Synopsys (SNPS) 10-K risk factor changes: FY2019 vs FY2018

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

[removed: (Mark One)][added: (Mark One)]

| [removed: ý] [added: ☒] | [removed: ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the fiscal year [removed: ended October] [added: ended October] 31, [removed: 2018][added: 2019]

| [removed: ¨] [added: ☐] | [removed: TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the transition period from [removed: to][added: to]

[removed: Commission] [added: Commission] File [removed: Number 0-19807][added: Number 0-19807]

[removed: ][added: ]

[removed: SYNOPSYS, INC.][added: SYNOPSYS, INC.]

| [removed: Delaware] [added: Delaware] | | [removed: 56-1546236] | [added: | 56-1546236 | |]

| (State or other jurisdiction of incorporation or organization) | | [added: | |] (I.R.S. Employer Identification No.) | [added: |]

[removed: 690] [added: | 690] East Middlefield [removed: Road, Mountain View, California 94043][added: Road, | Mountain View, | California | | 94043 | |]

[added: |] (Address of principal executive [removed: offices, including zip code)][added: offices) | | | | (Zip Code) | |]

[removed: (650) 584-5000][added: (650) 584-5000]

| [removed: Title] [added: Title] of Each [removed: Class] [added: Class] | [added: Trading Symbol(s)] | [removed: Name] [added: Name] of Each Exchange on Which [removed: Registered] [added: Registered] |

| [removed: Common] [added: Common] Stock, $0.01 par [removed: value] [added: value] | [added: SNPS] | [removed: Nasdaq] [added: Nasdaq] Global Select [removed: Market] [added: Market] |

Securities Registered Pursuant to Section 12(g) of the Act: [removed: None][added: None]

Yes [removed: ý] [added: ☒] No [removed: ¨][added: ☐]

Yes [removed: ¨] [added: ☐] No [removed: ý][added: ☒]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such files).

| [removed: Large accelerated] [added: Non-accelerated] filer [removed: x] | | [removed: Accelerated filer ¨] [added: ☐] | | [removed: Non-accelerated filer ¨] [added: Smaller reporting company] | | [removed: Smaller Reporting Company ¨] [added: ☐] |

| | | | | [removed: | |] Emerging growth company [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: $10.5] [added: $13.7] billion.

Aggregate market value excludes an aggregate of approximately [removed: 29.2] [added: 37.5] 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: 12, 2018, 149,515,012] [added: 13, 2019, 150,534,877] shares of the registrant’s Common Stock, $0.01 par value, were outstanding.

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the registrant’s Proxy Statement relating to the registrant’s [removed: 2019] [added: 2020] Annual Meeting of Stockholders, scheduled to be held on April [removed: 8, 2019,] [added: 9, 2020,] are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.

[removed: ANNUAL] [added: ANNUAL] REPORT ON FORM [removed: 10-K][added: 10-K]

[removed: Fiscal year ended] [added: | | Fiscal Year Ended] October [removed: 31, 2018][added: 31,(1) | | | | | | | | | | | | | | | | | | |]

[removed: TABLE] [added: TABLE] OF [removed: CONTENTS][added: CONTENTS]

| | | | | [removed: Page No.] [added: Page No.] |

[removed: | [PART I](#s5417F0A01FB25246B110D922963F7F71) | | | | |][added: PART I]

| [removed: Item 1. | | [Business](#sF9CBC6F7120F501193067444C08572AD) | | [3](#sF9CBC6F7120F501193067444C08572AD)] [added: Item 1. Business] |

| [removed: Item 1A. | | [Risk Factors](#s46E1CAE8E417528FA55EB9B278FD6CEF) | | [13](#s46E1CAE8E417528FA55EB9B278FD6CEF)] [added: Item 1A. Risk Factors] |

| [removed: Item 1B. | | [Unresolved] [added: Item 1B. Unresolved] Staff [removed: Comments](#s3E861672795954EABF55BB980B9EB824) | | [24](#s3E861672795954EABF55BB980B9EB824)] [added: Comments] |

| [removed: Item 2. | | [Properties](#s05E12D8A028E58F090FF18D3E5CB845C) | | [24](#s05E12D8A028E58F090FF18D3E5CB845C)] [added: Item 2. Properties] |

| [removed: Item 3. | | [Legal Proceedings](#sDB25963439DF5977917CEA5E26F9A63D) | | [25](#sDB25963439DF5977917CEA5E26F9A63D)] [added: Item 3. Legal Proceedings] |

[Table of Contents](#s7EC9245BA7305F5BB7C6C40978370A14)

OR

Yes ☒ No ☐

Yes ☒ No ☐

[Table of Contents](#s7EC9245BA7305F5BB7C6C40978370A14)

| Large accelerated filer | | ý | | Accelerated Filer | | ☐ |

Yes ☐ No ☒

[Table of Contents](#s7EC9245BA7305F5BB7C6C40978370A14)

[Table of Contents](#s7EC9245BA7305F5BB7C6C40978370A14)

| • | the impact of new and recently adopted accounting pronouncements; |

[Table of Contents](#s7EC9245BA7305F5BB7C6C40978370A14)

When a 53-week year occurs, we include the additional week in the first quarter to realign fiscal quarters with calendar quarters.

[Table of Contents](#s7EC9245BA7305F5BB7C6C40978370A14)

These products and services are part of our Semiconductor & System Design segment.

These tools and services are part of our Software Integrity segment.

[Table of Contents](#s7EC9245BA7305F5BB7C6C40978370A14)

“better,” “sooner,” and “cheaper” than competitors.

A similar dynamic is at work in the software arena, whether embedded on a chip or as a standalone.

Semiconductor & System Design Segment

Our Semiconductor & System Design segment includes the EDA, IP and System Integration and Other revenue categories.

| • | Manufacturing, which includes products that both enable early manufacturing process development and convert IC design layouts into the masks used to manufacture the chips. |

[Table of Contents](#s7EC9245BA7305F5BB7C6C40978370A14)

[Table of Contents](#s7EC9245BA7305F5BB7C6C40978370A14)

IP and System Integration

[Table of Contents](#s7EC9245BA7305F5BB7C6C40978370A14)

Our Other revenue category includes revenue from sales of products to academic and research institutions.

| • | Polaris Software Integrity Platform™, which is designed to provide customers with an easy-to-use and integrated platform that features critical application security products (see below) and certain services. Introduced in April 2019 with its initial configuration, Polaris Software Integrity Platform™ will be enhanced throughout 2020 and beyond; |

[Table of Contents](#s7EC9245BA7305F5BB7C6C40978370A14)

In our Software Integrity segment, post-contract customer support for our products includes access to our support community portal, where customers can access our product documentation, self-service training materials, customer forums and our product knowledge base.

Customers can also raise support tickets, request replacement license keys and validate the terms of their active license keys through the portal.

Our support community portal is frequently updated with new and supplemental materials on a variety of topics.

Customers may engage dedicated support engineers for an additional charge.

[Table of Contents](#s7EC9245BA7305F5BB7C6C40978370A14)

Performance Obligations and Backlog

We adopted the Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (ASC 606) at the beginning of fiscal 2019.

This revenue standard requires disclosure of revenue allocated to remaining performance obligations.

Contracted but unsatisfied or partially unsatisfied performance obligations were approximately $4.4 billion as of October 31, 2019, of which $494.3 million were in non-cancellable commitments from customers who will determine specific products or services selections at a later date.

The remaining performance obligations, excluding the non-cancellable commitments, were $3.9 billion, of which 56% are expected to be fulfilled and recognized over the next 12 months.

Our historical backlog was $4.0 billion as of October 31, 2018, primarily representing three years of committed orders which included non-cancellable commitments with future deliverables.

Revenue Attributable to Product Categories and Segments

10-K 1 snps10311810-k.htm 10-K

| | |

| --- | --- |

OR

| | | |

| --- | --- | --- |

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

| --- | --- | --- | --- | --- | --- | --- |

the security and quality of their code.

We are a global leader in supplying the electronic design automation

Revenue from our products and services is categorized into four groups:

| • | IP, Systems and Software Integrity, which includes our DesignWare® IP portfolio, system-level products, and software security and quality testing solutions; |

| • | Manufacturing Solutions; and |

| • | Verdi Coverage, our verification planning and coverage technology; |

Our Manufacturing Solutions software products and technologies enable semiconductor manufacturers to more quickly develop new fabrication processes that produce production-level yields.

These products are used in the early research and development phase, as well as in the production phase, where designers use these products to help convert IC design layouts into the masks used to manufacture the devices.

Professional Services and Other

These services assist our customers with new tool and methodology adoption, chip architecture and specification development, functional and low-power design and verification, and physical implementation and signoff.

We also provide a broad range of expert training and workshops on our latest tools and methodologies.

Professional services related to the security and quality of the software embedded on the chip or elsewhere are included in the Software Integrity Solutions category and further described above.

Our backlog was approximately $4.0 billion on October 31, 2018, an increase from backlog of $3.7 billion on October 31, 2017, resulting primarily from the timing of large multi-year contract renewals.

Backlog represents committed orders that are expected to be recognized as revenue over the following three years.

We currently expect that $1.7 billion of our backlog will be recognized after fiscal 2019.

Backlog may not be a reliable predictor of our future sales as business conditions may change and technologies may evolve, and customers may seek to renegotiate their arrangements or may default on their payment obligations.

For this and other reasons, we may not be able to recognize expected revenue from backlog when anticipated.

We currently offer our software products under, primarily, two license types: TSLs and perpetual licenses.

Executive Officers of the Registrant

banks we rely on for foreign currency forward contracts, credit and banking transactions, and deposit services, or cause them to default on their obligations.

| • | Changes in accounting standards, such as Topic 606, as discussed in Note 14 of Notes to Consolidated Financial Statements, which, for example, could impact the expected realization of our backlog. |

| • | Changes in accounting standards, such as Topic 606, as discussed in Note 14 of Notes to Consolidated Financial Statements; and |

Additionally, political uncertainty surrounding international trade disputes could have a negative impact on consumer confidence and spending, which could adversely impact our business operations.

In fiscal 2018, we incurred foreign taxes of $67.7 million as a result of reorganizing certain rights related to use of our intellectual property in our international business.

Such tax was recorded as a prepaid tax on our balance sheet, in accordance with current accounting rules.

The amount of tax is subject to audit by the Hungarian Tax Authority (HTA) and could increase, along with the imposition of penalties and interest, and could materially affect our financial results and cash flow.

We are currently under examination by the tax authorities in a number of jurisdictions.

uncertain.

We continue to appeal the assessment through the Hungarian Administrative Court.

If the assessment is ultimately canceled, the Hungarian statutory accounting treatment could have an indirect adverse impact on certain tax benefits in the year of the cancellation.

We are in the process of consolidating the space in these three separate buildings into a single location in Sunnyvale, California in 2019.

We own one building in Sunnyvale, California with approximately 120,000 square feet of space.