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, 1997
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 charter)
DELAWARE 04-3219960
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
275 Technology Drive, Canonsburg, PA 15317
(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 X No
--- ----
The number of shares of the Registrant's Common Stock, par value $.01 per
share, outstanding as of August 4, 1997 was 16,260,621 shares.
ANSYS, INC. AND SUBSIDIARIES
INDEX
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Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - June 30, 1997 1
and December 31, 1996
Condensed Consolidated Statements of Operations - Three
and Six Months Ended June 30, 1997 and June 30, 1996 2
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1997 and June 30, 1996 3
Notes to Condensed Consolidated Financial Statements 4
Review Report of Independent Accountants 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 6-10
PART II. OTHER INFORMATION
Item 2. Changes in Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
EXHIBIT INDEX 13
Trademarks used in this Form 10-Q: ANSYS(R) is a registered trademark and
DesignSpace(TM) are trademarks of SAS IP, Inc., a wholly-owned subsidiary of
ANSYS, Inc.
PART I FINANCIAL INFORMATION
Item 1. - Financial Statements:
ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
June 30, December 31,
1997 1996
--------------- ------------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $17,960 $17,069
Short-term investments 4,068 --
Accounts receivable, less allowance for doubtful accounts of $1,230 in 1997
and $950 in 1996 6,948 7,307
Other current assets 1,625 350
Deferred income taxes 435 422
--------------- ------------------
Total current assets 31,036 25,148
Securities available for sale 370 673
Property and equipment, net 5,186 4,334
Capitalized software costs, net of accumulated amortization of $15,424 in 1997 and $14,328
in 1996 149 1,174
Goodwill, net of accumulated amortization of $14,671 in 1997 and $13,652 in 1996 -- 1,019
Other intangibles, net 1,565 1,756
Deferred income taxes 9,431 9,327
--------------- ------------------
Total assets $47,737 $43,431
=============== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 412 $ 486
Accrued bonuses 1,190 2,281
Accrued pension and profit sharing 772 11
Other accrued expenses and liabilities 1,518 1,690
Accrued income taxes payable -- 677
Customer prepayments 1,228 1,447
Deferred revenue 6,714 3,865
--------------- ------------------
Total liabilities 11,834 10,457
Stockholders' equity:
Preferred stock, $.01 par value, 2,000,000 shares authorized -- --
Common stock, $.01 par value; 50,000,000 shares authorized; 16,258,094 shares
issued in 1997 and 16,228,985 shares issued in 1996 163 162
Additional paid-in capital 35,922 35,755
Less treasury stock, at cost: 73,700 shares held in 1997 and 71,600 shares held in 1996 (12) (12)
Retained earnings (deficit) (140) (3,073)
Unrealized appreciation in securities available for sale, net 244 444
Notes receivable from stockholders (274) (302)
--------------- ------------------
Total stockholders' equity 35,903 32,974
--------------- ------------------
Total liabilities and stockholders' equity $47,737 $43,431
=============== ==================
The accompanying notes are an integral part of the condensed consolidated
financial statements.
1
ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
Three months ended Six months ended
----------------------------- --------------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
------------ -------------- ------------ ------------
Revenue:
Software licenses $ 8,835 $ 8,837 $ 17,940 $ 17,222
Maintenance and service 3,722 2,503 6,631 4,851
----------- ----------- ----------- -----------
Total revenue 12,557 11,340 24,571 22,073
Cost of sales:
Software licenses 734 816 1,355 1,482
Maintenance and service 592 724 1,162 1,253
----------- ----------- ----------- -----------
Total cost of sales 1,326 1,540 2,517 2,735
----------- ----------- ----------- -----------
Gross profit 11,231 9,800 22,054 19,338
Operating expenses:
Selling amd marketing 2,746 2,279 5,724 4,447
Research and development 3,033 2,349 5,803 4,679
Amortization 177 2,714 2,430 5,433
General and administrative 1,941 1,806 3,864 3,656
----------- ----------- ----------- -----------
Total operating expenses 7,897 9,148 17,821 18,215
----------- ----------- ----------- -----------
Operating Income 3,334 652 4,233 1,123
Interest expense -- (781) -- (1,670)
Other income 274 64 421 155
----------- ----------- ----------- -----------
Income (loss) before income tax provision
(benefit) and extraordinary item 3,608 (65) 4,654 (392)
Income tax provision (benefit) 1,334 (24) 1,721 (150)
----------- ----------- ----------- -----------
Net income (loss) before extraordinary item 2,274 (41) 2,933 (242)
Extraordinary item, net -- (343) -- (343)
----------- ----------- ----------- -----------
Net income (loss) $ 2,274 $ (384) $ 2,933 $ (585)
=========== =========== =========== ===========
Net income (loss) applicable to common stock:
Net income (loss) $ 2,274 $ (384) $ 2,933 $ (585)
Redeemable preferred stock dividends -- (135) -- (236)
----------- ----------- ----------- -----------
$ 2,274 $ (519) $ 2,933 $ (821)
=========== =========== =========== ===========
Net income (loss) per common share:
Net income (loss) before extraordinary item $ 0.14 $ (0.01) $ 0.18 $ (0.04)
Extraordinary item $ -- $ (0.03) $ -- $ (0.02)
----------- ----------- ----------- -----------
Net income (loss) $ 0.14 $ (0.04) $ 0.18 $ (0.06)
=========== =========== =========== ===========
Shares used in computing per common
share amounts 16,643,000 $13,714,000 $16,703,000 $13,086,000
=========== =========== =========== ===========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
2
ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six months ended
--------------------------------------
June 30, June 30,
1997 1996
---------------- ----------------
Cash flows from operating activities:
Net income (loss) $ 2,933 $ (585)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 3,088 5,916
Extraordinary item -- 553
Deferred income tax benefit (13) (1,420)
Provision for bad debts 280 25
Change in operating assets and liabilities:
Accounts receivable 80 (2,939)
Income taxes (677) 674
Other current assets (1,275) 32
Accounts payable, accrued expenses and liabilities and customer (796) (516)
prepayments
Deferred revenue 2,849 1,324
---------------- ----------------
Net cash provided by operating activities 6,469 3,064
---------------- ----------------
Cash flows from investing activities:
Capital expenditures (1,635) (585)
Capitalization of internally developed software costs (70) (105)
Purchase of short-term investments (4,068) --
Notes receivable from stockholders -- 32
---------------- ----------------
Net cash used in investing activities (5,773) (658)
---------------- ----------------
Cash flows from financing activities:
Payments on long-term debt -- (21,000)
Proceeds from issuance of restricted stock -- 326
Proceeds from issuance of common stock under employee stock purchase
plan 157 --
Proceeds from exercise of stock options 10 106
Repayment of stockholder notes 28 --
Repayment of subordinated notes -- (17,204)
Redemption of preferred stock and accumulated dividends -- (5,128)
Purchase of treasury stock -- (1)
Proceeds from initial public offering, net of issuance costs of $1,250 -- 41,065
---------------- ----------------
Net cash provided by (used in) financing activities 195 (1,836)
---------------- ----------------
Net increase in cash and cash equivalents 891 570
Cash and cash equivalents, beginning of period 17,069 8,091
---------------- ----------------
Cash and cash equivalents, end of period $17,960 $ 8,661
================ ================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest -- $ 2,848
Income taxes $ 2,420 750
Supplemental non cash investing and financing activities:
Decrease in securities available for sale (200) --
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
ANSYS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed 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 and
six months ended June 30, 1997 should be read in conjunction with the Company's
consolidated financial statements (and notes thereto) included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996.
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, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997.
4
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS
----------------------------------------
To the Shareholders and Board of Directors of
ANSYS, Inc. and Subsidiaries:
We have reviewed the condensed consolidated balance sheet of ANSYS, Inc. and
Subsidiaries as of June 30, 1997 , the related condensed consolidated statements
of operations for the three-month and six-month periods ended June 30, 1997 and
1996, and condensed consolidated cash flows for the six-month periods ended June
30, 1997 and 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
an expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed 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, 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for the year then ended (not presented
herein). In our report dated February 7, 1997, 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, 1996, 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 21, 1997
5
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 computer-aided design ("CAD") integrated
products. A global network of ANSYS Support Distributors ("ASDs") provides
sales, support and training for customers. Additionally, the Company
distributes its DesignSpace(TM) products through its global network of ASDs, as
well as a network of independent distributors and dealers (value-added resellers
of "VARs") who support sales of DesignSpace(TM) products to end users throughout
the world. The following discussion should be read in conjunction with the
attached unaudited condensed consolidated financial statements and notes thereto
for the periods ended June 30, 1997 and June 30, 1996 and with the Company's
audited financial statements and notes thereto for the fiscal year ended
December 31, 1996.
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, potential volatility of revenues and profit in any period
due to, among other things, lower than expected demand for or the ability to
complete large contracts, as well as other risks and uncertainties that are
detailed in the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section in the 1996 Annual Report to Shareholders , and
in the statement of "Certain Factors Affecting Future Results" included herein
as Exhibit 99 to this Form 10-Q.
Results of Operations
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996
Revenue. The Company's revenue increased 10.7% for the 1997 quarter to $12.6
million from $11.3 million for the 1996 quarter. This increase primarily
resulted from an increase in revenue from renewals and sales of leases as
noncancellable annual leases, for which a portion of the annual license fee is
recognized as paid-up revenue upon renewal or inception of the lease, while the
remaining portion is recognized as maintenance revenue ratably over the
remaining lease period. This increase, which was partially offset by a decrease
in monthly lease revenue, was due, in part, to the active sales and licensing of
noncancellable annual leases to existing and new lease customers. The increase
in revenue in the 1997 quarter was also attributable to increased maintenance
revenue, which resulted from broader customer usage of maintenance and support
services and the Company's continued emphasis on marketing its maintenance
services.
Software license revenue remained stable for the 1997 and 1996 quarters at $8.8
million. The Company experienced a 25.2% decrease in lease license revenue to
$3.3 million for the 1997 quarter from $4.4 million for the 1996 quarter. This
decrease was attributable to both an increase in the renewal of existing monthly
leases as noncancellable annual leases, as well as the conversion of certain
existing lease licenses to paid-up licenses in the third and fourth quarters of
1996. The decrease in lease license revenue was offset by an increase in paid-up
revenue, which was primarily attributable to the portion of the noncancellable
annual license fees which are recognized as paid-up revenue upon renewal or
inception of the lease. Maintenance and service revenue increased 48.7% for the
1997 quarter to $3.7 million from $2.5 million for the 1996 quarter, as a result
of an increase in the renewal of noncancellable annual leases, an increase in
the sale of paid-up licenses and broader customer usage of maintenance and
support services.
6
Of the Company's total revenue for the 1997 quarter, approximately 54.2% and
45.8%, respectively, were attributable to international and domestic sales, as
compared to 57.5% and 42.5%, respectively, for the 1996 quarter.
Cost of Sales and Gross Profit. The Company's total cost of sales decreased
13.9 % to $1.3 million, or 10.6% of total revenue, for the 1997 quarter from
$1.5 million, or 13.6% of total revenue, for the 1996 quarter. The Company's
cost of sales for software license revenue decreased 10.1% for the 1997 quarter
to $734,000, or 8.3% of software license revenue, from $816,000, or 9.2% of
software license revenue, for the 1996 quarter. The decrease was primarily due
to slight reductions in royalty fees, costs related to the printing of users
manuals and packaging supplies. The Company's cost of sales for maintenance and
service revenue was $592,000 and $724,000, or 15.9% and 28.9% of maintenance and
service revenue, for the 1997 and 1996 quarters, respectively. The 18.2%
decrease is primarily attributable to a reduction in expenses through lower
headcount and lower consulting fees.
As a result of the foregoing, the Company's gross profit increased 14.6% to
$11.2 million for the 1997 quarter from $9.8 million for the 1996 quarter.
Selling and Marketing. Selling and marketing expenses increased 20.5% for the
1997 quarter to $2.7 million, or 21.9% of total revenue, from $2.3 million, or
20.1% of total revenue, for the 1996 quarter. This planned growth was
attributable principally to increased personnel costs, including costs
associated with increased headcount and compensation expenses related to
building a global sales and marketing organization and establishing strategic
offices in the UK, Michigan and Japan, as well as increased commissions
associated with increased revenue.
Research and Development. Research and development expenses increased 29.1% for
the 1997 quarter to $3.0 million, or 24.2% of total revenue, from $2.3 million,
or 20.7% of total revenue, for the 1996 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(TM) products, as well as
increased third party development and consulting costs associated with the
upcoming release of ANSYS 5.4.
Amortization. Amortization expense was $177,000 in the 1997 quarter as compared
to $2.7 million in the 1996 quarter. This significant decrease was attributable
to the full amortization of certain of the intangible assets which resulted from
the acquisition of the Company in 1994 (the "1994 Acquisition"), including
goodwill and capitalized software, in the first quarter of 1997.
General and Administrative. General and administrative expenses increased 7.5%
to $1.9 million, or 15.5% of total revenue, for the 1997 quarter from $1.8
million, or 15.9% of total revenue, for the 1996 quarter. The increase is
attributable to expenses incurred to increase the allowance for doubtful
accounts and the addition of internal legal and finance resources to support the
operations of a publicly owned company, which were offset by a significant
reduction in outside consulting fees.
Interest. Interest expense, which was zero in the 1997 quarter, totaled
$781,000 for the 1996 quarter. This decrease was attributable to the early
repayment of all outstanding debt related to the 1994 Acquisition with the net
proceeds from the Company's initial public offering in June 1996.
Income Tax Provision (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 37.0% for the
1997 and 1996 quarters. This percentage is less than the federal and state
combined statutory rate of approximately 39.0% due primarily to the utilization
of research and experimentation credits.
7
Net Income (Loss). The Company's net income in the second quarter of 1997 was
$2.3 million as compared to a net loss before extraordinary item of $41,000 and
a net loss including the extraordinary item of $384,000 in the second quarter of
1996. Net income per share increased to $.14 in the 1997 quarter as compared to
a net loss before extraordinary item of ($.01) and a net loss including the
extraordinary item of ($.04) per share in the 1996 quarter. The increase in net
income per share is attributable to the increase in net income, as well as the
elimination of the preferred stock dividends due to the redemption of the
Redeemable Preferred Stock. The weighted average common and common equivalent
shares increased to 16,643,000 in the 1997 quarter from 13,714,000 in the 1996
quarter, primarily as a result of the Company's initial public offering.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Revenue. The Company's revenue increased 11.3% for the 1997 six months to $24.6
million from $22.1 million for the 1996 six months. This increase was
attributable principally to an increase in revenue from renewals and sales of
leases as noncancellable annual leases, for which a portion of the annual
license fee is recognized as paid-up revenue upon renewal or inception of the
lease, while the remaining portion is recognized as maintenance revenue ratably
over the remaining lease period. The increase in revenue in the 1997 six months
was also attributable to increased sales of domestic and international paid-up
licenses and increased maintenance revenue. These increases, which were
partially offset by a decrease in monthly lease revenue, were due, in part, to
the active sales and licensing of noncancellable annual leases to existing and
new lease customers the Company's continued marketing emphasis, and broader
customer usage of maintenance and support services in response to the Company's
continued emphasis on marketing its maintenance services.
Software license revenue increased 4.2% for the 1997 six months to $17.9 million
from $17.2 million for the 1996 six months, resulting principally from a shift
in existing monthly lease customers renewing as noncancellable annual leases, as
well as increases in the sale of new noncancellable annual leases and paid-up
licenses in domestic and international markets. Revenue from the sales of paid-
up licenses, and the portion of noncancellable annual leases classified as paid-
up revenue, increased 36.1% for the 1997 six months to $10.9 million from $8.0
million for the 1996 six months. The Company also experienced a 23.6% decrease
in lease license revenue to $7.0 million for the 1997 six months from $9.2
million for the 1996 six months. This decrease was attributable to both an
increase in the renewal of existing monthly leases as noncancellable annual
leases, as well as the conversion of certain existing lease licenses to paid-up
licenses in the third and fourth quarters of 1996. Maintenance and service
revenue increased 36.7% for the 1997 six months to $6.6 million from $4.9
million for the 1996 six months, as a result of an increase in the renewal and
sale of noncancellable annual leases, an increase in the sale of paid-up
licenses and broader customer usage of maintenance and support services.
Of the Company's total revenue for the 1997 six months, approximately 51.4% and
48.6%, respectively, were attributable to international and domestic sales, as
compared to 53.7% and 46.3%, respectively, for the 1996 six months.
Cost of Sales and Gross Profit. The Company's total cost of sales decreased
8.0% to $2.5 million, or 10.2% of total revenue, for the 1997 six months from
$2.7 million, or 12.4% of total revenue, for the 1996 six months. The Company's
cost of sales for software license revenue decreased 8.6% for the 1997 six
months to $1.4 million, or 7.6% of software license revenue, from $1.5 million,
or 8.6% of software license revenue, for the 1996 six months. The decrease was
due primarily to a reduction of costs related to software reproduction and
packaging supplies, printing of user manuals and lower headcount, offset by a
slight increase in royalty fees. The Company's cost of sales for maintenance
and service revenue was $1.2 million and $1.3 million, or 17.5% and 25.8% of
maintenance and service revenue, for the 1997 and 1996 six months, respectively.
The 7.3% decrease is primarily attributable to a reduction in expenses through
lower headcount and lower consulting fees.
8
As a result of the foregoing, the Company's gross profit increased 14.0% to
$22.0 million for the 1997 six months from $19.3 million for the 1996 six
months.
Selling and Marketing. Selling and marketing expenses increased 28.7% for the
1997 six months to $5.7 million, or 23.3% of total revenue, from $4.4 million,
or 20.1% of total revenue, for the 1996 six months. The planned 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 global sales and marketing
organization and establishing strategic offices in the UK, Michigan and Japan,
as well as increased commissions associated with increased revenue.
Research and Development. Research and development expenses increased 24.0% for
the 1997 six months to $5.8 million, or 23.6% of total revenue, from $4.7
million, or 21.2% of total revenue, for the 1996 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 continued development of the Company's DesignSpace(TM)
products, as well as increased third party development and consulting costs
associated with the upcoming release of ANSYS 5.4.
Amortization. Amortization expense was $2.4 million for the 1997 six months and
$5.4 million for the 1996 six months. The decrease was attributable to the full
amortization of certain of the intangible assets, which resulted from the 1994
Acquisition, including goodwill and capitalized software, fully amortized in the
first quarter of 1997.
General and Administrative. General and administrative expenses increased 5.7%
for the 1997 six months to $3.9 million, or 15.7% of total revenue, from $3.7
million, or 16.6% of total revenue, for the 1996 six months. The increase is
attributable to expenses incurred to increase the allowance for doubtful
accounts and the addition of internal legal and finance resources to support the
operations of a publicly owned company, which were offset by a significant
reduction in outside consulting fees.
Interest. Interest expense, which was zero in the 1997 six months, totaled $1.7
million for the 1996 six months. This decrease was attributable to the early
repayment of all outstanding debt related to the 1994 Acquisition with the net
proceeds from the Company's initial public offering in June 1996.
Income Tax Provision (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 37.0% for the
1997 six months, as compared to 38.3% for the 1996 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 Income (Loss). The Company's net income in the six months of 1997 totaled
$2.9 million as compared to a net loss before extraordinary item of $242,000 and
a net loss including the extraordinary item of $585,000 in the 1996 six months.
Net income per share increased to $.18 in the 1997 six months as compared to a
net loss before extraordinary item of ($.04) per share and a net loss including
the extraordinary item of ($.06) per share in the 1996 six months. The increase
in net income per share is attributable to the increase in net income, as well
as the elimination of the preferred stock dividends due to the redemption of the
Redeemable Preferred Stock. The weighted average common and common equivalent
shares increased to 16,703,000 in the 1997 six month period from 13,086,000 in
the 1996 six month period, primarily as a result of the Company's initial public
offering.
9
Liquidity and Capital Resources
As of June 30, 1997, the Company had cash and cash equivalents totaling $22.0
million, which includes $4.1 of short-term investments and working capital of
$19.2 million, as compared to cash and cash equivalents of $17.1 million and
working capital of $14.7 million at December 31, 1996.
The Company's operating activities provided cash of $6.5 million for the six
months ended June 30, 1997 and $3.1 million for the six months ended June 30,
1996. The increase in the Company's cash flow from operations for the 1997 six
months as compared to the 1996 six months was a result of increased earnings
before the effect of depreciation and amortization, as well as improved
management of working capital. Net cash generated by operating activities
provided sufficient resources to fund increased headcount and capital needs to
support the Company's expansion of its global sales support network and
continued investment in research and development activities for the six months
ended June 30, 1997.
Cash used in investing activities was $5.8 million for the six months ended June
30, 1997 and $658,000 for the six months ended June 30, 1996. The increase is
principally due to the purchase of short-term investments in the six months
ended June 30, 1997, as well as the acquisition of $1.6 million in capital
equipment. The capital expenditures in 1997 were primarily related to furniture
and equipment for the new corporate office facility, which the Company initially
occupied in February 1997, as well as computer hardware and software to support
the continued growth of the Company's development activities and the expansion
of its global sales and support infrastructure. The Company currently plans
additional capital spending of approximately $1.5 million throughout the
remainder of 1997, however, the level of spending will be dependent upon various
factors, including growth of the business and general economic conditions
Financing activities provided net cash of $195,000 for the six months ended June
30, 1997 and used net cash of $1.8 million for the six months ended June 30,
1996. Cash provided from financing activities for the 1996 six month period
included the receipt of $41.1 million of net proceeds from the Company's initial
public offering in June 1996. Cash provided from financing activities for the
1997 and 1996 six month periods also included proceeds from issuance of common
stock under employee stock purchase and option plans. Cash used for financing
activities for the six months ended June 30, 1996 was the result of repayment of
all outstanding indebtedness related to the 1994 Acquisition and the redemption
of Preferred Stock and accumulated dividends.
10
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable.
Item 2. Changes in Securities
(c) The following information is furnished in connection with
securities sold by the Registrant during the period covered by this
Form 10-Q which were not registered under the Securities Act. The
transactions constitute sales of the Registrant's Common Stock, par
value $.01 per share, upon the exercise of vested options issued
pursuant to the Company's 1994 Stock Option and Grant Plan, in
reliance upon the exemption from registration under Rule 701
promulgated under the Securities Act and issued prior to the
Registrant becoming subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act of 1934, as amended.
Month/Year Number of Shares Number of Employees Aggregate Exercise Price
---------- ---------------- ------------------- ------------------------
June 1997 1,750 2 $1,575
In addition, in April 1997, the Registrant granted 25,000 options to
purchase an aggregate of 25,000 shares of the Company's Common Stock,
$.01 par value per share, to consultants at an exercise price of
$6.65 per share.
Item 3. Defaults upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of the Company held on May 7,
1997, the stockholders of the Company approved the election of Peter
J. Smith and John A. Swanson as Class I Directors of the Company to
hold office until the 2000 Annual Meeting of Stockholders and until
such Directors' successors are duly elected and qualified. No other
nominations were made. Each of the Company's nominees for Director
was reelected at the annual meeting. The total number of votes cast
for the election of Directors was 15,518,441. Following is a separate
tabulation with respect to each Director:
Votes For Votes Withheld
---------- --------------
Peter J. Smith 13,062,833 2,455,608
John A. Swanson 15,501,156 17,285
There were no broker non-votes on this matter.
Item 5. Other information
Not Applicable.
Item 6. Exhibits and Reports Filed on Form 8-K
(a) Exhibits.
15 Independent Accountants' Letter Regarding Unaudited
Financial Information
27.1 Financial Data Schedule
99 Certain Factors Regarding Future Results
(b) Reports on Form 8-K.
Not Applicable.
11
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 8, 1997 By: /s/ Peter J. Smith
-----------------------------------------------------
Peter J. Smith
Chairman, President and Chief Executive Officer
Date: August 8, 1997 By: /s/ John M. Sherbin II
-----------------------------------------------------
John M. Sherbin II
Chief Financial Officer; Vice President, Finance
and Administration; Secretary
12
Item 6.
EXHIBIT INDEX
-------------
Exhibit No.
-----------
15 Independent Accountants' Letter Regarding Unaudited
Financial Information
27.1 Financial Data Schedule
99 Certain Factors Regarding Future Results
13