [28](#sBDD42C44DF3A53DBA727B1D825FC102E)] |

| Item 7. | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s52817C54A86952D0A10880D1689584B5)] [added: Operations](#s6BD6CCAE51DE555DA582CEA4E7F715A5)] | | [removed: [26](#s52817C54A86952D0A10880D1689584B5)] [added: [28](#s6BD6CCAE51DE555DA582CEA4E7F715A5)] |

| Item 7A. | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s28CA2D7550485123A5909BFBBB5B1EF5)] [added: Risk](#s023D97D0B6725A23A01D2550B5261A6E)] | | [removed: [41](#s28CA2D7550485123A5909BFBBB5B1EF5)] [added: [43](#s023D97D0B6725A23A01D2550B5261A6E)] |

| Item 8. | | [Financial Statements and Supplementary [removed: Data](#s448BB73CD478522B919688E940420B84)] [added: Data](#s3043E03397FD5466B930D62E7AF51A25)] | | [removed: [45](#s448BB73CD478522B919688E940420B84)] [added: [46](#s3043E03397FD5466B930D62E7AF51A25)] |

| Item 9. | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s4A817C01873C5BCBB2E14F9814DB29A1)] [added: Disclosure](#s04A0011FAA445B12A23F92240BA0BD73)] | | [removed: [80](#s4A817C01873C5BCBB2E14F9814DB29A1)] [added: [84](#s04A0011FAA445B12A23F92240BA0BD73)] |

| Item 9A. | | [Controls and [removed: Procedures](#s7E0BC2F1A99C558F8932304C3ADA2D65)] [added: Procedures](#s9BCAB8F1CB245A9CAF1B14A3B789C870)] | | [removed: [80](#s7E0BC2F1A99C558F8932304C3ADA2D65)] [added: [84](#s9BCAB8F1CB245A9CAF1B14A3B789C870)] |

| Item 9B. | | [Other [removed: Information](#s5CC26399A94A5075A78FAFFC8B22384C)] [added: Information](#s79506F58627B50259CB1872DC42610DE)] | | [removed: [81](#s5CC26399A94A5075A78FAFFC8B22384C)] [added: [85](#s79506F58627B50259CB1872DC42610DE)] |

| [PART [removed: III](#s46571579162357B6A06A27E3A3AE8A9A)] [added: III](#s2947CECBEBDA5D66A89DC7F8E6293533)] | | | | |

| Item 10. | | [Directors, Executive Officers and Corporate [removed: Governance](#sBA24BB8192915FE0961FC956C83E4895)] [added: Governance](#s597D5464F7E45E7C9E87664718830D37)] | | [removed: [82](#sBA24BB8192915FE0961FC956C83E4895)] [added: [86](#s597D5464F7E45E7C9E87664718830D37)] |

| Item 11. | | [Executive [removed: Compensation](#s14349AA698B354178F7D9363379A2B9F)] [added: Compensation](#sB0E0F183FF695A23A534B054FC68E010)] | | [removed: [82](#s14349AA698B354178F7D9363379A2B9F)] [added: [86](#sB0E0F183FF695A23A534B054FC68E010)] |

| Item 12. | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#sEDEA5C609E2A5496BA7256CDB9B877F9)] [added: Matters](#s9D910EB6BAC45EE1BE6818C479773A4D)] | | [removed: [82](#sEDEA5C609E2A5496BA7256CDB9B877F9)] [added: [86](#s9D910EB6BAC45EE1BE6818C479773A4D)] |

| Item 13. | | [Certain Relationships and Related Transactions and Director [removed: Independence](#s1F08EEEA9BCF58D19565B632BDB3C215)] [added: Independence](#s11E2A6C3A8D7508DBA46F54B32F2B4BA)] | | [removed: [82](#s1F08EEEA9BCF58D19565B632BDB3C215)] [added: [86](#s11E2A6C3A8D7508DBA46F54B32F2B4BA)] |

| Item 14. | | [Principal Accountant Fees and [removed: Services](#s6277636088A6583DAE2B3BFB92C6D318)] [added: Services](#sEEC52888B1D35056947B97123F0D02FE)] | | [removed: [82](#s6277636088A6583DAE2B3BFB92C6D318)] [added: [86](#sEEC52888B1D35056947B97123F0D02FE)] |

| Item 15. | | [Exhibits and Financial Statement [removed: Schedules](#sE275638CA7F45CD6BD64362DD2A72173)] [added: Schedules](#sDC24F820EB8D53FEBAEDC02E46E9C14F)] | | [removed: [83](#sE275638CA7F45CD6BD64362DD2A72173)] [added: [87](#sDC24F820EB8D53FEBAEDC02E46E9C14F)] |

This Annual Report on Form 10-K (this Form 10-K or Annual Report) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), [removed: and] Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), [removed: which are subject to] [added: and] the [removed: “safe harbor” created by those sections.][added: Private Securities Litigation Reform Act of 1995.]

Any statements herein that are not statements of historical fact [removed: may be deemed to be] [added: are] forward-looking statements.

[removed: For example, words] [added: Words] such as “may,” “will,” “could,” “would,” [added: “can,”] “should,” “anticipate,” “expect,” “intend,” “believe,” “estimate,” [removed: “project”] [added: “project,” “continue,” “forecast,”] or [removed: “continue” and] the negatives of such [removed: terms] [added: terms, and similar expressions] are intended to identify forward-looking statements.

This Form 10-K includes, among others, forward-looking statements [removed: regarding our expectations about:][added: regarding:]

| • | our ability to successfully compete in the [removed: electronic design automation industry;] [added: markets in which we serve;] |

| • | our ability to protect our intellectual [removed: property rights;] [added: property;] |

These statements [added: are based on our current expectations about future events and] involve certain known and unknown risks, uncertainties and other factors that could cause our actual results, time frames or achievements to differ materially from those expressed or implied in our forward-looking statements.

Fiscal [added: 2016,] 2015, [removed: 2014,] and [removed: 2013] [added: 2014] were 52-week years ending on October [added: 29, 2016, October] 31, 2015, [added: and] November 1, 2014, [removed: and November 2, 2013,] respectively.

Synopsys, Inc. provides software, intellectual property, and services used by designers [removed: along] [added: across] the entire silicon to software spectrum, from engineers creating advanced semiconductors to software developers seeking to ensure the quality and security of their applications.

We are a global leader in supplying the electronic design automation (EDA) software that engineers use to design and test integrated [removed: circuits,] [added: circuits (ICs),] also known as chips.

We also offer intellectual property (IP) products, which are pre-designed circuits that engineers use as components of larger chip designs rather than [removed: designing] [added: design] those circuits themselves.

To complement these offerings, which are sold primarily to semiconductor and electronics companies, we provide technical services [removed: to support our solutions] and [added: support to] help our customers develop [added: advanced] chips and electronic systems.

10-K 1 snps10311610-k.htm 10-K

| [PART I](#sF1F646CA26F45A0AA7B0563BBD2E2352) | | | | |

| [PART II](#s4087805858925D0E921AE76EB54939B1) | | | | |

| [PART IV](#s88A033AA331B5C0799A7A15B65D7707C) | | | | |

| [SIGNATURES](#s20EFBD894C355852ACC5ACDE8AEF884F) | | | | [91](#s20EFBD894C355852ACC5ACDE8AEF884F) |

Background

The most complex chips today contain more than a billion transistors.

The designs of these chips and systems are extremely complex and necessitate state-of-the-art design solutions.

release cycles.

Our Role-The Silicon to Software™ Partner

Synopsys' products and services enable innovators across a variety of markets-from mobile electronics and finance to medical, industrial, and automotive-to develop smart and secure products and applications.

Across all industries, our customers face tremendous pressure to build differentiated chips and develop robust code more quickly and cost-effectively than ever before.

With the increasing amount of embedded software in today’s devices, quality and security are top concerns.

Synopsys technologies and services are designed to help our customers\-both hardware designers and software developers\-speed time to market, achieve the highest quality of results, mitigate risk, and maximize profitability.

Our offerings span from silicon to software.

power intent descriptions, and constraints throughout the design process.

| • | SpyGlass® family of static verification technologies including lint, CDC (clock domain crossing), RDC (reset domain crossing), DFT (design for test), and power verification; |

| • | VCS® functional verification solution, our comprehensive RTL and gate-level simulation technology; |

| • | Verdi® debug technology, the industry’s most compressive SoC debug; |

| • | VC Formal, our next-generation formal verification product; |

| • | Verification IP portfolio; |

| • | Verdi Coverage, our verification planning and coverage technology-in addition to its inclusion in our Verification Compiler™ solution, this verification technology also continues to be sold as individual point tools; |

| • | Security IP solutions, including cryptographic cores and software, security subsystems, platform security and content protection IP; |

This category also includes our Verification IP portfolio.

We also offer a broad portfolio of IP that has been optimized to address specific application requirements for the mobile, automotive, digital home, IoT, and cloud computing markets, enabling designers to quickly develop SoCs in these areas.

Our prototyping solutions are supported by extensive libraries of pre-verified models and DesignWare IP Prototyping Kits to speed development and reduce risk.

| • | Platform Architect™ tool for SoC architecture analysis and optimization for performance and power; |

| • | Virtual prototyping solution, including the Virtualizer™ tool and broad portfolio of transaction-level models (TLMs) for creating virtual prototypes and Virtualizer Development Kits (VDKs) for early software development and services to ensure project success; |

Our products include:

| • | Defensics® fuzz testing tools, which test for security vulnerabilities in software binaries and libraries, particularly network protocols and file formats, by systematically sending invalid or unexpected inputs to the system under test; |

| • | Protecode™ compositional analysis tools, which scan binary and source code for license issues and other known security vulnerabilities stemming from incorporated third-party and open source code; |

| • | Seeker® IAST tool, which finds confirmed vulnerabilities in web applications with a zero-false positive rate; and |

Post-contract customer support includes providing frequent updates and upgrades to maintain the utility of the software due to rapid changes in technology.

Our backlog was approximately $3.5 billion on October 31, 2016, a slight decrease from backlog of $3.6 billion on October 31, 2015, resulting primarily from the timing of large multi-year contract renewals.

We also deliver a significant amount of engineering and design consulting for our products.

In the area of IP products, we compete against numerous other IP providers, including Cadence Design Systems, Inc., and our customers' internally developed IP.

In the area of Software Integrity products, the market is still developing.

Mr. Beattie currently serves on the board of directors and audit committee for Lattice Semiconductor Corporation.

President of Business Development and General Counsel.

Furthermore, we depend on a relatively small number of large customers, and on such customers continuing to renew licenses and purchase additional products from us, for a large portion of our revenue.

10-K 1 snps10311510-k.htm 10-K

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| [PART I](#s1A0674FFF1D85B8F881AEB0E72CD5DC3) | | | | |

| [PART II](#s86D710655C205591A9245BC3A0BF74E4) | | | | |

| [PART IV](#s4E62C00D2E2F53CDAC4F0BBF680BC91F) | | | | |

| [SIGNATURES](#sD23AAEFAA8C35CD993F9580D1004DA66) | | | | [87](#sD23AAEFAA8C35CD993F9580D1004DA66) |

| • | the potential impact of the unauthorized third-party access to our customer-facing license and product delivery system that began in July 2015; |

Background—From Silicon to Software

Our Role

Synopsys’ products support innovators in these industries, from silicon to software, helping them to meet their design and time-to-market challenges.

We provide software tools, IP, hardware systems and other technologies that designers use to create chips and systems.

We also provide software tools that software developers use to detect critical flaws in their code.

| • | Our Verification Compiler™ solution, which is a complete portfolio of integrated, next-generation verification technologies that include advanced debug (our Verdi® solution), simulation (our VCS® comprehensive RTL verification technology), static and formal verification technology, verification IP, and planning and coverage technology. In addition to their inclusion in our Verification Compiler solution, these verification technologies also continue to be sold as individual point tools. |

| • | security IP, which includes cryptographic cores, security protocol accelerators and co-processors, embedded security IP modules, secure boot and cryptography middleware, and content protection IP for integration into SoCs; |

We also offer IP portfolios for applications in specific market segments such as mobile, cloud computing, Internet of Things, digital home, digital office, and automotive that combine our DesignWare IP offerings, optimized for market requirements, with software development tools to help designers more rapidly develop SoCs and systems in these areas.

Optimizing the system-level design earlier in the development cycle, including both hardware and software components, is increasingly important for customers to meet their performance, time-to-market, and development cost goals.

Our Platform Architect™ software enables early and rapid exploration of SoC architectural trade-offs.

To speed the creation, implementation and verification of differentiated IP blocks, we offer SPW™ and System Studio™ tools for algorithm design, Processor Designer™ software for custom processor design, ASIP Designer software for the design of application-specific instruction-set processors, and Synphony Model™ and C Compilers for high-level synthesis.

Our Saber™ platform models and simulates the behavior of power electronic and mechatronic systems.

Our system-level portfolio includes prototyping technologies that can improve the productivity of both hardware and software development teams.

| • | Our Virtualizer™ tool and broad portfolio of transaction-level models enable the creation of virtual prototypes, fully functional software models of complete systems that enable engineers to start software development up to 12 months earlier than traditional methods. |

We continued to expand our software integrity offerings with our acquisitions of Codenomicon OY and the Seeker® interactive application security testing solution from Quotium Technologies SA in fiscal 2015 and our acquisition of Protecode Inc. after the end of fiscal 2015.

Our Codenomicon products include the Defensics® security testing platform, which tests for security vulnerabilities in software code, particularly network protocols and file formats, by systematically sending invalid or unexpected inputs to the system under test, sometimes referred to as “fuzz testing.” Our Codenomicon AppCheck™ software tool scans binary code to identify incorporated third-party code and any known security vulnerabilities of such code, while our Protecode technology scans for the use of open source code and helps manage the associated license and security risks.

In the production phase, manufacturers use these products to convert IC design layouts into the masks used to manufacture the devices.

Software maintenance services include minor product enhancements, bug fixes and access to our technical support center for primary support.

In addition, our products support multiple

Our backlog was approximately $3.6 billion on October 31, 2015, an increase from backlog of $3.5 billion on October 31, 2014, which resulted primarily from business growth, and to a lesser extent, acquisitions.

seek to renegotiate their arrangements or may default on their payment obligations.

From July 1996 to April 1998, Mr. Beattie served as Group Vice President of Meridian Solutions of Nortel Networks Corporation.

For example, we have recently acquired several providers of software quality and security testing tools, including Coverity, Inc. and Codenomicon OY.

This is a new, though adjacent, technology space for us.

The customers for

these tools are diverse and include industries with which we do not have experience.

To successfully develop our software quality and security offerings, we will need to skillfully balance our investment in the space with investment in our existing products, as well as attract and retain employees with expertise in these new fields.

If we fail to do so, we may not realize the expected benefits of our acquisitions, and it may have a negative effect on our earnings and financial condition.

Changes in accounting principles or standards, or in the way they are applied, could result in unfavorable accounting charges or effects and unexpected financial reporting fluctuations, and could adversely affect our reported operating results.

A change in existing principles, standards or guidance can have a significant effect on our reported results, may retroactively affect previously reported results, could cause unexpected financial reporting fluctuations, and may require us to make costly changes to our operational processes.

In connection with this initiative, the FASB issued a new accounting standard for revenue recognition in May 2014 - Accounting Standards Update (ASU) 2014-09, "Revenue from Contracts with Customers (Topic 606)" - that supersedes nearly all existing U.S. GAAP revenue recognition guidance and will be effective for fiscal 2019.

Although we are currently in the process of evaluating the impact of ASU 2014-09 on our consolidated financial statements, it could change the way we account for certain of our sales transactions.