UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXCHANGE ACT OF 1934
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 March 31, 2004
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 incorporation or organization) | (IRS Employer 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 ¨
Indicate by a check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x No ¨
The number of shares of the Registrant’s Common Stock, par value $.01 per share, outstanding as of April 30, 2004 was 15,360,650 shares.
INDEX
ANSYS, DesignSpace, ANSYS DesignModeler, ANSYS DesignXplorer VT, ANSYS DesignXplorer, ANSYS ProFEA, ANSYS Emax, ANSYS Workbench environment, CFX, AI*Environment, CADOE S.A. and any and all ANSYS, Inc. product names are registered trademarks or trademarks of subsidiaries of ANSYS, Inc. located in the United States or other countries. All other product names mentioned are trademarks or registered trademarks of their respective manufacturers.
2
PART I – UNAUDITED FINANCIAL INFORMATION
| Item 1. | Financial Statements: |
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
(Unaudited)
| March 31, 2004 |
Dec. 31, 2003 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 91,295 | $ | 78,038 | ||||
| Short-term investments |
4,988 | 4,976 | ||||||
| Accounts receivable, less allowance for doubtful accounts of $2,010 and $2,110, respectively |
18,653 | 20,028 | ||||||
| Other current assets |
18,873 | 16,206 | ||||||
| Deferred income taxes |
3,452 | 3,311 | ||||||
| Total current assets |
137,261 | 122,559 | ||||||
| Property and equipment, net |
5,923 | 5,801 | ||||||
| Capitalized software costs, net |
1,026 | 959 | ||||||
| Goodwill |
35,176 | 35,151 | ||||||
| Other intangibles, net |
14,070 | 14,876 | ||||||
| Total assets |
$ | 193,456 | $ | 179,346 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,555 | $ | 988 | ||||
| Accrued bonuses |
2,140 | 4,439 | ||||||
| Other accrued expenses and liabilities |
8,285 | 8,323 | ||||||
| Deferred revenue |
43,787 | 37,874 | ||||||
| Total current liabilities |
55,767 | 51,624 | ||||||
| Deferred income taxes |
609 | 648 | ||||||
| Total liabilities |
56,376 | 52,272 | ||||||
| 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 |
46,375 | 44,535 | ||||||
| Less treasury stock, at cost: 1,237,083 and 1,317,488 shares, respectively |
(21,830 | ) | (22,768 | ) | ||||
| Retained earnings |
107,842 | 100,701 | ||||||
| Accumulated other comprehensive income |
4,527 | 4,440 | ||||||
| Total stockholders’ equity |
137,080 | 127,074 | ||||||
| Total liabilities and stockholders’ equity |
$ | 193,456 | $ | 179,346 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
| Three Months Ended | ||||||
| March 31, 2004 |
March 31, 2003 | |||||
| Revenue: |
||||||
| Software licenses |
$ | 16,324 | $ | 12,442 | ||
| Maintenance and service |
15,008 | 12,158 | ||||
| Total revenue |
31,332 | 24,600 | ||||
| Cost of sales: |
||||||
| Software licenses |
1,337 | 1,179 | ||||
| Amortization of software and acquired technology |
755 | 525 | ||||
| Maintenance and service |
3,083 | 2,894 | ||||
| Total cost of sales |
5,175 | 4,598 | ||||
| Gross profit |
26,157 | 20,002 | ||||
| Operating expenses: |
||||||
| Selling and marketing |
6,054 | 5,512 | ||||
| Research and development |
6,347 | 5,656 | ||||
| Amortization |
287 | 223 | ||||
| General and administrative |
3,499 | 2,644 | ||||
| Total operating expenses |
16,187 | 14,035 | ||||
| Operating income |
9,970 | 5,967 | ||||
| Other income, net |
230 | 534 | ||||
| Income before income tax provision |
10,200 | 6,501 | ||||
| Income tax provision |
3,060 | 2,222 | ||||
| Net income |
$ | 7,140 | $ | 4,279 | ||
| Earnings per share - basic: |
||||||
| Basic earnings per share |
$ | 0.47 | $ | 0.29 | ||
| Weighted average shares - basic |
15,315 | 14,627 | ||||
| Earnings per share - diluted: |
||||||
| Diluted earnings per share |
$ | 0.43 | $ | 0.27 | ||
| Weighted average shares - diluted |
16,461 | 15,584 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| Three Months Ended |
||||||||
| March 31, 2004 |
March 31, 2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 7,140 | $ | 4,279 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
1,866 | 1,379 | ||||||
| Deferred income tax provision |
(79 | ) | (74 | ) | ||||
| Provision for bad debts |
15 | 152 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
1,496 | 1,808 | ||||||
| Other current assets |
(2,639 | ) | (1,011 | ) | ||||
| Accounts payable, accrued expenses and liabilities |
(319 | ) | (558 | ) | ||||
| Deferred revenue |
5,732 | 5,493 | ||||||
| Net cash provided by operating activities |
13,212 | 11,468 | ||||||
| Cash flows from investing activities: |
||||||||
| Capital expenditures |
(935 | ) | (640 | ) | ||||
| Capitalization of internally developed software costs |
(261 | ) | (103 | ) | ||||
| Purchases of short-term investments |
— | (4,985 | ) | |||||
| Maturities of short-term investments |
— | 4,975 | ||||||
| Acquisition of CFX, net of cash acquired |
— | (21,489 | ) | |||||
| Net cash used in investing activities |
(1,196 | ) | (22,242 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuance of common stock under Employee Stock Purchase Plan |
216 | 187 | ||||||
| Proceeds from exercise of stock options |
779 | 1,189 | ||||||
| Cash provided by financing activities |
995 | 1,376 | ||||||
| Effect of exchange rate changes on cash |
246 | 49 | ||||||
| Net increase (decrease) in cash and cash equivalents |
13,257 | (9,349 | ) | |||||
| Cash and cash equivalents, beginning of period |
78,038 | 46,198 | ||||||
| Cash and cash equivalents, end of period |
$ | 91,295 | $ | 36,849 | ||||
| Supplemental disclosures of cash flow information: |
||||||||
| Cash paid during the period for income taxes |
$ | 1,224 | $ | 676 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2004
(Unaudited)
1. Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared by ANSYS, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information for commercial and industrial companies and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the accompanying statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The accompanying condensed consolidated financial statements 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, 2003. The condensed consolidated December 31, 2003 balance sheet presented is derived from the audited December 31, 2003 balance sheet included in the most recent Form 10-K. 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 ended March 31, 2004 are not necessarily indicative of the results that may be expected for any future period.
Concentrations of Credit Risk: The Company has a concentration of credit risk with respect to trade receivables due to the limited number of distributors through which the Company sells its products. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral.
In addition to the concentration of credit risk with respect to trade receivables, the Company’s cash and cash equivalents are also exposed to concentration of credit risk. The Company maintains its cash accounts primarily in U.S. banks which are insured by the F.D.I.C. up to $100,000 per bank. The Company had cash balances on deposit with a U.S. bank at March 31, 2004 that exceeded the balance insured by the F.D.I.C. in the amount of approximately $43 million. A significant portion of the Company’s remaining cash balance is also uninsured.
Stock-Based Compensation: The Company has elected to account for stock-based compensation arrangements under the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock-Based Compensation.” No compensation expense has been recognized in the condensed consolidated statements of income as option grants generally are made with exercise prices equal to the fair value of the underlying common stock on the award date, which is typically the date of compensation measurement.
6
Had compensation cost been determined based on the fair value at the date of grant, in accordance with the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” the Company’s net income and basic and diluted earnings per share would have been reduced to the pro forma amounts indicated below:
| Three Months Ended |
||||||||
| (in thousands, except per share data) | March 31, 2004 |
March 31, 2003 |
||||||
| Net income, as reported |
$ | 7,140 | $ | 4,279 | ||||
| Add: Stock-based employee compensation expense included in net income, net of related tax effects |
— | — | ||||||
| Deduct: Stock-based employee compensation expense determined under the fair value-based method for all awards, net of related tax effects |
(724 | ) | (751 | ) | ||||
| Pro forma net income |
$ | 6,416 | $ | 3,528 | ||||
| Earnings per share: |
||||||||
| Basic – as reported |
$ | 0.47 | $ | 0.29 | ||||
| Basic – pro forma |
$ | 0.42 | $ | 0.24 | ||||
| Diluted – as reported |
$ | 0.43 | $ | 0.27 | ||||
| Diluted – pro forma |
$ | 0.39 | $ | 0.23 | ||||
Reclassifications: Certain reclassifications have been made to the 2003 financial statements to conform to the 2004 presentation.
2. Accumulated Other Comprehensive Income
As of March 31, 2004 and December 31, 2003, accumulated other comprehensive income, as reflected on the condensed consolidated balance sheets, was comprised of foreign currency translation adjustments.
Comprehensive income for the three-month periods ended March 31, 2004 and 2003 was as follows:
| Three months ended | ||||||
| (in thousands) | March 31, 2004 |
March 31, 2003 | ||||
| Comprehensive Income |
$ | 7,227 | $ | 4,671 | ||
3. Other Current Assets