UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15
(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-20853
ANSYS, Inc.
(exact name of registrant as specified in its chapter)
DELAWARE 04-3219960
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
201 Johnson Road, Houston, PA 15342-1300
(Address of principal executive offices) (Zip Code)
412-746-3304
(Registrant's telephone number, including area code)
Indicate by a check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes No X
---- -----
The number of shares of the Registrant's Common Stock, par value $.01
per share, outstanding as of August 9, 1996 was 16,150,410 shares.
ANSYS, INC. AND SUBSIDIARIES
INDEX
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Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets June 30, 1996 1
and December 31, 1995
Consolidated Statements of Income Three
and Six Months Ended June 30, 1996 and June 2
30, 1995
Consolidated Statements of Cash Flows Six
Months Ended June 30, 1996 and June 30, 1995 3
Notes to Consolidated Financial Statements 4
Review Report of Independent Accountants 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of 6-10
Operations
PART II. OTHER INFORMATION
Item 2. Changes in Securities 11
Item 4. Submission of Matters to Vote of Security 11-12
Holders
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES
EXHIBIT INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
ANSYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
June 30, December 31,
1996 1995
------------ ---------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 8,661 $ 8,091
Accounts receivable, less
allowance for doubtful accounts
of $725 in 1996 and
$700 in 1995:
Software licenses 8,077 7,666
Maintenance and service 2,503 -
Refundable and prepaid income taxes 823 1,497
Other current assets 407 439
Deferred income taxes 336 356
------------ ------------
Total current assets 20,807 18,049
Property and equipment, net 3,149 3,163
Capitalized software costs, net of
accumulated amortization of $11,744 in
1996 and $9,179 in 1995 3,746 6,207
Goodwill, net of accumulated
amortization of $11,207 in 1996 and
$8,762 in 1995 3,464 5,909
Other intangibles 1,948 2,807
Deferred income taxes 8,226 6,786
------------ ------------
Total assets $41,340 $ 42,921
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable $ 80 $ 639
Accrued bonuses 1,113 1,952
Accrued pension and profit sharing 700 387
Other accrued expenses and
liabilities 3,359 1,753
Accrued interest payable on
subordinated debt - 1,155
Customer prepayments 1,090 972
Deferred revenue 4,319 2,995
Current portion of long-term debt - 5,000
------------ ------------
Total current liabilities 10,661 14,853
Long-term debt, less current portion
including amounts due to related
parties of $17,204 in 1995 - 33,204
------------ ------------
Total liabilities 10,661 48,057
Redeemable preferred stock, $.01 par
value, 800 shares authorized; 412
shares issued and outstanding at
liquidation value, including accrued
dividends of $772 in 1995
Stockholders' equity (deficit): - 4,893
Common stock, $.01 par value;
50,000,000 shares authorized;
16,216,110 shares issued and
outstanding in 1996; 10,626,000
shares issued and outstanding in
1995 162 106
Class A common stock, $.01 par
value; nonvoting, 2,000,000
shares authorized; 993,750
shares issued in 1995 - 10
Additional paid-in capital 35,793 1,352
Adjustment for predecessor basis - (7,010)
Less treasury stock, at cost:
62,870 shares held in 1996 and
54,850 shares held in 1995 (11) (10)
Retained earnings (deficit) (4,962) (4,142)
Notes receivable from stockholders (303) (335)
------------ ------------
Total stockholders' equity
(deficit) 30,679 (10,029)
------------ ------------
Total liabilities, preferred stock
and common stockholders' equity
(deficit) $41,340 $ 42,921
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
1
ANSYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share date)
(unaudited)
Three months ended Six months ended
------------------------ ---------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
----------- ---------- --------- ---------
Revenue:
Software licenses $ 8,837 $ 7,883 $ 17,222 $ 14,987
Maintenance and service 2,503 1,455 4,851 2,577
-------- ---------- --------- ---------
Total revenue 11,340 9,338 22,073 17,564
Cost of sales:
Software licenses 816 1,015 1,482 1,971
Maintenance and service 724 334 1,253 607
-------- ---------- --------- ---------
Total cost of sales 1,540 1,349 2,735 2,578
-------- ---------- --------- ---------
Gross profit 9,800 7,989 19,338 14,986
Operating expenses:
Selling and marketing 2,279 1,713 4,447 3,362
Research and development 2,349 2,045 4,679 4,064
Amortization 2,714 2,660 5,433 5,320
General and
administrative 1,806 1,502 3,656 2,995
-------- ---------- --------- ---------
Total operating
expenses 9,148 7,920 18,215 15,741
-------- ---------- --------- ---------
Operating income (loss) 652 69 1,123 (755)
Interest expenses (781) (1,021) (1,670) (2,016)
Other income 64 46 155 85
-------- ---------- --------- ---------
Loss before income
tax benefit and
extraordinary item (65) (906) (392) (2,686)
Income tax benefit 24 302 150 897
-------- ---------- --------- ---------
Net loss before
extraordinary item (41) (604) (242) (1,789)
Extraordinary item, net (343) _ (343) _
-------- ---------- --------- ---------
Net loss $ (384) $ (604) $ (585) $ (1,789)
======== ========== ========= =========
Net loss applicable to
common stock:
Net loss $ (384) $ (604) $ (585) $ (1,789)
Redeemable preferred
stock dividends (135) (119) (236) (221)
-------- ---------- --------- ---------
$ (519) $ (723) $ (821) $ (2,010)
======== ========== ========= =========
Net loss per common share:
Net loss before
extraordinary item $ (0.01) $ (0.06) $ (0.04) $ (0.16)
Extraordinary Item $ (0.03) $ - $ (0.02) $ _
-------- ---------- --------- ---------
Net loss $ (0.04) $ (0.06) $ (0.06) $ (0.16)
======== ========== ========= =========
Shares used in computing
per common share amounts 13,714,000 12,274,000 13,086,000 12,277,000
========== ========== ========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
2
ANSYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six months ended
---------------------
June 30, June 30,
1996 1995
---------- --------
Cash flows from operating activities:
Net loss $ (585) $(1,789)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 5,916 5,612
Extraordinary item 553 -
Deferred income tax benefit (1,420) (1,248)
Provision for bad debts 25 (8)
Change in operating assets and
liabilities, net of effects of
acquisition:
Accounts receivable (2,939) (54)
Refundable and prepaid income
taxes 674 257
Other current assets 32 (308)
Accounts payable, accrued
expenses and liabilities and
customer prepayments (516) 684
Deferred revenue 1,324 1,078
---------- --------
Net cash provided by
operating activities 3,064 4,224
---------- --------
Cash flows from investing activities:
Capital expenditures (585) (747)
Capitalization of internally
developed software costs (105) -
Payments for software products
acquired - (175)
Notes receivable from stockholders 32 -
---------- --------
Net cash used in investing
activities (658) (922)
---------- --------
Cash flows from financing activities:
Payments on long-term debt (21,000) (2,000)
Proceeds from issuance of
restricted stock 326 -
Proceeds from exercise of stock
options 106 -
Repayment of subordinated notes (17,204) -
Redemption of preferred stock and
accumulated dividends (5,128) -
Purchase of treasury stock (1) (3)
Proceeds from initial public
offering, net of issuance costs
of $1,250 41,065 -
---------- --------
Net cash used in financing
activities (1,836) (2,003)
---------- --------
Net increase in cash and cash 570 1,299
equivalents
Cash and cash equivalents, beginning of
period 8,091 4,300
---------- --------
Cash and cash equivalents, end of
period 8,661 5,599
========== ========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest 2,848 1,221
Income taxes 750 500
Supplemental non cash investing and
financing activities:
Deferred interest notes issued for
interest in arrears on subordinated
notes - 508
The accompanying notes are an integral part of the consolidated financial
statements.
3
ANSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements included herein
have been prepared by ANSYS, Inc. (the "Company") in accordance with generally
accepted accounting principles for interim financial information for commercial
and industrial companies and the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. The financial statements as of and for the three months ended
June 30, 1996 should be read in conjunction with the Company's Consolidated
financial statements (and notes thereto) included in the Company's Form S-1
dated June 20, 1996 which includes the year ended December 31, 1995.
Accordingly, the accompanying statements do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation of the financial statements have been
included, and all adjustments are of a normal and recurring nature. Operating
results for the three months and six months ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996.
2. INITIAL PUBLIC OFFERING
Effective June 20, 1996, the Company completed its initial public offering of
3,500,000 shares of Common Stock at $13.00 per share. The net proceeds (after
deducting underwriting discounts and commissions and offering expenses) totaled
$41.1 million and were used as follows: i) the repayment of approximately $18.5
million of senior secured indebtedness (the "1994 Loan"), including accrued and
unpaid interest; ii) the repayment of $17.5 million of 10% Subordinated Notes
(the "Subordinated Notes"); and iii) the redemption of $5.1 million of
Redeemable Preferred Stock, including accumulated dividends.
3. EXTRAORDINARY ITEM
The Company incurred an extraordinary item for the three months ended June 30,
1996 of $343,000, net of income tax benefit. In connection with the acquisition
of its business in 1994 (the "1994 Acquisition"), the Company capitalized
$925,000 of debt issuance costs and $179,000 associated with an interest rate
cap agreement, the unamortized portion of which totaled $552,866 at June 20,
1996. As a result of the early repayment of the 1994 Loan with a portion of the
net proceeds from its initial public offering in June 1996, the Company has
written-off the unamortized balance as an extraordinary non-cash charge in the
second quarter of 1996.
4
[LOGO OF COOPERS AND LYBRAND]
Coopers & Lybrand L.L.P.
a professional services firm
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS
----------------------------------------
To the Shareholders and Board of Directors
ANSYS, Inc. and Subsidiaries
We have reviewed the unaudited consolidated balance sheet of ANSYS, Inc. and
subsidiaries as of June 30, 1996, the unaudited statements of consolidated
income for the six-month periods ended June 30, 1996 and 1995, and consolidated
cash flows for the six-month periods ended June 30, 1996 and 1995, which are
included in ANSYS's Form 10-Q for the period ended June 30, 1996. These
financial statements are the responsibility of ANSYS's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of ANSYS, Inc. and subsidiaries as of
December 31, 1995, and the related statements of consolidated income,
stockholders' equity (deficit) and cash flows for the year then ended (not
presented herein). In our report dated April 19, 1996, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 1995, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ Coopers & Lybrand L.L.P.
Pittsburgh, Pennsylvania
July 18, 1996
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ANSYS, Inc. (the "Company") is a leading international supplier of analysis and
engineering software for optimizing the design of new products. The Company is
committed to providing the most open and flexible analysis solutions to suit
customer requirements for engineering software in today's competitive
marketplace. In addition, the Company partners with leading design software
suppliers to develop state-of-the-art CAD integrated products. A global network
of ANSYS Support Distributors provides sales, support and training for
customers. The following discussion should be read in conjunction with the
attached unaudited consolidated financial statements and notes thereto for the
periods ended June 30, 1996 and June 30, 1995 and with the Company's audited
financial statements and notes thereto for the fiscal year ended December 31,
1995.
Results of Operations
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995
Revenue. The Company's revenue increased 21.4% for the 1996 quarter to $11.3
million from $9.3 million for the 1995 quarter. This increase was attributable
principally to increased international and domestic sales of paid-up licenses
and increased maintenance and services revenue, both of which resulted primarily
from the Company's increased marketing emphasis, market acceptance of new
product releases and broader customer usage of maintenance and support services
in response to accelerated frequency of product releases and the Company's
increased emphasis on marketing its maintenance services.
Software licenses revenue increased 12.1% for the 1996 quarter to $8.8 million
from $7.9 million for the 1995 quarter, resulting from increased sales of paid-
up licenses in international and domestic markets. Revenue from sales of paid-
up licenses increased 33.2% for the 1996 quarter to $4.4 million from $3.3
million for the 1995 quarter. The Company also experienced a 3.1% decrease in
lease license revenue to $4.4 million for the 1996 quarter from $4.6 million for
the 1995 quarter. Maintenance and service revenue increased 72.0% for the 1996
quarter to $2.5 million from $1.5 million for the 1995 quarter, as a result of a
substantial increase in the sale of paid-up licenses, broader customer usage of
maintenance and support services and reduction in the warranty period.
Of the Company's total revenue for the 1996 quarter, approximately 57.5% and
42.5% were attributable to international and domestic sales, as compared to
55.7% and 44.3% for the 1995 quarter.
Cost of Sales and Gross Profit. The Company's total cost of sales increased
14.2 % to $1.5 million, or 13.6% of total revenue, for the 1996 quarter from
$1.3 million, or 14.5% of total revenue, for the 1995 quarter. The Company's
cost of sales for software license revenue decreased 19.6% for the 1996 quarter
to $816,000, or 9.2% of software license revenue, from $1,015,000, or 12.9% of
software license revenue, for the 1995 quarter. The decrease was due primarily
to a reduction of expenses through lower headcount and cost controls and
implementation of a more efficient multi-platform development environment for
the Company's product releases and was partially offset by increased royalty
fees. The Company's cost of sales for maintenance and service revenue was
$724,000 and $334,000, or 28.9% and 22.9% of maintenance and service revenue,
for the 1996 and 1995 quarters, respectively, reflecting the substantial
increase in maintenance and service revenue in the 1996 quarter.
As a result of the foregoing, the Company's gross profit increased 22.7% to $9.8
million for the 1996 quarter from $8.0 million for the 1995 quarter.
6
Selling and Marketing. Selling and marketing expenses increased 33.0% for the
1996 quarter to $2.3 million, or 20.1% of total revenue, from $1.7 million, or
18.3% of total revenue, for the 1995 quarter. This growth was attributable
principally to increased personnel costs, including costs associated with
increased headcount and compensation expenses related to building a sales and
marketing organization, as well as increased commissions associated with
increased revenue.
Research and Development. Research and development expenses increased 14.9% for
the 1996 quarter to $2.3 million, or 20.7% of total revenue, from $2.0 million,
or 21.9% of total revenue, for the 1995 quarter. This increase resulted
primarily from employment of additional staff and independent contractors to
develop and enhance the Company's products, including a dedicated team working
on the development of the Company's DesignSpace product, costs associated with
quality assurance, and equipment costs to implement an enhanced multi-platform
development environment.
Amortization. Amortization expense was $2.7 million in the second quarter in
both 1996 and 1995. This amortization expense resulted from the 1994 Acquisition
and relates primarily to intangible assets, including goodwill, which are being
amortized from the date of the 1994 Acquisition, March 14, 1994. The unamortized
portion of the goodwill and capitalized software acquired in connection with the
1994 Acquisition will be fully amortized in the first quarter of 1997.
General and Administrative. General and administrative expenses increased 20.3%
to $1.8 million, or 15.9% of total revenue, for the 1996 quarter from $1.5
million, or 16.1% of total revenue, for the 1995 quarter. The Company has
maintained a relatively stable headcount while adding administrative support
services, such as computerized order fulfillment and corporate-wide information
technology systems, to support its future operations. Additionally, accounting
and legal expenses have increased due to the support of the Company's increased
level of operations.
Interest. Interest expense decreased 23.5% for the 1996 quarter to $781,000
from $1,021,000 for the 1995 quarter. This decrease was attributable to a
reduction in the outstanding principal of the 1994 Loan, as well as a reduction
in the effective interest rate from period to period. Interest expense will
decrease substantially commencing in the third quarter of 1996 due to the early
repayment of the 1994 Loan and the Subordinated Notes with the net proceeds from
the initial public offering in June 1996.
Income Tax Benefit. The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." The Company's effective rate of taxation was 37.2% for the 1996 quarter,
as compared to 33.3% for the 1995 quarter. These percentages are less than the
federal and state combined statutory rate of approximately 39.0% due primarily
to the utilization of research and experimentation credits.
Net Loss. The Company's net loss before extraordinary item decreased in the
second quarter of 1996 to $41,000 from a net loss of $604,000 in the 1995
quarter. The net loss including the extraordinary item in the second quarter of
1996 was $384,000.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Revenue. The Company's revenue increased 25.7% for the 1996 six months to $22.1
million from $17.6 million for the 1995 six months. This increase was
attributable principally to increased international and domestic sales of paid-
up licenses and increased maintenance and services revenue, both of which
resulted primarily from the Company's increased marketing emphasis, market
acceptance of new product releases and broader customer usage of maintenance and
support services in response to accelerated frequency of product releases and
the Company's increased emphasis on marketing its maintenance services.
Software license revenue increased 14.9% for the 1996 six months to $17.2
million from $15.0 million for the 1995 six months, resulting principally from
increased sales of paid-up licenses in international and
7
domestic markets. Revenue from sales of paid-up licenses increased 31.3% for
the 1996 six months to $8.0 million from $6.1 million for the 1995 six months.
The Company also experienced a 3.7% increase in lease license revenue to $9.2
million for the 1996 six months from $8.9 million for the 1995 six months.
Maintenance and service revenue increased 88.3% for the 1996 six months to $4.9
million from $2.6 million for the 1995 six months, as a result of a substantial
increase in the sale of paid-up licenses, broader customer usage of maintenance
and support services and reduction in the warranty period.
Of the Company's total revenue for the 1996 six months, approximately 53.7% and
46.3% respectively, were attributable to international and domestic sales, as
compared to 55.0% and 45.0% respectively, for the 1995 six months.
Cost of Sales and Gross Profit. The Company's total cost of sales increased 6.1
% to $2.7 million, or 12.4% of total revenue, for the 1996 six months from $2.6
million, or 14.7% of total revenue, for the 1995 six months. The Company's cost
of sales for software license revenue decreased 24.8% for the 1996 six months to
$1.5 million, or 8.6% of software license revenue, from $2.0 million, or 13.1%
of software license revenue, for the 1995 six months. The decrease was due
primarily to a reduction of expenses through lower headcount and cost controls
and implementation of a more efficient multi-platform development environment
for the Company's product releases and was partially offset by increased royalty
fees. The Company's cost of sales for maintenance and service revenue was
$1,253,000 and $607,000, or 25.8% and 23.5% of maintenance and service revenue,
for the 1996 and 1995 six months, respectively, reflecting the substantial
increase in maintenance and service revenue in the 1996 six months.
As a result of the foregoing, the Company's gross profit increased 29.0% to
$19.3 million for the 1996 six months from $15.0 million for the 1995 six
months.
Selling and Marketing. Selling and marketing expenses increased 32.3% for the
1996 six months to $4.4 million, or 20.1% of total revenue, from $3.4 million,
or 19.1% of total revenue, for the 1995 six months. The increase in selling and
marketing expenses resulted primarily from increased personnel costs, including
costs associated with increased headcount and compensation expenses related to
the establishment of a sales force to support the Company's distribution
network, as well as increased commissions associated with increased revenue.
Research and Development. Research and development expenses increased 15.1% for
the 1996 six months to $4.7 million, or 21.2% of total revenue, from $4.1
million, or 23.1% of total revenue, for the 1995 six months. This increase
resulted primarily from employment of additional staff and independent
contractors to develop and enhance the Company's products, including a dedicated
team working on the development of the Company's DesignSpace product, costs
associated with quality assurance and equipment costs to implement an enhanced
multi-platform development environment.
Amortization. Amortization expense was $5.4 million for the 1996 six months and
$5.3 million for the 1995 six months. This amortization expense resulted from
the 1994 Acquisition and relates primarily to intangible assets, including
goodwill, which are being amortized from the date of the 1994 Acquisition, March
14, 1994. The unamortized portion of the goodwill and capitalized software
acquired in connection with the 1994 Acquisition will be fully amortized in the
first quarter of 1997.
General and Administrative. General and administrative expenses increased 22.1%
for the 1996 six months to $3.7 million, or 16.6% of total revenue, from $3.0
million, or 17.1% of total revenue, for the 1995 six months. The Company has
maintained a relatively stable headcount while adding administrative support
services, such as a computerized order fulfillment and corporate-wide
information technology systems, to support its future operations. Additionally,
accounting and legal expenses have increased due to the support of the Company's
increased level of operations.
8
Interest. Interest expense decreased 17.2% for the 1996 six months to $1.7
million from $2.0 million for the 1995 six months. This decrease was
attributable to a reduction in the outstanding principal of the 1994 Loan, as
well as a reduction in the effective interest rate from period to period.
Interest expense will decrease substantially commencing in the third quarter of
1996 due to the early repayment of the 1994 Loan and the Subordinated Notes with
the net proceeds from the initial public offering in June 1996.
Income Tax Benefit. The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." The Company's effective rate of taxation was 38.3% for the 1996 six
months, as compared to 33.4% for the 1995 six months. These percentages are less
than the federal and state combined statutory rate of approximately 39.0% due
primarily to the utilization of research and experimentation credits.
Net Loss. The Company's net loss before extraordinary item decreased in the six
months of 1996 to $242,000 from a net loss of $1,789,000 in the 1995 six months.
The net loss including the extraordinary item in the 1996 six months was
$585,000.
Liquidity and Capital Resources
As of June 30, 1996, the Company had cash and cash equivalents of $8.7 million
and working capital of $10.1 million, as compared to cash and cash equivalents
of $8.1 million and working capital of $3.2 million at December 31, 1995. The
improvement in the working capital position was due primarily to the net
proceeds of $41.1 million received from the Company's initial public offering on
June 25, 1996. The proceeds from the offering were used to repay the 1994 Loan
and the Subordinated Notes, including accrued and unpaid interest, and retire
all of the Company's outstanding Redeemable Preferred Stock, including
accumulated dividends. Previously, the Company also had available to it a $1.0
million revolving line of credit with a commercial bank under a credit
facilities agreement. During the second quarter of 1996, the Company elected to
terminate the line of credit.
The Company's operating activities provided cash of $3.1 million for the six
months ended June 30, 1996 and $4.2 million for the six months ended June 30,
1995. The Company's cash flow from operations decreased for the six months
ended June 30, 1996 as compared to the six months ended June 30, 1995. This was
a result of increased working capital requirements, primarily relating to an
increase in accounts receivable, resulting from the substantial increase in
maintenance and service revenue.
Cash used in investing activities was $658,000 for the six months ended June 30,
1996 and $922,000 for the six months ended June 30, 1995. The Company's use of
cash in these periods was substantially related to capital expenditures and
internally developed software costs. The Company expects to spend approximately
$2.5 million for capital equipment in 1996 principally for the acquisition of
computer hardware, software and equipment.
Financing activities used net cash of $1.8 million for the six months ended June
30, 1996 and $2.0 million for the six months ended June 30, 1995. Cash provided
from financing activities for the six months ended June 30, 1996 was due
primarily to the net proceeds of $41.1 million received from the Company's
initial public offering on June 25, 1996 (see Note 2). Cash used for financing
activities for the six months ended June 30, 1996 was the result of the
repayment of the 1994 Loan and Subordinated Notes, payment of related unpaid
interest and the redemption of the Preferred Stock and accumulated dividends.
Cash used for the six months ended June 30, 1995 was the result of principal
repayments made on the 1994 loan.
9
New Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of."
The new standard was implemented in the first quarter of 1996 and did not have a
material effect on the consolidated financial statements.
Statement Regarding Forward Looking Disclosures
RIDER 9-1
This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Company's actual results could differ materially from those set
forth in the forward-looking statements. Certain factors that might cause such
a difference include possible delays in developing, completing or shipping new
or enhanced products, as well as other risks and uncertainties that are detailed
from time to time in reports filed by ANSYS, Inc. with the Securities and
Exchange Commission, including ANSYS, Inc.'s registration statement on Form S-1
and related prospectus dated June 20, 1996, and the "Risk Factors" described
therein, and in the statement of "Certain Factors Affecting Future Results"
included herein as Exhibit 99.
10
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable.
Item 2. Changes in Securities
On June 25, 1996, the Company's non-voting Class A Common Stock was
converted into voting Common Stock in accordance with its terms in
conjunction with the closing of the Company's initial public
offering. See Item 4(c) below.
Item 3. Defaults upon Secured Securities
Not Applicable.
Item 4. Submission of Matters to Vote of Security-Holders
(a) The stockholders of the Company acted by written consent (the
"Consent") in lieu of Annual Meeting of Stockholders dated April
27, 1996.
(b) As described in paragraph (c) below, the Registrant's Board of
Directors as previously reported to the Commission was re-
elected in its entirety pursuant to the above-referenced
consent.
(c) The Consent was executed by the holders of all of the 1,172,186
shares of Common Stock then outstanding and, as to item 2 below
only as required by Delaware law, the holders of 64,450 of the
110,746 shares of Class A Common Stock then outstanding (with no
votes in opposition, withheld or abstaining or broker non-votes)
and the holders of all of the 412 shares of 10% Cumulative
Redeemable Preferred Stock then outstanding. The matters acted
upon by the stockholders pursuant to the Consent are as follows:
1. Election of Directors
The stockholders approved the election of Peter J. Smith,
John A. Swanson, Gary B. Eichhorn, Roger J. Heinen, Jr.,
Roger B. Kafker, Jacqueline C. Morby and John F. Smith as
Directors and also approved the classification of the Board
from and after the completion of the Company's initial
public offering for the terms indicated below as follows:
Class I - Term Expires at Annual Meeting of Stockholders
held in 1997:
Peter J. Smith
Dr. John A. Swanson
Class II - Term Expires at Annual Meeting of Stockholders
held in 1998:
Roger J. Heinen, Jr.
Roger B. Kafker
Jacqueline C. Morby
Class III - Term Expires at Annual Meeting of Stockholders
held in 1999:
Gary B. Eichhorn
John T. Smith
11
Each Director received the same number of votes.
2. Adoption of and Approval of Amended and Restated
Certificate of Incorporation.
The stockholders of the Company acted to amend and restate
the Company's Certificate of Incorporation (the
"Certificate") effective upon completion of the Company's
initial public offering, to: (i) provide for the
classification of the Board of Directors; (ii) increase the
number of shares of common stock authorized to 50,000,000
and authorize 2,000,000 shares of undesignated preferred
stock; (iii) prohibit action by stockholders by written
consent; (iv) provide that amendments to the Certificate
relating to the establishment of the Board of Directors and
amendments to the Certificate shall require 80% of the
total votes eligible to be cast; and (v) certain other
amendments related to the foregoing.
The stockholders of the Company voted to authorize the
filing with the Secretary of the State of Delaware of (i)
certificates retiring and eliminating (A) all authorized
shares of the Company's 10% Cumulative Redeemable Preferred
Stock upon redemption thereof and (B) all authorized shares
of the Company's Class A Common Stock upon conversion
thereof to shares of Common Stock upon the closing of the
Company's initial public offering and (ii) a Restated
Certificate of Incorporation reflecting such retirement.
3. The stockholders voted to approve the Company's 1996
Stock Plan and its 1996 Employee Stock Purchase Plan.
(d) Not Applicable.
Item 5. Other information
Not Applicable.
Item 6. Exhibits and Reports Filed on Form 8-K
(a) Exhibits.
3.1 Restated Certificate of Incorporation
10.1 1996 Stock Option and Grant Plan, as amended
10.2 1996 Employee Stock Purchase Plan, as amended
27.1 Financial Data Schedules
99 Certain Factors Regarding Future Results
(b) Reports on Form 8-K.
Not Applicable.
12
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, thereunto duly authorized.
ANSYS, Inc.
Date: August 13, 1996 By: /s/ Peter J. Smith
---------------------------------------
Peter J. Smith
Chairman, President and Chief Executive Officer
Date: August 13, 1996 By: /s/ John M. Sherbin II
---------------------------------------
John M. Sherbin II
Vice President, Finance and Administration,
Secretary, Treasurer and Chief Financial Officer
13
Item 6.
EXHIBIT INDEX
-------------
Exhibit No.
- -------------
3.1 Restated Certificate of Incorporation
10.1 1996 Stock Option and Grant Plan, as amended
10.2 1996 Employee Stock Purchase Plan, as amended
27.1 Financial Data Schedules
99 Certain Factors Regarding Future Results
1