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, 2001
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)
724-746-3304
(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 July 30, 2001 was 14,549,344 shares.
1
ANSYS, INC. AND SUBSIDIARIES
INDEX
-----
Page No.
PART I. FINANCIAL INFORMATION --------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - June 30, 2001 and 3
December 31, 2000
Condensed Consolidated Statements of Income - Three and 4
Six Months Ended June 30, 2001 and 2000
Condensed Consolidated Statements of Cash Flows - Six 5
Months Ended June 30, 2001 and 2000
Notes to Condensed Consolidated Financial Statements 6-7
Report of Independent Accountants 8
Item 2. Management's Discussion and Analysis of Financial 9-15
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16-17
Item 6. Exhibits and Reports Filed on Form 8-K 17
SIGNATURES 18
EXHIBIT INDEX 19
Trademarks used in this Form 10-Q: ANSYS(R) and DesignSpace(R) are registered
trademarks of SAS IP, Inc., a wholly-owned subsidiary of ANSYS, Inc.
2
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements:
ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
June 30, Dec. 31,
2001 2000
-------------------- -----------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 19,786 $ 6,313
Short-term investments 29,878 41,227
Accounts receivable, less allowance for doubtful
accounts of $2,480 and $2,350, respectively 11,701 14,403
Other current assets 1,822 2,269
Deferred income taxes 844 695
--------- ---------
Total current assets 64,031 64,907
Investments 500 500
Property and equipment, net 5,446 5,152
Capitalized software costs, net 492 574
Goodwill, net 8,703 9,227
Other intangibles, net 7,586 8,970
Deferred income taxes 4,619 4,895
----------- ---------
Total assets $ 91,377 $ 94,225
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 231 $ 459
Accrued bonuses 3,516 4,869
Other accrued expenses and liabilities 4,369 6,429
Deferred revenue 16,328 13,104
----------- ---------
Total current liabilities 24,444 24,861
Stockholders' equity:
Preferred stock, $.01 par value, 2,000,000 shares authorized - -
Common stock, $.01 par value; 50,000,000 shares authorized;
16,584,758 shares issued; 166 166
Additional paid-in capital 37,246 37,502
Less treasury stock, at cost: 2,129,277 and 1,451,692
shares, respectively (23,002) (15,127)
Accumulated other comprehensive income (154) 86
Retained earnings 52,677 46,737
----------- ---------
Total stockholders' equity 66,933 69,364
----------- ---------
Total liabilities and stockholders' equity $ 91,377 $ 94,225
=========== =========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
ANSYS, INC. AND SUBIDARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
Three months ended Six months ended
----------------------------- ----------------------------
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
---------- --------- -------- --------
Revenue:
Software licenses $11,078 $ 9,409 $20,560 $19,916
Maintenance and service 9,853 6,844 18,593 13,717
---------- --------- -------- --------
Total revenue 20,931 16,253 39,153 33,633
Cost of sales:
Software licenses 1,333 997 2,443 2,091
Maintenance and service 1,613 797 3,166 1,706
--------- --------- -------- --------
Total cost of sales 2,946 1,794 5,609 3,797
--------- --------- -------- --------
Gross profit 17,985 14,459 33,544 29,836
Operating expenses:
Selling and marketing 5,112 4,023 10,046 7,858
Research and development 4,298 3,203 8,213 6,614
Amortization 1,318 191 2,643 399
General and administrative 2,552 2,253 5,123 4,942
--------- --------- --------- ---------
Total operating expenses 13,280 9,670 26,025 19,813
--------- --------- --------- ---------
Operating income 4,705 4,789 7,519 10,023
Other income 467 895 1,111 1,892
--------- --------- --------- ---------
Income before income tax provision 5,172 5,684 8,630 11,915
Income tax provision 1,603 1,592 2,690 3,336
--------- --------- --------- ---------
Net income $ 3,569 $ 4,092 $ 5,940 $ 8,579
========== ========= ========= ==========
Earnings per share - basic:
Basic earnings per share $ 0.25 $ 0.26 $ 0.41 $ 0.54
Weighted average shares - basic 14,342 15,815 14,628 16,034
Earnings per share - diluted:
Diluted earnings per share $ 0.24 $ 0.25 $ 0.39 $ 0.52
Weighted average shares - diluted 15,171 16,272 15,310 16,546
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Six months ended
--------------------------------
June 30, June 30,
2001 2000
--------- ---------
Cash flows from operating activities:
Net income $ 5,940 $ 8,579
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 3,864 1,472
Deferred income tax provision 127 108
Provision for bad debts 270 99
Changes in operating assets and liabilities:
Accounts receivable 2,432 909
Other current assets 447 (199)
Accounts payable, accrued expenses and
liabilities (3,164) (1,153)
Deferred revenue 3,224 2,553
-------- --------
Net cash provided by operating
activities 13,140 12,368
-------- --------
Cash flows from investing activities:
Capital expenditures (1,549) (1,939)
Capitalization of internally developed
software costs (97) -
Acquisition payments (150) (200)
Purchases of short-term investments (15,056) (6,000)
Maturities of short-term investments 26,405 18,025
Repayment of stockholder loan - 250
ICEM CFD acquisition (183) -
Purchase of investment - (375)
-------- --------
Net cash provided by investing
activities 9,370 9,761
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock
under Employee Stock Purchase Plan 86 74
Purchase of treasury stock (11,199) (9,851)
Proceeds from exercise of stock options 2,316 1,153
-------- --------
Net cash used in financing activities (8,797) (8,624)
Effect of exchange rate changes on cash (240) (33)
Net increase in cash and cash equivalents 13,473 13,472
Cash and cash equivalents, beginning of period 6,313 10,401
-------- --------
Cash and cash equivalents, end of period $ 19,786 $ 23,873
======== ========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Income taxes $ 2,073 $ 3,324
======== ========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
ANSYS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001
(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, 2001 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 year ended December 31, 2000. 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 and six months ended June 30, 2001 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2001.
2. Accumulated Other Comprehensive Income
As of June 30, 2001 and December 31, 2000, accumulated other comprehensive
income, as reflected on the condensed consolidated balance sheets, was comprised
of foreign currency translation adjustments.
3. Recently Issued Accounting Pronouncements
On July 20, 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141 (Statement 141), Business Combinations,
and No. 142 (Statement 142), Goodwill and Other Intangible Assets.
Statement 141 supersedes Accounting Principles Board Opinion No. 16 (APB 16),
Business Combinations. The most significant changes made by Statement 141 are:
(1) requiring that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001, (2) establishing specific criteria
for the recognition of intangible assets separately from goodwill, and (3)
requiring unallocated negative goodwill to be written off immediately as an
extraordinary gain (rather than being deferred and amortized).
Statement 142 supersedes APB 17, Intangible Assets and primarily addresses the
accounting for goodwill and intangible assets subsequent to their acquisition
(i.e., the post-acquisition accounting). The most significant changes made by
Statement 142 are:
6
(1) goodwill and indefinite lived intangible assets will no longer be amortized,
(2) goodwill will be tested for impairment at least annually at the reporting
unit level, (3) intangible assets deemed to have an indefinite life will be
tested for impairment at least annually, and (4) the amortization period of
intangible assets with finite lives will no longer be limited to forty years.
Statement 142 also specifies that certain intangible assets that were previously
identified as separate from goodwill (e.g., assembled workforce) are not
considered separately identifiable for purposes of this standard and should be
included as part of goodwill and subject to the non-amortization provisions of
Statement 142.
The provisions of Statement 142 will be effective for the Company's fiscal year
beginning January 1, 2002, and must be adopted as of the beginning of the year.
At adoption, an evaluation of goodwill and intangible assets will be required,
and any impairment of goodwill or intangible assets at that time will be
recognized as a cumulative effect of adoption. Management has not yet completed
the evaluation of the impact of adoption of these standards.
7
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders of
ANSYS, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of ANSYS,
Inc. and its subsidiaries as of June 30, 2001, and the related condensed
consolidated statements of income for each of the three-month and six-month
periods ended June 30, 2001 and 2000 and the condensed consolidated statements
of cash flows for the six-month periods ended June 30, 2001 and 2000. These
financial statements are the responsibility of the Company'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 accompanying condensed consolidated interim financial statements
for them to be in conformity with accounting principles generally accepted in
the United States of America.
We previously audited in accordance with auditing standards generally accepted
in the United States of America, the consolidated balance sheet of ANSYS, Inc.
and its subsidiaries as of December 31, 2000 and the related consolidated
statements of income, of stockholders' equity and of cash flows for the year
then ended (not presented herein), and in our report dated January 30, 2001, 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, 2000, is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.
/s/ PricewaterhouseCoopers LLP
- -----------------------------
Pittsburgh, Pennsylvania
July 11, 2001
8
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. Sales, support and training for customers are provided primarily
through the Company's global network of independent ANSYS Support Distributors
("ASDs"). The Company distributes and supports its ANSYS(R), DesignSpace(R) and
ICEM CFD product lines through its ASDs, certain direct sales offices, as well
as a network of independent resellers and dealers. The following discussion
should be read in conjunction with the accompanying unaudited condensed
consolidated financial statements and notes thereto for the three-month and six-
month periods ended June 30, 2001 and 2000, and with the Company's audited
financial statements and notes thereto for the year ended December 31, 2000.
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, including statements below concerning future trends regarding the
Company's intentions related to continued investments in sales and marketing and
research and development, plans related to future capital spending, the
sufficiency of existing cash and cash equivalent balances to meet future working
capital and capital expenditure requirements, as well as statements which
contain such words as "anticipates", "intends", "believes", "plans" and other
similar expressions. The Company's actual results could differ materially from
those set forth in forward-looking statements. Certain factors that might cause
such a difference include risks and uncertainties detailed in the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
section in the 2000 Annual Report to Shareholders and in "Certain Factors
Regarding Future Results" included herein as Exhibit 99 to this Form 10-Q.
Results of Operations
Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000
Revenue. The Company's total revenue increased 28.8% in the 2001 second quarter
to $20.9 million from $16.3 million in the 2000 second quarter. Reported
revenue for the second quarter of 2001 was adversely affected by a modification
of the Company's revenue recognition policy related to noncancellable annual
software leases.
9
As previously disclosed, the Company modified its previous revenue recognition
policy for annual software leases to comply with a Technical Practice Aid
("TPA") issued by the American Institute of Certified Public Accountants. Prior
to the revenue recognition modification, the Company recognized a portion of the
license fee from annual leases upon inception or renewal of the lease, while the
remaining portion was recognized ratably over the lease period. The TPA now
requires all revenue from noncancellable annual software lease licenses to be
recognized ratably over the lease term. The Company estimates that revenue
would have been approximately $21.4 million in the second quarter of 2001, or a
31.9% increase over the prior year quarter, had this modification not been made.
Software license revenue increased 17.7% in the 2001 quarter to $11.1 million
from $9.4 million in the 2000 quarter. The quarterly revenue increase was
primarily the result of approximately $1.1 million in revenue related to the
August 2000 acquisition of ICEM CFD Engineering ("ICEM CFD"). Also contributing
to the increase were increased sales of paid-up licenses to the Company's major
account customers.
Maintenance and service revenue increased 44.0% in the 2001 quarter to $9.9
million from $6.8 million in the 2000 quarter. This increase was primarily the
result of maintenance contracts sold in association with increased paid-up
license sales in recent quarters, as well as approximately $1.2 million in
quarterly revenue related to the acquisition of ICEM CFD.
Of the Company's total revenue in the 2001 quarter, approximately 51.1% and
48.9%, respectively, were attributable to international and domestic sales, as
compared to 55.5% and 44.5%, respectively, in the 2000 quarter.
Cost of Sales and Gross Profit. The Company's total cost of sales increased
64.2% to $2.9 million, or 14.1% of total revenue, in the 2001 second quarter
from $1.8 million, or 11.0% of total revenue, in the 2000 second quarter. The
increase in the 2001 quarter was principally attributable to costs associated
with engineering consulting services provided by ICEM CFD.
As a result of the foregoing, the Company's gross profit increased 24.4% to
$18.0 million in the 2001 quarter from $14.5 million in the 2000 quarter.
Selling and Marketing. Total selling and marketing expenses increased from $4.0
million, or 24.8% of total revenue in the 2000 quarter, to $5.1 million, or
24.4% of total revenue in the 2001 quarter. The increase primarily resulted
from higher salaries and related headcount costs associated with the acquisition
of ICEM CFD, as well as increased third-party commission costs related to major
account customer sales during the quarter. The Company anticipates that it will
continue to make significant investments throughout the remainder of 2001 in its
global sales and marketing organization to strengthen its competitive position,
to enhance major account sales activities and to support its worldwide sales
channels and marketing strategies.
10
Research and Development. Research and development expenses increased 34.2% in
the 2001 second quarter to $4.3 million, or 20.5% of total revenue, from $3.2
million, or 19.7% of total revenue, in the 2000 quarter. The increase primarily
resulted from higher salaries and related headcount costs associated with both
the acquisition of ICEM CFD, as well as the hiring of development personnel
within the ANSYS product creation organization. The Company has traditionally
invested significant resources in research and development activities and
intends to continue to make significant investments in this area throughout the
remainder of 2001.
Amortization. Amortization expense increased to $1.3 million in the 2001 second
quarter from $191,000 in the prior year quarter. The increase resulted from
amortization associated with the acquisition of ICEM CFD.
General and Administrative. General and administrative expenses increased from
$2.3 million, or 13.9% of total revenue, in the 2000 second quarter, to $2.6
million, or 12.2% of total revenue, in the second quarter of 2001. The increase
resulted primarily from the general and administrative costs incurred by ICEM
CFD.
Other Income. Other income decreased to $467,000 in the 2001 second quarter
from $895,000 in the prior year quarter. The decrease was primarily
attributable to lower interest-bearing cash and short-term investment balances,
as well as a declining interest rate environment.
Income Tax Provision. The Company's effective rates of taxation were 31.0% for
the 2001 quarter and 28.0% for the 2000 quarter. The effective rate increased
from the prior year quarter as a result of certain non-deductible amortization
expense associated with the acquisition of ICEM CFD. These rates are lower than
the federal and state combined statutory rate as a result of the utilization of
a foreign sales corporation, as well as the generation of research and
experimentation credits.
Net Income. The Company's net income in the 2001 quarter was $3.6 million as
compared to $4.1 million in the 2000 quarter. Diluted earnings per share
decreased to $.24 in the 2001 quarter as compared to $.25 in the 2000 quarter as
a result of the decrease in net income. The weighted average shares used in
computing diluted earnings per share were 15.2 million in the 2001 quarter and
16.3 million in the 2000 quarter. The decrease in shares outstanding is
primarily the result of treasury stock acquisitions (see Liquidity and Capital
Resources). Excluding the estimated effects of the modification of the
Company's revenue recognition policy for noncancellable annual software leases
and amortization associated with the acquisition of ICEM CFD, net income
increased 17.0% to $4.8 million, or diluted earnings per share of $0.32.
11
Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000
Revenue. The Company's total revenue increased 16.4% for the 2001 six months to
$39.2 million from $33.6 million for the 2000 six months. Reported revenue for
the first six months of 2001 was adversely affected by a modification of the
Company's revenue recognition policy related to noncancellable annual software
leases.
The Company modified its previous revenue recognition policy for annual software
leases to comply with a Technical Practice Aid ("TPA") issued by the American
Institute of Certified Public Accountants. Prior to the revenue recognition
modification, the Company recognized a portion of the license fee from annual
leases upon inception or renewal of the lease, while the remaining portion was
recognized ratably over the lease period. The TPA now requires all revenue from
noncancellable annual software lease licenses to be recognized ratably over the
lease term. The Company estimates that revenue would have been approximately
$42.7 million in the first six months of 2001, or a 27.0% increase over the
comparable prior year period, had this modification not been made.
Software license revenue totaled $20.6 million in the 2001 six months as
compared to $19.9 million for the 2000 six months, an increase of 3.2%. The
revenue increase was significantly impacted by the annual lease revenue
recognition policy modification discussed above. Excluding the impact of this
modification, software license revenue would have increased approximately 19.2%
to $23.7 million. This increase was primarily the result of approximately $3.3
million in revenue related to the August 2000 acquisition of ICEM CFD
Engineering ("ICEM CFD"). Also contributing were increased sales of paid-up
licenses to the Company's major account customers.
Maintenance and service revenue increased 35.5% for the six months ended June
30, 2001 to $18.6 million from $13.7 million for the comparable 2000 period.
Reported maintenance and service revenue would have been approximately $19.0
million, or 38.4% higher than the prior year period, had the revenue recognition
modification not occurred. This increase was primarily the result of maintenance
contracts sold in association with increased paid-up license sales in recent
quarters, as well as approximately $1.9 million in revenue related to the
acquisition of ICEM CFD.
Of the Company's total revenue in the 2001 six months, approximately 53.6% and
46.4%, respectively, were attributable to international and domestic sales, as
compared to 56.1% and 43.9%, respectively, in the 2000 six months.
Cost of Sales and Gross Profit. The Company's total cost of sales increased
47.7% to $5.6 million, or 14.3% of total revenue, for the 2001 six months from
$3.8 million, or 11.3% of total revenue, for the 2000 six months. The increase
in the 2001 six months was principally attributable to costs associated with
engineering consulting services provided by ICEM CFD.
12
As a result of the foregoing, the Company's gross profit increased 12.4% to
$33.5 million in the 2001 six-month period from $29.8 million in the comparable
2000 period.
Selling and Marketing. Selling and marketing expenses increased 27.8% in the
six months ended June 30, 2001 to $10.0 million, or 25.7% of total revenue, from
$7.9 million, or 23.4% of total revenue, in the comparable 2000 period. The
increase primarily resulted from higher salaries and related headcount costs
associated with both the acquisition of ICEM CFD, as well as the hiring of
personnel to bolster the ANSYS direct sales organization. Higher third-party
commission costs associated with direct sales to certain of the Company's major
account customers also contributed to the increase. The Company anticipates
that it will continue to make significant investments throughout the remainder
of 2001 in its global sales and marketing organization to strengthen its
competitive position, to enhance major account sales activities and to support
its worldwide sales channels and marketing strategies.
Research and Development. Research and development expenses increased 24.2% in
the 2001 six months to $8.2 million, or 21.0% of total revenue, from $6.6
million, or 19.7% of total revenue, in the 2000 six months. The increase
primarily resulted from higher salaries and related headcount costs associated
with both the acquisition of ICEM CFD, as well as the hiring of development
personnel within the ANSYS product creation organization. The Company has
traditionally invested significant resources in research and development
activities and intends to continue to make significant investments in this area
throughout the remainder of 2001.
Amortization. Amortization expense increased to $2.6 million in the 2001 six-
month period from $399,000 in the comparable prior year period. The increase
resulted from amortization associated with the acquisition of ICEM CFD.
General and Administrative. General and administrative expenses increased from
$4.9 million, or 14.7% of total revenue, in the 2000 six months, to $5.1
million, or 13.1% of total revenue, in the 2001 six months. General and
administrative costs incurred by ICEM CFD in the 2001 period were partially
offset by a $500,000 one-time legal charge in the first quarter of 2000 that did
not recur in the first half of 2001.
Other Income. Other income decreased from $1.9 million in the 2000 six-month
period to $1.1 million in the comparable 2001 period. The decrease was
primarily attributable to lower interest-bearing cash and short-term investment
balances, as well as a declining interest rate environment.
Income Tax Provision. The Company's effective rates of taxation were 31.2% for
the 2001 six months and 28.0% for the 2000 six months. The effective rate
increased from the prior year period as a result of certain non-deductible
amortization expense associated with the acquisition of ICEM CFD. These rates
are lower than the federal and state combined statutory rate as a result of the
utilization of a foreign sales corporation, as well as the generation of
research and experimentation credits.
13
Net Income. The Company's net income in the 2001 six months was $5.9 million as
compared to $8.6 million in the 2000 six months. Diluted earnings per share
decreased to $.39 in the 2001 period as compared to $.52 in the 2000 period as a
result of the decrease in net income. The weighted average shares used in
computing diluted earnings per share were 15.3 million and 16.5 million in the
2001 and 2000 six-month periods, respectively. The decrease in shares
outstanding is primarily the result of treasury stock acquisitions (see
Liquidity and Capital Resources). Excluding the estimated effects of the
modification of the Company's revenue recognition policy for noncancellable
annual software leases and amortization associated with the acquisition of ICEM
CFD, net income increased 18.0% to $10.1 million, or diluted earnings per share
of $0.66.
Liquidity and Capital Resources
As of June 30, 2001, the Company had cash, cash equivalents and short-term
investments totaling $49.7 million and working capital of $39.6 million, as
compared to cash, cash equivalents and short-term investments of $47.5 million
and working capital of $40.0 million at December 31, 2000. The short-term
investments are generally investment grade and liquid, which allows the Company
to minimize interest rate risk and to facilitate liquidity in the event an
immediate cash need arises.
The Company's operating activities provided cash of $13.1 million for the six
months ended June 30, 2001 and $12.4 million for the six months ended June 30,
2000. The increase in the Company's cash flow from operations for the 2001 six-
month period as compared to the comparable 2000 period was a result of increased
accounts receivable collections. Net cash generated by operating activities
provided sufficient resources to fund increased headcount and capital needs, as
well as to sustain share repurchase activity under the Company's announced share
repurchase program.
The Company's investing activities provided cash of $9.4 million and $9.8
million for the six months ended June 30, 2001 and 2000, respectively. Net cash
generated in both the 2001 and 2000 six-month periods related primarily to net
maturities of short-term investments. The Company currently plans additional
capital spending of approximately $1.0 million throughout the remainder of 2001;
however, the level of spending will be dependent upon various factors, including
growth of the business and general economic conditions.
Financing activities used cash of approximately $8.8 million and $8.6 million
for the six months ended June 30, 2001 and 2000, respectively. In both periods,
cash outlays related to the Company's share repurchase program were partially
offset by proceeds from the issuance of common stock under employee stock
purchase and option plans.
14
The Company believes that existing cash and cash equivalent balances, together
with cash generated from operations, will be sufficient to meet the Company's
working capital and capital expenditure requirements through the remainder of
fiscal 2001. The Company's cash requirements in the future may also be financed
through additional equity or debt financings. There can be no assurance that
such financings can be obtained on favorable terms, if at all.
Recently Issued Accounting Pronouncements
On July 20, 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141 (Statement 141), Business Combinations,
and No. 142 (Statement 142), Goodwill and Other Intangible Assets.
Statement 141 supersedes Accounting Principles Board Opinion No. 16 (APB 16),
Business Combinations. The most significant changes made by Statement 141 are:
(1) requiring that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001, (2) establishing specific criteria
for the recognition of intangible assets separately from goodwill, and (3)
requiring unallocated negative goodwill to be written off immediately as an
extraordinary gain (rather than being deferred and amortized).
Statement 142 supersedes APB 17, Intangible Assets and primarily addresses the
accounting for goodwill and intangible assets subsequent to their acquisition
(i.e., the post-acquisition accounting). The most significant changes made by
Statement 142 are:
(1) goodwill and indefinite lived intangible assets will no longer be amortized,
(2) goodwill will be tested for impairment at least annually at the reporting
unit level, (3) intangible assets deemed to have an indefinite life will be
tested for impairment at least annually, and (4) the amortization period of
intangible assets with finite lives will no longer be limited to forty years.
Statement 142 also specifies that certain intangible assets that were previously
identified as separate from goodwill (e.g., assembled workforce) are not
considered separately identifiable for purposes of this standard and should be
included as part of goodwill and subject to the non-amortization provisions of
Statement 142.
The provisions of Statement 142 will be effective for the Company's fiscal year
beginning January 1, 2002, and must be adopted as of the beginning of the year.
At adoption, an evaluation of goodwill and intangible assets will be required,
and any impairment of goodwill or intangible assets at that time will be
recognized as a cumulative effect of adoption. Management has not yet completed
the evaluation of the impact of adoption of these standards.
15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is subject to various legal proceedings from time to time
that arise in the ordinary course of business. Each of these matters
is subject to various uncertainties, and it is possible that these
matters may be resolved unfavorably to the Company.
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, issued 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.
Number of Number of Aggregate
Month/Year Shares Employees Exercise Price
---------- --------- --------- --------------
April 2001 6,000 2 $ 40,800.00
May 2001 22,250 3 $201,118.75
June 2001 1,000 1 $ 400.00
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 2,
2001, the stockholders of the Company elected Roger J. Heinen, Jr. and
Jacqueline C. Morby as Class II Directors of the Company to hold
office until the 2004 Annual Meeting of Stockholders and until such
Directors' successors are duly elected and qualified. The votes were
as follows:
Roger J. Heinen, Jr.
Votes For: 13,139,291
Votes Withheld: 531,258
Jacqueline C. Morby
Votes For: 11,624,944
Votes Withheld: 2,045,605
16
At the Annual Meeting of Stockholders of the Company held on May 2,
2001, the stockholders of the Company approved an amendment to the
1996 Stock Option and Grant Plan which increased the number of shares
of Common Stock available for issuance under the Plan from 3,250,000
to 4,250,000. The votes were as follows:
Votes For: 7,982,227
Votes Against: 2,625,253
Votes Abstained: 531,831
Broker Non-Votes: 2,531,238
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
99 Certain Factors Regarding Future Results
(b) Reports on Form 8-K.
Not Applicable.
17
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 1, 2001 By: /s/ James E. Cashman, III
---------------------------------------
James E. Cashman, III
President and Chief
Executive Officer
Date: August 1, 2001 By: /s/ Maria T. Shields
---------------------------------------
Maria T. Shields
Chief Financial Officer
18
Item 6.
EXHIBIT INDEX
-------------
Exhibit
No.
-------
15 Independent Accountants' Letter Regarding
Unaudited Financial Information
99 Certain Factors Regarding Future Results
19