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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 1999
[_] 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 (I.R.S. 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)
Securities registered pursuant to Section 12(b) of the Act:
None None
(Title of each class) (Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
(Title of class)
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be
contained, to the best of the registrant's knowledge, in definitive proxy
or information statements incorporated by reference in PART III of this
Form 10-K, or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based upon the closing sale price of the Common Stock on
March 17, 2000 as reported on the Nasdaq National Market, was approximately
$118,452,250. Shares of Common Stock held by each officer and director and
by each person who owns 5% or more of the outstanding Common Stock have
been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive
determination for other purposes.
The number of shares of the Registrant's Common Stock, par value $.01 per
share, outstanding as of March 17, 2000 was 16,116,716 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year ended
December 31, 1999 are incorporated by reference into Parts I, II and IV.
Portions of the Proxy Statement for the Registrant's 2000 Annual Meeting of
Stockholders to be held on May 2, 2000 are incorporated by reference into
Part III.
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Important Factors Regarding Future Results
Information provided by ANSYS, Inc. (the "Company"), including information
contained in this Annual Report on Form 10-K, or by its spokespersons may from
time to time contain forward-looking statements concerning such matters as
projected financial performance, market and industry segment growth, product
development and commercialization, acquisitions or other aspects of future
operations. Such statements, made pursuant to the safe harbor established by the
securities laws, are based on the assumptions and expectations of the Company's
management at the time such statements are made. The Company cautions investors
that its performance (and, therefore, any forward-looking statement) is subject
to risks and uncertainties. Various important factors, including but not limited
to those discussed herein, may cause the Company's future results to differ
materially from those projected in any forward-looking statement. Important
information about the basis for those assumptions is contained in "Important
Factors Regarding Future Results" included in Item 7 "Management's Discussion
and Analysis of Financial Condition and Results of Operations," incorporated by
reference to pages 10 through 17 of the Company's 1999 Annual Report to
Stockholders. All information presented is as of December 31, 1999, unless
otherwise indicated.
PART I
ITEM 1: BUSINESS
ANSYS, Inc. develops, markets and supports software solutions for design,
analysis and optimization. Engineering analysts and design engineers use the
Company's software to accelerate product time to market, reduce production
costs, improve engineering processes and optimize product quality and safety for
a variety of manufactured products. The ANSYS(R) product family features open,
flexible architecture that permits easy integration and collaboration within
customers' enterprise-wide engineering systems.
Since its founding in 1970 as Swanson Analysis Systems, Inc. ("Swanson
Analysis"), the Company has become a technology leader in the market for
computer-aided engineering ("CAE") analysis software. The Company has long-
standing relationships with customers in many industries, including automotive,
aerospace, consumer goods and electronics. Using the Company's products,
engineers can construct computer models of structures, compounds, components or
systems to simulate performance conditions and physical responses to varying
levels of stress, pressure, temperature and velocity. This helps reduce the time
and expense of physical prototyping and testing.
The Company's product line ranges from ANSYS/Multiphysics, a sophisticated
multi-disciplinary CAE tool for engineering analysts, to its DesignSpace(R)
products, innovative computer-aided design ("CAD") integrated design
optimization products for design engineers. The Company's individual design and
analysis software programs, all of which are included in the ANSYS/Multiphysics
program, are available as subsets or standalone products. The Company's
multiphysics products, and maintenance sold in connection with those products,
comprise the core of its business and accounted for a substantial portion of the
Company's revenue in 1999, 1998 and 1997. The Company's CAD integration products
provide design optimization tools for use directly within a particular CAD
product. CAD integration products are accessed from the graphical user interface
of, and operate directly on the geometry produced within, the CAD product. The
output from these programs may be read into any of the products in the ANSYS
product family. The Company's product family features a unified database, a wide
range of analysis functionality, a consistent, easy-to-use graphical user
interface, support for multiple hardware platforms and operating systems
(including Windows 98, Windows NT and UNIX), effective user customization tools
and integration with leading CAD systems. The Company's products are developed
using the Company's ISO 9001-certified quality system.
The Company markets its products principally through its global network of 29
independent regional ANSYS Support Distributors ("ASDs"), which have 56 offices
in 22 countries.
PRODUCT DEVELOPMENT
The Company makes significant investments in research and development and
emphasizes accelerated new product releases. The Company's product development
strategy centers on ongoing development and innovation of new technologies to
increase productivity and provide solutions that customers can integrate into
enterprise-wide engineering systems. The Company's product development efforts
focus on extensions of the ANSYS product family with new functional modules,
further integration with CAD products and the development of new products based
on object-oriented technology. The Company's products run on the most widely
used engineering computing platforms
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and operating systems, including Windows 98, Windows NT and most UNIX
workstations, as well as on supercomputers such as the Cray.
During 1999, the Company achieved the following with respect to major product
development activities and releases:
. The release of ANSYS 5.6, a new and enhanced version of the Company's
flagship multiphysics product, and all component products. This release
incorporates major enhancements for modeling contact, plasticity, creep and
elastomeric material behavior, along with significant advances to the
solver options.
. The release of DesignSpace 5.0. This software release provides significant
technological advancements for the upfront simulation of product designs,
including, most notably, the addition of assembly analysis functionality.
Additional functionality in this release includes an enhanced reporting
tool, interface improvements, enhanced thermal analysis and natural
frequency analysis.
. The introduction of ANSYS/Professional, an intermediate analysis product
that provides a toolkit for structural and thermal simulation. The
Mechanical Toolbar graphical user interface enables advanced analysis
without the use of extensive commands and protocols.
The Company's total research and development expense was $13.5 million, $11.6
million and $11.0 million in 1999, 1998 and 1997, or 21.3%, 20.6% and 21.8% of
total revenue, respectively. As of December 31, 1999, the Company's product
development staff consisted of 114 full time employees, most of whom hold
advanced degrees and have industry experience in engineering, mathematics,
computer science or related disciplines.
The Company uses multi-functional teams to develop its products and develops
them simultaneously on multiple platforms to reduce subsequent porting costs.
In addition to developing source code, these teams create and perform highly
automated software verification tests; develop on-line documentation and support
for the products; implement development enhancement tools, software
configuration management and product licensing processes; and conduct regression
tests of ANSYS products for all supported platforms.
PRODUCT QUALITY
During 1999, the Company continued to maintain ISO 9001 certification for its
quality system. This standard applies to all of the Company's commercial
software products and covers all product-related activities, from establishing
product requirements to customer service practices and procedures.
In accordance with the ISO 9001 certification for its quality system, the
Company's employees perform all product development and support tasks according
to predefined quality plans, procedures and work instructions. These plans
define for each project the methods to be used, the responsibilities of project
participants and the quality objectives to be met. To ensure that the Company
meets or surpasses the IS0 9001 standards, the Company establishes quality plans
for all products and services, subjects product designs to multiple levels of
testing and verification and selects development subcontractors in accordance
with processes established under the Company's quality system.
SALES AND MARKETING
The Company distributes and supports its ANSYS and DesignSpace product lines
primarily through its global ASD and reseller network. This network provides the
Company with a cost-effective, highly specialized channel of distribution and
technical support. Approximately 70% of the Company's revenue in 1999 was
derived through the ASD and reseller network.
At December 31, 1999, the ASD network consisted of 29 independent distributors
in 56 locations in 22 countries, including 12 in North America, 6 in Europe and
11 throughout the Asia-Pacific region and the remainder of the world. The ASDs
sell ANSYS and DesignSpace products to new customers, expand installations
within the existing customer base, offer training and consulting services and
provide the first line of ANSYS technical support. The Company's ASD
certification process helps to ensure that each ASD has the ongoing capacity to
adequately represent the Company's product line and provide an acceptable level
of training, consultation and support.
The Company also has a sales management infrastructure in place to develop a
more enterprise-wide focused sales approach and to implement a worldwide major
account strategy. The sales management organization also functions as a focal
point for requests to ANSYS from the ASD and reseller channel, and provides
additional support in
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strategic locations through the presence of direct sales offices. As of December
31, 1999, the Company's sales management organization was headed by a Vice
President of Worldwide Sales, a North American Vice President of Sales and an
International Vice President of Sales. These senior members of sales management
were supported by Regional Sales Directors, devoted to the overall management of
stated sales territories, and Strategic Account Managers, devoted to specific
major accounts within those territories.
During 1999, the Company continued to invest in its previously established
strategic sales offices in Minneapolis, Minnesota; Houston, Texas; New England;
the United Kingdom; China and Japan. In total, these offices employ 30 persons
who are responsible for the implementation of sales and marketing initiatives
and administration in those geographic areas designed to support the Company's
overall revenue growth and market share expansion strategies.
During 1999, the Company also continued to expand the reseller channel for both
its ANSYS and DesignSpace products. This channel complements the ASD network by
establishing a broader user base for the Company's products and services. As of
December 31, 1999, the Company had signed agreements with 143 resellers. The
resellers are required to have appropriately trained marketing and technical
personnel.
The Company's products have an installed base of approximately 62,000 seats at
commercial sites and approximately 109,000 seats at university sites worldwide.
The Company's products are utilized by organizations ranging in size from small
consulting firms to the world's largest industrial companies. No single customer
accounted for more than 1.2% of the Company's revenue in 1999.
Information with respect to foreign and domestic revenue may be found in Note 14
to the Consolidated Financial Statements and the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of the
Annual Report to Stockholders for the year ended December 31,1999 ("1999 Annual
Report to Stockholders"), which financial statements are included in Exhibit
13.1 to this Annual Report on Form 10-K and incorporated herein by reference.
Additionally, countries in certain international regions have continued to
experience weaknesses in their currency, banking and equity markets. These
weaknesses could adversely affect consumer demand for the Company's products and
ultimately the Company's financial position or results of operations.
STRATEGIC ALLIANCES AND MARKETING RELATIONSHIPS
The Company has established and continues to pursue strategic alliances with
advanced technology suppliers and marketing relationships with hardware vendors,
specialized application developers and CAD providers. The Company believes these
relationships allow it to accelerate the incorporation of advanced technology
into the ANSYS product family, gain access to important new markets, expand the
Company's sales channels, develop specialized product applications and provide
direct integration with leading CAD systems.
The Company has technical and marketing relationships with leading CAD vendors,
such as Autodesk, Parametric Technology Corporation, SolidWorks and Unigraphics
to provide direct links between the vendors' CAD packages. These links
facilitate the transfer of electronic data models between the CAD system and
ANSYS products.
To augment the partnerships with CAD vendors, in 1999 the Company increased its
capability for capturing and modifying geometry from CAD via a partnership with
International TechneGroup Inc. This partnership resulted in a bundled product,
CADfix for ANSYS, that interrogates geometry for its fitness to be received by
ANSYS products and further heals problem geometry by both automatic and manual
methods.
The Company has established relationships with leading suppliers of computer
hardware, including Hewlett-Packard, Compaq, Silicon Graphics, Sun Microsystems,
Intergraph, IBM, Dell, Intel and various graphics card vendors. These
relationships typically provide the Company with joint marketing opportunities
such as advertising, events and internet links with the hardware partner's home
page. In addition, the Company receives reduced equipment costs and software
porting support to ensure that the Company's software products are certified to
run on various hardware configurations.
The Company's Enhanced Solution Partner ("ESP") Program actively encourages
specialized developers of niche software solutions to use ANSYS as a development
platform for their applications. In most cases, the sale of the Enhanced
Solution Providers' products is accompanied by the sale of an ANSYS product.
The Company partners with Inceciber, S.A. of Spain through the ESP program.
Inceciber has developed a set of high-end civil engineering simulation modules
that address the steel and concrete construction marketplace. The
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bundled products are marketed worldwide as CivilFEM for ANSYS. The Company also
recently announced a partnership with Mechanical Dynamics, Inc. ("MDI"), the
goal of which is to combine the structural analysis of DesignSpace with the
motion analysis of MDI's Dynamic Designer Motion software into one tightly
integrated modeling system.
The Company has a software license agreement with Livermore Software Corporation
("LSTC") under which LSTC has provided LS/DYNA software for explicit dynamics
solutions used in applications such as crash test simulation in the automotive
and other industries. Under this arrangement, LSTC assists in the integration of
the LS/DYNA software with the Company's pre- and post-processing capabilities
and provides updates and problem resolution in return for a share of revenue
from sales of ANSYS/LS-DYNA.
In the area of MicroElectro Mechanical Systems ("MEMS"), the Company formed an
alliance with MEMScAP, S.A. of Grenoble, France. The ANSYS/MEMScAP relationship
provides multiphysical products to a variety of industries that are developing
electrostatically driven miniature MEMS devices.
COMPETITION
The CAD, CAE and computer-aided manufacturing ("CAM") markets are intensely
competitive. In the traditional CAE market, the Company's primary competitors
include MSC.Software Corporation and Hibbitt, Karlsson and Sorensen, Inc. The
Company also faces competition from smaller vendors of specialized analysis
applications in fields such as computational fluid dynamics. In addition,
certain integrated CAD suppliers such as Parametric Technology Corporation,
Structural Dynamics Research Corporation and Dassault Systemes provide varying
levels of design analysis and optimization and verification capabilities as part
of their product offerings. The entrance of new competitors would likely
intensify competition in all or a portion of the overall CAD, CAE and CAM
markets. Some of the Company's current and possible future competitors have
greater financial, technical, marketing and other resources than the Company,
and some have well-established relationships with current and potential
customers of the Company. It is also possible that alliances among competitors
may emerge and rapidly acquire significant market share or that competition will
increase as a result of software industry consolidation. Increased competition
may result in price reductions, reduced profitability and loss of market share,
any of which would materially adversely affect the Company's business, financial
condition and results of operations.
The Company believes that the principal competitive factors affecting its market
include ease of use; flexibility; quality; ease of integration into CAD systems;
file compatibility across computer platforms; range of supported computer
platforms; performance; price and cost of ownership; customer service and
support; company reputation and financial viability; and effectiveness of sales
and marketing efforts. Although the Company believes that it currently competes
effectively with respect to such factors, there can be no assurance that the
Company will be able to maintain its competitive position against current and
potential competitors. There also can be no assurance that CAD software
companies will not develop their own analysis software, acquire analysis
software from companies other than the Company or otherwise discontinue their
relationships with the Company. If any of these events occur, the Company's
business, financial condition and results of operations could be materially
adversely affected.
PROPRIETARY RIGHTS AND LICENSES
The Company regards its software as proprietary and relies on a combination of
trade secret, copyright and trademark laws, license agreements, nondisclosure
and other contractual provisions, and technical measures to protect its
proprietary rights in its products. The Company distributes its ANSYS software
under software license agreements that grant customers nonexclusive licenses for
the use of the Company's products, which are typically nontransferable. Although
the Company distributes its products primarily through the ASDs, license
agreements for the Company's products are directly between the Company and end
users. Use of the licensed software is restricted to designated computers at
specified sites, unless the customer obtains a site license for its use of the
software. Software and hardware security measures are also employed to prevent
unauthorized use of the Company's software; and the licensed software is subject
to terms and conditions prohibiting unauthorized reproduction of the software.
Customers may either purchase a paid-up perpetual license of the technology with
the right to annually purchase ongoing maintenance, technical support and
updates, or may lease the product on an annual basis for a fee which includes
the license, maintenance, technical support and upgrades.
For certain software products such as DesignSpace and ANSYS/ED, the Company
primarily relies on "click-wrapped" licenses. The enforceability of these types
of agreements under the laws of certain jurisdictions is uncertain.
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The Company also seeks to protect the source code of its software as a trade
secret and as unpublished copyrighted work. The Company has obtained federal
trademark protection for ANSYS and DesignSpace. The Company has also obtained
trademark registrations of ANSYS and DesignSpace in a number of foreign
countries and is in the process of seeking such registration in other foreign
countries. Additionally, the Company has been recently notified that the U.S.
Patent and Trademark Office intends to issue a patent for the Company's web-
based reporting technology.
The employees of the Company have signed a Covenant Agreement under which they
have agreed not to disclose trade secrets or confidential information, or to
engage in or become connected with any business which is competitive with the
Company anywhere in the world while employed by the Company (and in some cases
for specified periods thereafter), and that any products or technology created
by them during their term of employment is the property of the Company. In
addition, the Company requires all ASDs and resellers to enter into agreements
not to disclose the Company's trade secrets and other proprietary information.
Despite these precautions, there can be no assurance that misappropriation of
the Company's technology will not occur. Further, there can be no assurance that
copyright and trade secret protection will be available for the Company's
products in certain countries, or that restrictions on competition will be
enforceable.
The software development industry is characterized by rapid technological
change. Therefore, the Company believes that factors such as the technological
and creative skills of its personnel, new product developments, frequent product
enhancements, name recognition and reliable product maintenance are more
important to establishing and maintaining a technology leadership position than
the various legal protections of its technology which may be available.
The Company is not aware that any of its products infringe upon the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not claim in the future such infringement by the Company or its licensors
or licensees with respect to current or future products. The Company expects
that software product developers will increasingly be subject to such claims as
the number of products and competitors in the Company's market segment grow and
the functionality of products in different market segments overlaps. Any such
claims, with or without merit, could be time-consuming, result in costly
litigation, cause product shipment delays or require the Company to enter into
royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company.
BACKLOG
The Company generally ships its products within 30 days after acceptance of an
order and execution of a software license agreement. Accordingly, the Company
does not believe that its backlog at any particular point in time is indicative
of future sales levels.
EMPLOYEES
As of December 31, 1999, the Company had 280 full time employees. At that date,
there were also approximately 21 contract personnel and co-op students providing
ongoing development services and technical support. The Company believes that
its relationship with its employees is good.
ITEM 2: PROPERTIES
The Company's executive offices and those related to product development,
marketing, production and administration are located in a 107,000 square foot
office facility in Canonsburg, Pennsylvania, which is leased for an annual rent
of approximately $1,227,000. The Company also leases office space in various
locations throughout the world. ANSYS's subsidiaries lease office space for
their operations as well. The Company owns substantially all equipment used in
its facilities. Management believes that its facilities allow for sufficient
space to support not only its present needs, but also allow for expansion and
growth as the business may require in the foreseeable future.
ITEM 3: LEGAL PROCEEDINGS
The Company is subject to various legal proceedings from time to time that arise
in the ordinary course of business activities. Each of these matters is subject
to various uncertainties, and it is possible that these matters may be resolved
unfavorably to the Company.
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ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year 1999.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference to page 35
and the section captioned "Corporate Information" appearing in the Company's
1999 Annual Report to Stockholders.
ITEM 6: SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference to page 1 of
the Company's 1999 Annual Report to Stockholders.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is incorporated by reference to pages 10
through 17 of the Company's 1999 Annual Report to Stockholders, including the
Important Factors Regarding Future Results.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to pages 18
through 34 of the Company's 1999 Annual Report to Stockholders.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the Company's directors and executive officers
required by this Item is incorporated by reference to the Company's 2000 Proxy
Statement and is set forth under "Information Regarding Directors" and
"Information Regarding Executive Officers" therein.
ITEM 11: EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Company's 2000 Proxy Statement and is set forth under "Executive Compensation"
therein.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Company's 2000 Proxy Statement and is set forth under "Principal and Management
Stockholders" therein.
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ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
Company's 2000 Proxy Statement and is set forth under "Certain Transactions"
therein.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of this Annual Report on Form 10-K:
1. Financial Statements: The following Consolidated Financial Statements
of ANSYS, Inc. and Report of PricewaterhouseCoopers LLP, Independent
Accountants, are incorporated by reference to pages 18 through 33 of
the Registrant's 1999 Annual Report to Stockholders:
- Report of PricewaterhouseCoopers LLP, Independent Accountants
- Consolidated Balance Sheets as of December 31, 1999 and 1998
- Consolidated Statements of Income for the years ended December
31, 1999, 1998 and 1997
- Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997
- Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1999, 1998 and 1997
- Notes to Consolidated Financial Statements
2. Financial Statement Schedules: The following financial statement
schedule for ANSYS, Inc. is filed on page 12 of this Annual Report and
should be read in conjunction with the Consolidated Financial
Statements of ANSYS, Inc.
Schedule II - Valuation and Qualifying Accounts
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set
forth therein is included in the Consolidated Financial Statements or
Notes thereto.
3. Exhibits:
The Exhibits listed on the accompanying Exhibit Index immediately
following the financial statement schedule are filed as part of, or
incorporated by reference into, this Annual Report.
(b) Reports on Form 8-K:
The Registrant did not file any reports on Form 8-K during the last quarter of
the period covered by this Annual Report.
(c) Exhibits
The Company hereby files as part of this Annual Report on Form 10-K the Exhibits
listed in the attached Exhibit Index on page 10 of this Annual Report.
(d) Financial Statement Schedules
The Company hereby files as part of this Annual Report on Form 10-K the
financial statement schedule listed in Item 14 (a) 2 as set forth above.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 20, 2000 By: /s/ James E. Cashman III
------------------------------------------
James E. Cashman III
President and Chief Executive Officer
Date: March 20, 2000 By: /s/ Maria T. Shields
------------------------------------------
Maria T. Shields
Chief Financial Officer,
Vice President, Finance and Administration
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James E. Cashman III, his or her
attorney-in-fact, with the power of substitution, for such person in any and all
capacities, to sign any amendments to this Report on Form 10-K, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated below.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ James E. Cashman III President and Chief Executive Officer March 20, 2000
- ------------------------- (Principal Executive Officer)
James E. Cashman III
/s/ Maria T. Shields Chief Financial Officer, Vice President, March 20, 2000
- ------------------------- Finance and Administration; (Principal
Maria T. Shields Financial Officer and Accounting Officer)
/s/ Peter J. Smith
- -------------------------
Peter J. Smith Chairman of the Board of Directors March 20, 2000
/s/ Dr. John A. Swanson Director March 20, 2000
- -------------------------
Dr. John A. Swanson
/s/ Jacqueline C. Morby Director March 20, 2000
- -------------------------
Jacqueline C. Morby
/s/ Roger B. Kafker Director March 20, 2000
- -------------------------
Roger B. Kafker
/s/ Roger J. Heinen, Jr. Director March 20, 2000
- -------------------------
Roger J. Heinen, Jr.
/s/ John F. Smith Director March 20, 2000
- -------------------------
John F. Smith
</TABLE>
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EXHIBIT INDEX
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Exhibit No. Exhibit
- ---------- -------
<S> <C>
3.1 Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996 and incorporated
herein by reference).
3.2 By-laws of the Company (filed as Exhibit 3.3 to the Company's Registration Statement on
Form S-1 (File No. 333-4278) and incorporated herein by reference).
10.1 1994 Stock Option and Grant Plan, as amended (filed as Exhibit 10.1 to the Company's
Registration Statement on Form S-1 (File No. 333-4278) and incorporated herein by
reference). *
10.2 1996 Stock Option and Grant Plan, as amended (filed as Exhibit 10.1 to the Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 1996 and incorporated herein by
reference). *
10.3 1996 Employee Stock Purchase Plan, as amended (filed as Exhibit 10.2 to the Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 1996 and incorporated herein by
reference). *
10.4 Investment Agreement among SAS Holdings, Inc., the Present Investors (as defined), Peter
J. Smith and the Parametric Investors (as defined) dated July 8, 1994, as amended (filed
as Exhibit 10.6 to the Company's Registration Statement on Form S-1 (File No. 333-4278)
and incorporated herein by reference).
10.5 Agreement Regarding Inventions, Confidentiality and Competitive Activities between the
Registrant, subsidiaries of the Registrant and Dr. John A. Swanson dated February 7, 1994
(filed as Exhibit 10.9 to the Company's Registration Statement on Form S-1 (File No.
333-4278) and incorporated herein by reference). *
10.6 Employment Agreement between a subsidiary of the Registrant and Peter J. Smith dated as
of March 28, 1994 (filed as Exhibit 10.10 to the Company's Registration Statement on Form
S-1 (File No. 333-4278) and incorporated herein by reference). *
10.7 Incentive Option Agreement between the Registrant and Peter J. Smith dated February 29,
1996, as amended. (filed as Exhibit 10.15 to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 and incorporated herein by reference). *
10.8 Key-Man Executive Life Insurance Policy for Peter J. Smith (filed as Exhibit 10.17 to the
Company's Registration Statement on Form S-1 (File No. 333-4278) and incorporated herein
by reference).
10.9 Lease between National Build to Suit Washington County, L.L.C. and the Registrant for the
Southpointe property (filed as Exhibit 10.19 to the Company's Registration Statement on
Form S-1 (File No. 333-4278) and incorporated herein by reference).
10.10 Registrant's Pension Plan and Trust, as amended (filed as Exhibit 10.20 to the Company's
Registration Statement on Form S-1 (File No. 333-4278) and incorporated herein by
reference). *
10.11 Form of Director Indemnification Agreement (filed as Exhibit 10.21 to the Company's
Registration Statement on Form S-1 (File No. 333-4278) and incorporated herein by
reference). *
* Indicates management contract or compensatory plan, contract or arrangement
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
13.1 Annual Report to Stockholders for the fiscal year ended December 31, 1999 (which is not
deemed to be "filed" except to the extent that portions thereof are expressly
incorporated by reference in this Annual Report on Form 10-K); filed herewith.
21 Subsidiaries of the Registrant; filed herewith.
23.1 Report of PricewaterhouseCoopers LLP; filed herewith.
23.2 Consent of PricewaterhouseCoopers LLP; filed herewith.
23.3 Consent of PricewaterhouseCoopers LLP for Form 11-K; filed herewith.
24.1 Powers of Attorney. Contained on page 9 of this Annual Report on Form 10-K and
incorporated herein by reference.
27.1 Financial Data Schedule; filed herewith.
99 1996 Employee Stock Purchase Plan Annual Report on Form 11-K.
</TABLE>
11
<PAGE>
SCHEDULE II
ANSYS, INC.
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Balance at Deductions -
Beginning Additions - Returns and Balance at End
Description of Year Provisions Write-Offs of Year
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31, 1999 $1,900,000 $1,052,000 $1,252,000 $1,700,000
Allowance for doubtful accounts
Year ended December 31, 1998 $2,080,000 $1,309,000 $1,489,000 $1,900,000
Allowance for doubtful accounts
Year ended December 31, 1997 $ 950,000 $1,435,000 $ 305,000 $2,080,000
Allowance for doubtful accounts
</TABLE>
12
<PAGE>
EXHIBIT 13.1
Year Ended December 31
<TABLE>
(in thousands, except per share data) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Revenue $ 63,139 $ 56,553 $ 50,547 $ 47,066 $ 39,616
- ---------------------------------------------------------------------------------------------------------------------
Operating income 17,243 15,206 10,731 3,674 1,360
- ---------------------------------------------------------------------------------------------------------------------
Net income (loss) 14,751 11,349 7,400 1,304 (1,580)
- ---------------------------------------------------------------------------------------------------------------------
Net income (loss) per
basic share after
extraordinary item/1/ .90 .71 .47 .08 (.18)
- ---------------------------------------------------------------------------------------------------------------------
Weighted average
shares - basic/1/ 16,366 16,052 15,742 14,000 11,354
- ---------------------------------------------------------------------------------------------------------------------
Net income (loss) per
diluted share after
extraordinary item/1/ .88 .68 .45 .07 (.17)
- ---------------------------------------------------------------------------------------------------------------------
Weighted average
shares - diluted/1/ 16,689 16,581 16,518 14,906 12,204
- ---------------------------------------------------------------------------------------------------------------------
Total assets $ 83,891 $ 67,998 $ 54,566 $ 43,431 $ 42,921
- ---------------------------------------------------------------------------------------------------------------------
Working capital 52,655 38,049 23,761 14,691 3,196
- ---------------------------------------------------------------------------------------------------------------------
Long-term obligations - - - - 33,204
- ---------------------------------------------------------------------------------------------------------------------
Redeemable preferred stock - - - - 4,892
- ---------------------------------------------------------------------------------------------------------------------
Stockholders' equity 65,631 52,367 40,414 32,974 (10,028)
=====================================================================================================================
</TABLE>
/1/ The Company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share," issued in February 1997. This Statement requires the
disclosure of basic and diluted earnings per share and revises the method to
calculate these amounts. Earnings per share data for periods prior to 1997
have been restated to reflect adoption of this Statement.
[Graph Appears Here] [Graph Appears Here]
ANSYS, Inc. 1999 Annual Report 1
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
- --------------------------------------------------------------------------------
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) and DesignSpace(R)
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 audited consolidated financial statements and notes
thereto included elsewhere in this Annual Report.
This Annual Report 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 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 the
forward-looking statements due to various risks and uncertainties which are
detailed in "Important Factors Regarding Future Results" beginning on page 15.
For purposes of the following discussion and analysis, the following table
sets forth certain consolidated financial data for the years 1999, 1998 and
1997.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended December 31,
- --------------------------------------------------------------------------------
(in thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
- --------------------------------------------------------------------------------
Software licenses $37,675 $35,463 $35,083
- --------------------------------------------------------------------------------
Maintenance and service 25,464 21,090 15,464
- --------------------------------------------------------------------------------
Total revenue 63,139 56,553 50,547
- --------------------------------------------------------------------------------
Cost of sales:
- --------------------------------------------------------------------------------
Software licenses 3,530 3,404 2,833
- --------------------------------------------------------------------------------
Maintenance and service 3,088 2,661 2,365
- --------------------------------------------------------------------------------
Total cost of sales 6,618 6,065 5,198
- --------------------------------------------------------------------------------
Gross profit 56,521 50,488 45,349
- --------------------------------------------------------------------------------
Operating expenses:
- --------------------------------------------------------------------------------
Selling and marketing 15,326 13,137 11,834
- --------------------------------------------------------------------------------
Research and development 13,475 11,627 11,004
- --------------------------------------------------------------------------------
Amortization 855 884 2,797
- --------------------------------------------------------------------------------
General and administrative 9,622 9,634 8,983
- --------------------------------------------------------------------------------
Total operating expenses 39,278 35,282 34,618
- --------------------------------------------------------------------------------
Operating income 17,243 15,206 10,731
- --------------------------------------------------------------------------------
Other income 2,626 1,931 911
- --------------------------------------------------------------------------------
Income before income tax provision 19,869 17,137 11,642
- --------------------------------------------------------------------------------
Income tax provision 5,118 5,788 4,242
- --------------------------------------------------------------------------------
Net income $14,751 $11,349 $ 7,400
- --------------------------------------------------------------------------------
</TABLE>
10 ANSYS, Inc. 1999 Annual Report
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
- --------------------------------------------------------------------------------
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
REVENUE: The Company's total revenue increased 11.6% in 1999 to $63.1 million
from $56.6 million in 1998. The increase in total revenue was attributable
primarily to an increase in revenue from paid-up licenses associated with
increased sales of new paid-up licenses and, to a lesser extent, the conversion
of existing leases to paid-up licenses. Higher maintenance and service revenue,
resulting from broader customer usage of such services and the Company's
continued emphasis on marketing these services, also contributed to the overall
revenue increase.
Software license revenue totaled $37.7 million in 1999 as compared to $35.5
million in 1998, an increase of 6.2%. The increase resulted principally from an
increase in sales of paid-up licenses. Revenue from sales of paid-up licenses
increased 31.1% to $24.4 million in 1999 from $18.6 million in 1998. This
increase was partially offset by a 41.5% decrease in monthly lease license
revenue to $3.7 million in 1999 from $6.2 million in 1998. This decrease was
primarily attributable to an increase in the renewal of existing monthly leases
as noncancellable annual leases. The paid-up license revenue increase was also
partially offset by a reduction in noncancellable annual lease revenue that the
Company believes was principally the result of an increase in its annual lease
price as compared to the prior year, as well as the conversion of certain
existing leases to paid-up licenses.
Maintenance and service revenue increased 20.7% in 1999 to $25.5 million from
$21.1 million in 1998. The increase was primarily the result of maintenance
contracts sold in association with the increased paid-up license sales discussed
above, as well as broader customer usage of support services and the Company's
continued emphasis on marketing these services. These increases were partially
offset by reduced revenue associated with the portion of noncancellable annual
leases classified as maintenance and service revenue. This decrease resulted
from the refinement of management's estimate relative to the allocation of
noncancellable annual lease revenue between paid-up license revenue and
maintenance and service revenue, which occurred in the first quarter of 1998.
Of the Company's total revenue in both 1999 and 1998, approximately 54.4% and
45.6% were attributable to international and domestic sales, respectively.
COST OF SALES AND GROSS PROFIT: The Company's total cost of sales increased 9.1%
to $6.6 million, or 10.5% of total revenue, in 1999 from $6.1 million, or 10.7%
of total revenue, in 1998. The increase was principally attributable to higher
salaries and related expenses associated with increased headcount to support the
growth in software license and maintenance revenue.
As a result of the foregoing, the Company's gross profit increased 11.9% to
$56.5 million in 1999 from $50.5 million in 1998.
SELLING AND MARKETING: Selling and marketing expenses increased 16.7% in 1999 to
$15.3 million, or 24.3% of total revenue, from $13.1 million, or 23.2% of total
revenue, in 1998. The increase was primarily the result of additional headcount
and facility costs associated with the establishment of strategic direct sales
offices in Houston, Texas; Minneapolis, Minnesota and New England in the latter
part of fiscal 1998, as well as the Company's expanded presence in China and a
slightly revised sales model in Detroit. Higher commission costs associated with
several direct sales to major account customers also contributed to the current
year increase. The Company anticipates that it will continue to make significant
investments in its global sales and marketing organization to strengthen its
competitive position and to support its worldwide sales channels and marketing
strategies.
RESEARCH AND DEVELOPMENT: Research and development expenses increased 15.9% in
1999 to $13.5 million, or 21.3% of total revenue, from $11.6 million, or 20.6%
of total revenue, in 1998. The increase in 1999 resulted from additional
headcount and facility costs associated with the acquisition of Centric
Engineering Systems and, to a lesser extent, additional headcount within the
corporate product creation group. These increases were partially offset by the
capitalization of approximately $516,000 of internal labor costs related to new
commercial product releases in 1999. The Company has traditionally invested
significant resources in research and development activities and intends to
continue to make significant investments in the future.
ANSYS, Inc. 1999 Annual Report 11
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
AMORTIZATION: Amortization expense remained comparable at $855,000 and $884,000
in 1999 and 1998, respectively.
GENERAL AND ADMINISTRATIVE: General and administrative expenses remained
relatively flat in 1999 at $9.6 million, or 15.2% of total revenue, as compared
to $9.6 million, or 17.0% of total revenue, in 1998. Decreases in bad debt
expense were offset by higher consulting costs and additional headcount and
related expenses. The increases in headcount resulted as the Company continued
to add internal information technology, financial and administrative resources
to support its global operations and infrastructure.
OTHER INCOME: Other income increased to $2.6 million in 1999 as compared to $1.9
million in 1998. The increase was primarily attributable to higher interest-
bearing cash and short-term investment balances in 1999.
INCOME TAX PROVISION: The Company's effective tax rate was 25.8% in 1999 as
compared to 33.8% in 1998. The decrease in the 1999 rate as compared to that of
1998 was a result of increased utilization of the Company's foreign sales
corporation, as well as increased generation of research and experimentation
credits. The 1999 rate was also favorably impacted by a one-time tax benefit
related to an amended prior year tax return. These percentages are less than the
federal and state combined statutory rate due primarily to the use of a foreign
sales corporation, as well as research and experimentation credits.
NET INCOME: The Company's net income increased 30.0% to $14.8 million, or $.88
diluted earnings per share, in 1999 as compared to net income of $11.3 million,
or $.68 diluted earnings per share, in 1998. The weighted average common and
common equivalent shares used in computing diluted earnings per share were 16.7
million in 1999 compared with 16.6 million in 1998.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
REVENUE: The Company's total revenue increased 11.9% in 1998 to $56.6 million
from $50.5 million in 1997. The increase in total revenue in 1998 as compared to
1997 was attributable principally to an increase in revenue from renewals and
sales of 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 ratably over the remaining lease
period. This increase, which was partially offset by a decrease in monthly lease
license revenue, as described below, was due, in part, to the active sales and
licensing of noncancellable annual leases to existing and new lease customers.
The increase in total revenue in 1998 was also attributable to increased
maintenance and service revenue, which resulted from broader customer usage of
maintenance and support services and the Company's continued emphasis on the
marketing and promotion of these services.
Software license revenue totaled $35.5 million in 1998 as compared to $35.1
million in 1997, an increase of 1.1%. The increase resulted principally from an
increase in revenue from renewals and sales of noncancellable annual leases and,
to a lesser extent, an increase in sales of paid-up licenses in international
markets. Revenue from the sale of paid-up licenses and the portion of
noncancellable annual leases classified as paid-up revenue increased 29.6% in
1998 to $29.2 million from $22.6 million in 1997. This increase was partially
attributable to a refinement of management's estimate relative to the allocation
of noncancellable annual lease revenue between paid-up and maintenance revenue.
The refinement, which management believes more accurately reflects the Company's
current pricing and business practices, resulted in a net revenue increase of
approximately $1.3 million during 1998. The increase in software license revenue
was substantially offset by a 50.3% decrease in monthly lease license revenue to
$6.2 million in 1998 from $12.5 million in 1997. This decrease was attributable
to both an increase in the renewal of existing monthly leases as noncancellable
annual leases and, to a much lesser extent, the conversion of certain existing
leases to paid-up licenses.
Maintenance and service revenue increased from $15.5 million in 1997 to $21.1
million in 1998. Contributing to the increase were broader customer usage of
maintenance and support services and the Company's increased emphasis on
marketing and promoting these services, as well as an increase in the renewal
and sale of noncancellable annual leases.
Of the Company's total revenue in 1998, approximately 54.4% and 45.6% were
attributable to international and domestic sales, respectively, as compared to
53.2% and 46.8% in 1997.
12 ANSYS, Inc. 1999 Annual Report
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
COST OF SALES AND GROSS PROFIT: The Company's total cost of sales increased
16.7% to $6.1 million, or 10.7% of total revenue, in 1998 from $5.2 million, or
10.3% of total revenue, in 1997. The increase was due to additional headcount
and related expenses, increased consulting expenses and higher costs associated
with the printing of manuals, packing supplies and media, as well as increased
royalty fees. The headcount-related increases resulted as additional staff and
consultants were added to support the growth in global service revenue and
related customer and ASD support needs. These expense increases were partially
offset by lower pension and profit-sharing costs resulting from plan amendments
in fiscal 1998.
As a result of the foregoing, the Company's gross profit increased 11.3% to
$50.5 million in 1998 from $45.3 million in 1997.
SELLING AND MARKETING: Selling and marketing expenses increased 11.0% in 1998 to
$13.1 million, or 23.2% of total revenue, from $11.8 million, or 23.4% of total
revenue, in 1997. The increase was principally the result of increased
consulting and sales support costs incurred in connection with supporting a
global sales and marketing infrastructure. Additionally, during 1998 the Company
experienced an increase in expenses directly associated with its worldwide
users' conference and increased expenses associated with strategic office
locations in the United Kingdom, China and Japan. These increases were partially
offset by lower sales commissions and pension and profit-sharing costs.
RESEARCH AND DEVELOPMENT: Research and development expenses increased 5.7% in
1998 to $11.6 million, or 20.6% of total revenue, from $11.0 million, or 21.8%
of total revenue, in 1997. The increase resulted primarily from additional
headcount and related expenses, higher salaries and increased consulting costs
associated with the releases of ANSYS 5.5 and DesignSpace 4.0, as well as
increased computer software costs and hardware-related depreciation expense as
the Company continued to invest in software and hardware tools used to develop
and enhance the Company's products. These increases were partially offset by a
reduction in pension and profit-sharing costs.
AMORTIZATION: Amortization expense was $884,000 in 1998 and $2.8 million in
1997. The decrease was attributable to certain intangible assets, including
goodwill and capitalized software, becoming fully amortized during the first
quarter of 1997.
GENERAL AND ADMINISTRATIVE: General and administrative expenses increased 7.2%
in 1998 to $9.6 million, or 17.0% of total revenue, from $9.0 million, or 17.8%
of total revenue, in 1997. The increase was primarily attributable to an
increase in salaries and headcount and related expenses, as well as higher
depreciation expense attributable to computer hardware and software. These
increases resulted as the Company continued to add internal information
technology, financial and administrative resources to support its global
operations and infrastructure. These increases were partially offset by
decreases in both pension and profit-sharing costs, as well as bad debt expense.
OTHER INCOME: Other income increased to $1.9 million in 1998 as compared to
$911,000 in 1997. The increase was primarily attributable to higher interest-
bearing cash and short-term investment balances in 1998.
INCOME TAX PROVISION: The Company's effective tax rate was 33.8% in 1998 as
compared to 36.4% in 1997. The lower 1998 rate is primarily the result of a full
year of benefit related to the use of a foreign sales corporation that was
established in the fourth quarter of 1997. The effective rates in both 1998 and
1997 are less than the federal and state combined statutory rate due primarily
to research and experimentation credits, as well as the impact of the foreign
sales corporation.
NET INCOME: The Company's net income increased 53.4% to $11.3 million, or $.68
diluted earnings per share, in 1998 as compared to net income of $7.4 million,
or $.45 diluted earnings per share, in 1997. The weighted average common and
common equivalent shares used in computing diluted earnings per share were 16.6
million in 1998 compared with 16.5 million in 1997.
ANSYS, Inc. 1999 Annual Report 13
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Liquidity and Capital Resources
- --------------------------------------------------------------------------------
As of December 31, 1999, the Company had cash, cash equivalents and short-
term investments totaling $57.1 million and working capital of $52.7 million, as
compared to cash, cash equivalents and short-term investments of $42.7 million
and working capital of $38.0 million at December 31, 1998. The short-term
investments are generally investment grade and liquid-type, 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 $18.3 million in 1999,
$15.6 million in 1998 and $12.7 million in 1997. The increase in cash generated
from operations in 1999 compared to 1998, as well as in 1998 compared to 1997,
was primarily the result of increased earnings after the effect of non-cash
expenses such as depreciation, amortization and deferred income taxes. 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.
Cash used in investing activities was $13.0 million in 1999, $23.5 million in
1998 and $16.1 million in 1997. The Company's use of cash in 1999, 1998 and 1997
was primarily related to the purchase of short-term investments and, to a lesser
extent, the purchase of equipment and computer hardware and software. The
Company expects to spend approximately $2.7 million for capital expenditures in
the year 2000, principally for the acquisition of computer hardware and software
to support the continued growth of the Company's development activities, as well
as for investments in the Company's global sales and customer support
infrastructure.
Financing activities used cash of $1.5 million in 1999, and provided cash of
$453,000 in 1998 and $336,000 in 1997. Cash used for financing activities in
1999 was substantially related to the purchase of treasury stock, which was
partially offset by proceeds from the issuance of common stock under employee
stock purchase and option plans. In 1998 and 1997, cash provided from financing
activities was substantially related to proceeds from the issuance of common
stock under employee stock purchase and option plans and the reissuance of
treasury shares.
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 at least
the next fiscal year. 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.
Year 2000 Update
- --------------------------------------------------------------------------------
The Company did not experience any significant malfunctions or errors in its
operating or business systems when the date changed from the year 1999 to the
year 2000. Based on operating results since January 1, 2000, the Company does
not expect a significant impact on its ongoing business as a result of the year
2000 issue. However, it is possible that the full impact of the date change,
which was of concern due to computer programs that used two digits instead of
four digits to define years, has not been fully recognized. For example, it is
possible that year 2000 or similar issues such as leap year-related problems may
occur with billing, payroll or financial closings at month, quarter or year end.
The Company believes that any such problems are likely to be minor and
correctable. In addition, the Company could still be negatively affected if its
customers or suppliers are adversely affected by the year 2000 or similar
issues. The Company currently is not aware of any significant year 2000 or
similar problems that have arisen for its customers and suppliers.
The Company estimates that total costs incurred over three years (1997-2000)
to achieve year 2000 compliance were approximately $500,000.
14 ANSYS, Inc. 1999 Annual Report
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Conversion to the Euro
- --------------------------------------------------------------------------------
On January 1, 1999, eleven of the member countries of the European Union
established fixed conversion rates between their existing currencies and one
common currency, the euro. The legacy currencies will remain legal currency in
the participating countries during a transition period through January 1, 2002.
Beginning on this date, new euro-denominated currency will be issued and the
legacy currencies will be withdrawn from circulation.
The Company is currently in the process of identifying and addressing issues
that may result from the euro conversion such as changes to information systems
to accommodate euro-denominated transactions, long-term competitive implications
and the exposure to market risk with respect to financial instruments. Although
the Company's assessment of the impact of the euro conversion is not yet
complete, it currently does not believe that the conversion will have a material
adverse impact on its financial position or results of operations.
Recently Issued Accounting Pronouncements
- --------------------------------------------------------------------------------
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which defines derivatives, requires that
all derivatives be carried at fair value and provides for hedge accounting when
certain conditions are met. The Standard was effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. In June 1999, the FASB delayed
the effective date of this Statement for one year through the issuance of
Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities
- - Deferral of the Effective Date of SFAS No. 133 and an Amendment of SFAS No.
133." The Company will implement Statement No. 133 during the year 2000 and
believes that the adoption of this Statement will not have a material effect on
its consolidated financial statements.
Important Factors Regarding Future Results
- --------------------------------------------------------------------------------
Information provided by the Company or its spokespersons, including
information contained in this Annual Report to Shareholders, may from time to
time contain forward-looking statements concerning projected financial
performance, market and industry segment growth, product development and
commercialization or other aspects of future operations. Such statements will be
based on the assumptions and expectations of the Company's management at the
time such statements are made. The Company cautions investors that its
performance (and, therefore, any forward-looking statement) is subject to risks
and uncertainties. Various important factors including, but not limited to, the
following may cause the Company's future results to differ materially from those
projected in any forward-looking statement.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS: The Company may experience
significant fluctuations in future quarterly operating results. Fluctuations may
be caused by many factors, including the timing of new product releases or
product enhancements by the Company or its competitors; the size and timing of
individual orders, including a fluctuation in the demand for and the ability to
complete large contracts; software errors or other product quality problems;
competition and pricing; customer order deferrals in anticipation of new
products or product enhancements; reduction in demand for the Company's
products; changes in operating expenses; changes in the mix of software license
and maintenance and service revenue; personnel changes and general economic
conditions. A substantial portion of the Company's operating expenses are
related to personnel, facilities and marketing programs. The level of personnel
and related expenses cannot be adjusted quickly and is based, in significant
part, on the Company's expectation for future revenue. The Company does not
typically experience significant order backlog. Further, the Company has often
recognized a substantial portion of its revenue in the last month of a quarter,
with this revenue frequently concentrated in the last weeks or days of a
quarter. During certain quarterly periods, the Company has been dependent upon
receiving large orders of perpetual licenses involving the payment of a single
up-front fee and, more recently, has shifted the business emphasis of its
products to provide a collaborative solution to the Company's customers. This
emphasis has increased the Company's average order size and increased the
related sales cycle time for the larger orders and may have the effect of
increasing the volatility of the Company's revenue and profit from period to
period. The Company also depends upon renewals and sales of 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. As a result, product
revenue in any quarter is substantially dependent on sales completed in the
latter part of that quarter, and revenue for any future quarter is not
predictable with any significant degree of accuracy.
ANSYS, Inc. 1999 Annual Report 15
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
STOCK MARKET AND STOCK PRICE VOLATILITY: Market prices for securities of
software companies have generally been volatile. In particular, the market price
of the Company's common stock has been and may continue to be subject to
significant fluctuations as a result of factors affecting the Company, the
software industry or the securities markets in general. Such factors include,
but are not limited to, declines in trading price that may be triggered by the
Company's failure to meet the expectations of securities analysts and investors.
The Company cannot provide assurance that in such circumstances the trading
price of the Company's common stock will recover or that it will not experience
a further decline. Moreover, the trading price could be subject to additional
fluctuations in response to quarter-to-quarter variations in the Company's
operating results, material announcements made by the Company or its
competitors, conditions in the software industry generally or other events and
factors, many of which are beyond the Company's control.
In addition, a large percentage of the Company's common stock is held by
investment funds associated with TA Associates, Inc. and various institutional
investors. Consequently, actions with respect to the Company's common stock by
either TA Associates, Inc. or certain of these institutional investors could
have a significant impact on the market price of the stock.
RAPIDLY CHANGING TECHNOLOGY; NEW PRODUCTS; RISK OF PRODUCT DEFECTS: The markets
for the Company's products are generally characterized by rapidly changing
technology and frequent new product introductions that can render existing
products obsolete or unmarketable. A major factor in the Company's future
success will be its ability to anticipate technological changes and to develop
and introduce in a timely manner enhancements to its existing products and new
products to meet those changes. If the Company is unable to introduce new
products and respond quickly to industry changes, its business, financial
condition and results of operations could be materially adversely affected. The
introduction and marketing of new or enhanced products require the Company to
manage the transition from existing products in order to minimize disruption in
customer purchasing patterns. There can be no assurance that the Company will be
successful in developing and marketing, on a timely basis, new products or
product enhancements, that its new products will adequately address the changing
needs of the marketplace or that it will successfully manage the transition from
existing products. Software products as complex as those offered by the Company
may contain undetected errors or failures when first introduced or as new
versions are released, and the likelihood of errors is increased as a result of
the Company's commitment to accelerating the frequency of its product releases.
There can be no assurance that errors will not be found in new or enhanced
products after commencement of commercial shipments. Any of these problems may
result in the loss of or delay in market acceptance, diversion of development
resources, damage to the Company's reputation or increased service and warranty
costs, any of which could have a materially adverse effect on the Company's
business, financial condition and results of operations.
DEPENDENCE ON DISTRIBUTORS: The Company continues to distribute its products
principally through its global network of 29 independent, regional ASDs. The
ASDs sell ANSYS and DesignSpace products to new and existing customers, expand
installations within their existing customer base, offer consulting services and
provide the first line of ANSYS technical support. The ASDs have more immediate
contact with most customers who use ANSYS software than does the Company.
Consequently, the Company is highly dependent on the efforts of the ASDs.
Difficulties in ongoing relationships with ASDs, such as delays in collecting
accounts receivable, failure to meet performance criteria or to promote the
Company's products as aggressively as the Company expects and differences in the
handling of customer relationships could adversely affect the Company's
performance. Additionally, the loss of any major ASD for any reason, including
an ASD's decision to sell competing products rather than the Company's products,
could have a materially adverse effect on the Company. Moreover, the Company's
future success will depend substantially on the ability and willingness of its
ASDs to continue to dedicate the resources necessary to promote the Company's
products and to support a larger installed base of the Company's products. If
the ASDs are unable or unwilling to do so, the Company may be unable to sustain
revenue growth.
COMPETITION: The CAD, CAE and computer-aided manufacturing ("CAM") markets are
intensely competitive. In the traditional CAE market, the Company's primary
competitors include MSC.Software Corporation and Hibbitt, Karlsson and Sorenson,
Inc. The Company also faces competition from smaller vendors of specialized
analysis applications in fields such as computational fluid dynamics. In
addition, certain integrated CAD suppliers such as Parametric Technology
Corporation, Structural Dynamics Research Corporation and Dassault Systemes
provide varying levels of design analysis, optimization and verification
capabilities as part of their product offerings. The entrance of new competitors
would likely intensify competition in all or a portion of the overall CAD, CAE
and CAM markets. Some of the Company's current and possible future competitors
have greater financial, technical, marketing and other resources than the
Company, and some have well established relationships with current and potential
customers of the Company. It is also possible that alliances among competitors
may emerge and rapidly acquire significant market share or that competition will
increase as a result of software industry consolidation. Increased competition
may result in price reductions, reduced profitability and loss of market share,
any of which would materially adversely affect the Company's business, financial
condition and results of operations.
16 ANSYS, Inc. 1999 Annual Report
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
DEPENDENCE ON SENIOR MANAGEMENT AND KEY TECHNICAL PERSONNEL: The Company is
highly dependent upon the ability and experience of its senior executives and
its key technical, sales and other management employees. Although the Company
has an employment agreement with one executive, the loss of this employee, or
any of the Company's other key employees, could adversely affect the Company's
ability to conduct its operations.
RISKS ASSOCIATED WITH INTERNATIONAL ACTIVITIES: A significant portion of the
Company's business comes from outside the United States. Risks inherent in the
Company's international business activities include imposition of government
controls, export license requirements, restrictions on the export of critical
technology, political and economic instability, trade restrictions, changes in
tariffs and taxes, difficulties in staffing and managing international
operations, longer accounts receivable payment cycles and the burdens of
complying with a wide variety of foreign laws and regulations. Effective patent,
copyright and trade secret protection may not be available in every foreign
country in which the Company sells its products. The Company's business,
financial condition and results of operations could be materially adversely
affected by any of these risks.
Additionally, countries in certain international regions have continued to
experience weaknesses in their currency, banking and equity markets. These
weaknesses could adversely affect consumer demand for the Company's products and
ultimately the Company's financial position or results of operations.
Recently, the World Trade Organization ("WTO") ruled that tax incentives
provided to U.S.-based companies that export their products via a foreign sales
corporation are prohibited tax subsidies. The United States has until October 1,
2000 to comply with the WTO decision. Any prospective changes regarding tax
benefits associated with a foreign sales corporation may directly impact the
Company's effective tax rate.
DEPENDENCE ON PROPRIETARY TECHNOLOGY: The Company's success is highly dependent
upon its proprietary technology. The Company has recently been notified that the
U.S. Patent and Trademark Office intends to issue the Company a patent for its
web-based reporting technology; however, the Company generally relies on
contracts and the laws of copyright and trade secrets to protect its technology.
Although the Company maintains a trade secrets program, enters into
confidentiality agreements with its employees and distributors and limits access
to and distribution of its software, documentation and other proprietary
information, there can be no assurance that the steps taken by the Company to
protect its proprietary technology will be adequate to prevent misappropriation
of its technology by third parties, or that third parties will not be able to
develop similar technology independently. Although the Company is not aware that
any of its technology infringes upon the rights of third parties, there can be
no assurance that other parties will not assert technology infringement claims
against the Company, or that, if asserted, such claims will not prevail.
INCREASED RELIANCE ON PERPETUAL LICENSES: The Company has historically
maintained stable recurring revenue from the sale of monthly lease licenses and
noncancellable annual leases for its software products. More recently, the
Company has experienced an increase in customer preference for perpetual
licenses that involve payment of a single up-front fee and that are more typical
in the computer software industry. While revenue generated from monthly lease
licenses and noncancellable annual leases currently represents a portion of the
Company's software license revenue, to the extent that perpetual license revenue
continues to increase as a percentage of total software license revenue, the
Company's revenue in any period will increasingly depend on sales completed
during that period.
RISKS ASSOCIATED WITH ACQUISITIONS: The Company has consummated and may continue
to consummate certain strategic acquisitions in order to provide increased
capabilities to its existing products, enter new product and service markets or
enhance its distribution channels. The ability of the Company to integrate the
acquired businesses, including delivering sales and support, ensuring continued
customer commitment, obtaining further commitments and challenges associated
with expanding sales in particular markets and retaining key personnel, will
impact the success of these acquisitions. If the Company is unable to integrate
properly and in a timely manner the acquired businesses, there could be a
materially adverse effect on the Company's business, financial condition and
results of operations.
GENERAL CONTINGENCIES: The Company is subject to various investigations, claims
and legal proceedings from time to time that arise in the ordinary course of its
business activities. Each of these matters is subject to various uncertainties,
and it is possible that some of these matters may be resolved unfavorably to the
Company.
ANSYS, Inc. 1999 Annual Report 17
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of ANSYS, Inc. and Subsidiaries
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of ANSYS, Inc. and its
subsidiaries at December 31, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLC
Pittsburgh, PA
January 27, 2000
18 ANSYS, Inc. 1999 Annual Report
<PAGE>
Consolidated Balance Sheets
- ---------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
(in thousands, except share data) December 31, 1999 December 31, 1998
- ----------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------
Current assets:
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $10,401 $ 6,589
- ----------------------------------------------------------------------------------------------------
Short-term investments 46,731 36,138
- ----------------------------------------------------------------------------------------------------
Accounts receivable, less allowance for doubtful
accounts of $1,700 in 1999 and $1,900 in 1998 10,518 8,943
- ----------------------------------------------------------------------------------------------------
Other current assets 2,929 1,848
- ----------------------------------------------------------------------------------------------------
Deferred income taxes 336 162
- ----------------------------------------------------------------------------------------------------
Total current assets 70,915 53,680
- ----------------------------------------------------------------------------------------------------
Securities available for sale 182 182
- ----------------------------------------------------------------------------------------------------
Property and equipment, net 3,529 3,748
- ----------------------------------------------------------------------------------------------------
Capitalized software costs, net 676 426
- ----------------------------------------------------------------------------------------------------
Goodwill, net 428 424
- ----------------------------------------------------------------------------------------------------
Other intangibles, net 1,518 1,866
- ----------------------------------------------------------------------------------------------------
Deferred income taxes 6,643 7,672
- ----------------------------------------------------------------------------------------------------
Total assets $83,891 $67,998
- ----------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------
Current liabilities:
- ----------------------------------------------------------------------------------------------------
Accounts payable $ 222 $ 205
- ----------------------------------------------------------------------------------------------------
Accrued bonuses 2,882 2,449
- ----------------------------------------------------------------------------------------------------
Other accrued expenses and liabilities 3,750 3,437
- ----------------------------------------------------------------------------------------------------
Customer prepayments 140 168
- ----------------------------------------------------------------------------------------------------
Deferred revenue 11,266 9,372
- ----------------------------------------------------------------------------------------------------
Total current liabilities 18,260 15,631
- ----------------------------------------------------------------------------------------------------
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 and 16,395,938 shares issued
in 1999 and 1998 166 164
- ----------------------------------------------------------------------------------------------------
Additional paid-in capital 37,543 36,657
- ----------------------------------------------------------------------------------------------------
Less treasury stock, at cost: 339,358 shares held in 1999 (2,375) -
- ----------------------------------------------------------------------------------------------------
Retained earnings 30,427 15,676
- ----------------------------------------------------------------------------------------------------
Accumulated other comprehensive income 120 120
- ----------------------------------------------------------------------------------------------------
Note receivable from stockholder (250) (250)
- ----------------------------------------------------------------------------------------------------
Total stockholders' equity 65,631 52,367
- ----------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $83,891 $67,998
- ----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
ANSYS, Inc. 1999 Annual Report 19
<PAGE>
Consolidated Statements of Income
- ---------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
(in thousands, except per share data) 1999 1998 1997
- -----------------------------------------------------------------------------
Revenue:
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Software licenses $37,675 $35,463 $35,083
- -----------------------------------------------------------------------------
Maintenance and service 25,464 21,090 15,464
- -----------------------------------------------------------------------------
Total revenue 63,139 56,553 50,547
- -----------------------------------------------------------------------------
Cost of sales:
- -----------------------------------------------------------------------------
Software licenses 3,530 3,404 2,833
- -----------------------------------------------------------------------------
Maintenance and service 3,088 2,661 2,365
- -----------------------------------------------------------------------------
Total cost of sales 6,618 6,065 5,198
- -----------------------------------------------------------------------------
Gross profit 56,521 50,488 45,349
- -----------------------------------------------------------------------------
Operating expenses:
- -----------------------------------------------------------------------------
Selling and marketing 15,326 13,137 11,834
- -----------------------------------------------------------------------------
Research and development 13,475 11,627 11,004
- -----------------------------------------------------------------------------
Amortization 855 884 2,797
- -----------------------------------------------------------------------------
General and administrative 9,622 9,634 8,983
- -----------------------------------------------------------------------------
Total operating expenses 39,278 35,282 34,618
- -----------------------------------------------------------------------------
Operating income 17,243 15,206 10,731
- -----------------------------------------------------------------------------
Other income 2,626 1,931 911
- -----------------------------------------------------------------------------
Income before income tax provision 19,869 17,137 11,642
- -----------------------------------------------------------------------------
Income tax provision 5,118 5,788 4,242
- -----------------------------------------------------------------------------
Net income $14,751 $11,349 $ 7,400
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Net income per basic common share:
- -----------------------------------------------------------------------------
Basic earnings per share $ .90 $ .71 $ .47
- -----------------------------------------------------------------------------
Weighted average shares - basic 16,366 16,052 15,742
- -----------------------------------------------------------------------------
Net income per diluted common share:
- -----------------------------------------------------------------------------
Diluted earnings per share $ .88 $ .68 $ .45
- -----------------------------------------------------------------------------
Weighted average shares - diluted 16,689 16,581 16,518
- -----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
20 ANSYS, Inc. 1999 Annual Report
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
(in thousands) 1999 1998 1997
- -----------------------------------------------------------------------------------------------------
Cash flows from operating activities:
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 14,751 $ 11,349 $ 7,400
- -----------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by operating activities:
- -----------------------------------------------------------------------------------------------------
Depreciation and amortization 2,762 2,710 4,170
- -----------------------------------------------------------------------------------------------------
Deferred income tax provision 855 1,357 725
- -----------------------------------------------------------------------------------------------------
Provision for bad debts 1,052 1,309 1,130
- -----------------------------------------------------------------------------------------------------
Changes in operating assets and liabilities:
- -----------------------------------------------------------------------------------------------------
Accounts receivable (2,627) (2,151) (2,857)
- -----------------------------------------------------------------------------------------------------
Other current assets (1,081) 63 (576)
- -----------------------------------------------------------------------------------------------------
Accounts payable, accrued expenses and
liabilities and customer prepayments 735 265 (870)
- -----------------------------------------------------------------------------------------------------
Deferred revenue 1,894 744 3,580
- -----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 18,341 15,646 12,702
- -----------------------------------------------------------------------------------------------------
Cash flows from investing activities:
- -----------------------------------------------------------------------------------------------------
Capital expenditures (1,758) (917) (2,063)
- -----------------------------------------------------------------------------------------------------
Capitalization of internally developed software costs (591) (322) (229)
- -----------------------------------------------------------------------------------------------------
Acquisition payment (100) - -
- -----------------------------------------------------------------------------------------------------
Purchases of short-term investments (38,331) (28,533) (13,853)
- -----------------------------------------------------------------------------------------------------
Maturities of short-term investments 27,738 6,248 -
- -----------------------------------------------------------------------------------------------------
Notes receivable from stockholders - 24 28
- -----------------------------------------------------------------------------------------------------
Net cash used in investing activities (13,042) (23,500) (16,117)
- -----------------------------------------------------------------------------------------------------
Cash flows from financing activities:
- -----------------------------------------------------------------------------------------------------
Proceeds from issuance of common stock under
Employee Stock Purchase Plan 159 168 283
- -----------------------------------------------------------------------------------------------------
Proceeds from exercise of stock options 895 54 50
- -----------------------------------------------------------------------------------------------------
Purchase of treasury stock (2,550) (5) (1)
- -----------------------------------------------------------------------------------------------------
Proceeds from issuance of treasury stock 9 236 4
- -----------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (1,487) 453 336
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 3,812 (7,401) (3,079)
- -----------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of year 6,589 13,990 17,069
- -----------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 10,401 $ 6,589 $ 13,990
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
- -----------------------------------------------------------------------------------------------------
Cash paid during the year for:
- -----------------------------------------------------------------------------------------------------
Income taxes $ 3,894 $ 3,245 $ 4,148
- -----------------------------------------------------------------------------------------------------
Supplemental noncash investing and financing activities:
- -----------------------------------------------------------------------------------------------------
Exercise of option for non-compete agreement - - 1,000
- -----------------------------------------------------------------------------------------------------
Decrease in securities available for sale - - (491)
- -----------------------------------------------------------------------------------------------------
Acquisition of assets net of liabilities assumed of $198 - 400 -
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
ANSYS, Inc. 1999 Annual Report 21
<PAGE>
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock Additional Treasury Stock Retained Accumulated
-------------- Paid-in -------------- Earnings Other Compre-
(in thousands) Shares Amount Capital Shares Amount (Deficit) hensive Income
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 16,229 $162 $35,755 72 $ (12) $(3,073) $ 444
- ---------------------------------------------------------------------------------------------------------------------------------
Treasury stock acquired - - - 4 (1) - -
- ---------------------------------------------------------------------------------------------------------------------------------
Treasury stock sold - - 3 (7) 1 - -
- ---------------------------------------------------------------------------------------------------------------------------------
Exercise of stock options 92 1 49 - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock under Employee
Stock Purchase Plan 38 1 282 - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Repayment of note receivable from
stockholder - - - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Net income for the year - - - - - 7,400 -
- ---------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income - - - - - - (324)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 16,359 164 36,089 69 (12) 4,327 120
- ---------------------------------------------------------------------------------------------------------------------------------
Treasury stock acquired - - - 15 (5) - -
- ---------------------------------------------------------------------------------------------------------------------------------
Treasury stock sold - - 221 (70) 15 - -
- ---------------------------------------------------------------------------------------------------------------------------------
Exercise of stock options 27 - 180 - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock under
Employee Stock Purchase Plan 10 - 167 (14) 2 - -
- ---------------------------------------------------------------------------------------------------------------------------------
Repayment of note receivable from
stockholder - - - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Net income for the year - - - - - 11,349 -
- ---------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income - - - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 16,396 164 36,657 - - 15,676 120
- ---------------------------------------------------------------------------------------------------------------------------------
Treasury stock acquired - - - 382 (2,550) - -
- ---------------------------------------------------------------------------------------------------------------------------------
Treasury stock sold - - 3 (18) 6 - -
- ---------------------------------------------------------------------------------------------------------------------------------
Exercise of stock options 168 2 724 (25) 169 - -
- ---------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock under Employee
Stock Purchase Plan 21 - 159 - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Net income for the year - - - - - 14,751 -
- ---------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income - - - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 16,585 $166 $37,543 339 $(2,375) $30,427 $ 120
=================================================================================================================================
</TABLE>
22 ANSYS, INC. 1999 Annual Report
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------- ---------
Notes Total Total
Receivable Stock- Compre-
from Stock- holders' hensive
holders Equity Income
- ---------------------------------------------------------------------- ---------
<S> <C> <C> <C>
Balance, December 31, 1996 $(302) $32,974
- ----------------------------------------------------------------------
Treasury stock acquired - (1)
- ----------------------------------------------------------------------
Treasury stock sold - 4
- ----------------------------------------------------------------------
Exercise of stock options - 50
- ----------------------------------------------------------------------
Issuance of common stock under Employee
Stock Purchase Plan - 283
- ----------------------------------------------------------------------
Repayment of note receivable from
stockholder 28 28
- ---------------------------------------------------------------------- ---------
Net income for the year - 7,400 $ 7,400
- ---------------------------------------------------------------------- ---------
Other comprehensive income - (324) (324)
- ---------------------------------------------------------------------- ---------
Balance, December 31, 1997 (274) 40,414 7,076
- ---------------------------------------------------------------------- =========
Treasury stock acquired - (5)
- ----------------------------------------------------------------------
Treasury stock sold - 236
- ----------------------------------------------------------------------
Exercise of stock options - 180
- ----------------------------------------------------------------------
Issuance of common stock under
Employee Stock Purchase Plan - 169
- ----------------------------------------------------------------------
Repayment of note receivable from
stockholder 24 24
- ---------------------------------------------------------------------- ---------
Net income for the year - 11,349 11,349
- ---------------------------------------------------------------------- ---------
Other comprehensive income - - -
- ---------------------------------------------------------------------- ---------
Balance, December 31, 1998 (250) 52,367 11,349
- ---------------------------------------------------------------------- =========
Treasury stock acquired - (2,550)
- ----------------------------------------------------------------------
Treasury stock sold - 9
- ----------------------------------------------------------------------
Exercise of stock options - 895
- ----------------------------------------------------------------------
Issuance of common stock under Employee
Stock Purchase Plan - 159
- ---------------------------------------------------------------------- ---------
Net income for the year - 14,751 14,751
- ---------------------------------------------------------------------- ---------
Other comprehensive income - - -
- ---------------------------------------------------------------------- ---------
Balance, December 31, 1999 $(250) $65,631 $14,751
====================================================================== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
ANSYS, Inc. 1999 Annual Report 23
<PAGE>
Notes to Consolidated Financial Statements
1. Organization and Initial Public Offering
- --------------------------------------------------------------------------------
ANSYS, Inc. (the "Company") develops, markets and supports a family of
mechanical computer-aided engineering software products. The Company's products
are marketed and sold to companies throughout the world that operate in many
industries, including automotive, aerospace and electronics. Effective June 20,
1996, the Company completed an initial public offering ("IPO") of 3,500,000
shares of common stock at $13.00 per share.
2. Summary of Significant Accounting Policies
- --------------------------------------------------------------------------------
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries, ASN
Systems Limited, SAS IP, Inc., ANSYS Software Engineering Technology (Beijing)
Co., Ltd. and ANSYS Foreign Sales Corporation. All significant intercompany
accounts and transactions have been eliminated in consolidation.
REVENUE RECOGNITION: The Company's products are sold primarily through
distributors, who are resellers with respect to the Company's products. Revenue
is derived principally from the licensing of computer software products, either
on an annual lease, monthly lease or perpetual basis, and from related
maintenance contracts. Revenue from product licensing for perpetual licenses is
recognized upon delivery of the product, acceptance by the customer and receipt
of a signed contractual obligation, provided that no significant Company
obligations remain and collection of the receivable is probable. A portion of
the license fee from noncancellable annual leases is recognized as paid-up
revenue upon inception of the lease. The remaining portion is recognized ratably
over the remaining lease period. Revenue for monthly lease licenses is
recognized monthly, as earned, because the lease license agreements can be
cancelled by the customers with 30 days notice. Revenue from maintenance
contracts is recognized ratably over the term of the contract. Costs related to
maintenance obligations are expensed as incurred. Revenue from training, support
and other services is recognized as the services are performed.
CASH EQUIVALENTS: For purposes of the consolidated statements of cash flows, the
Company considers highly liquid deposits in money market funds to be cash
equivalents. Cash equivalents are recorded at cost, which approximates fair
value.
SHORT-TERM INVESTMENTS: The Company considers investments backed by government
agencies or U.S. financial institutions and which have a maturity or renewal
option between thirty days and up to one year from the date of purchase to be
short-term investments. Short-term investments are recorded at cost, which
approximates fair value.
SECURITIES AVAILABLE FOR SALE: The Company follows the provisions of Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," which addresses the classification, accounting
and disclosure of investments in debt and equity securities. In accordance with
Statement No. 115, the Company has investments in marketable equity securities
that have been classified as available-for-sale and, accordingly, are carried at
fair value, with the unrealized gains and losses, net of tax, reported in a
separate component of stockholders' equity.
24 ANSYS, Inc. 1999 Annual Report
<PAGE>
Notes to Consolidated Financial Statements
PROPERTY AND EQUIPMENT: Property and equipment is stated at cost. Depreciation
is computed on the straight-line method over the estimated useful lives of the
various classes of assets, which range from one to seven years. Repairs and
maintenance are charged to expense as incurred. Gains or losses from the sale or
retirement of property and equipment are included in the results of operations.
CAPITALIZED SOFTWARE: Internally developed computer software costs and costs of
product enhancements are capitalized subsequent to the determination of
technological feasibility; such capitalization continues until the product
becomes available for general release. Amortization of capitalized software
costs, both for internally developed as well as for purchased software products,
is computed on a product-by-product basis over the estimated economic life of
the product, which is generally three years. Amortization is the greater of the
amount computed using: (i) the ratio of the current year's gross revenue to the
total current and anticipated future gross revenue for that product or (ii) the
straight-line method over the estimated life of the product.
The Company periodically reviews the carrying value of capitalized software
and impairments are recognized in the results of operations when the expected
future undiscounted operating cash flow derived from the capitalized software is
less than its carrying value.
RESEARCH AND DEVELOPMENT COSTS: Research and development costs are expensed as
incurred.
GOODWILL AND OTHER INTANGIBLE ASSETS: Intangible assets consist of the excess of
the purchase cost over the fair value of net assets acquired ("goodwill"), the
ANSYS trade name and non-compete agreements. These assets are being amortized on
the straight-line method over their estimated useful lives. The Company
periodically evaluates the carrying value of goodwill based on whether the
goodwill is recoverable from expected future undiscounted operating cash flows
of the related business. The Company periodically reviews the carrying value of
other intangible assets and will recognize impairments when the expected future
operating cash flow derived from such intangible assets is less than their
carrying value.
CONCENTRATIONS OF CREDIT RISK: The Company invests its excess cash primarily in
deposits, money market funds and commercial paper with commercial banks. The
Company has not experienced any losses to date on its invested cash.
The Company has a concentration of credit risk with respect to trade
receivables because of 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.
During 1999, sales by distributors comprised approximately 70% of the
Company's total revenue, with two distributors accounting for approximately 12%
and 11% of total revenue. During 1998, sales by distributors comprised
approximately 82% of the Company's total revenue, with two distributors
accounting for approximately 13% and 10% of total revenue. During 1997, sales by
distributors comprised approximately 97% of the Company's total revenue, with
two distributors accounting for approximately 14% and 10% of total revenue.
INCOME TAXES: Deferred tax assets and liabilities are determined based on
temporary differences between the financial statement and tax bases of assets
and liabilities, using enacted tax rates in effect in the years in which the
differences are expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
ANSYS, Inc. 1999 Annual Report 25
<PAGE>
FOREIGN CURRENCY TRANSACTIONS: Certain of the Company's sales transactions are
denominated in foreign currencies. These transactions are translated to U.S.
dollars at the exchange rate on the transaction date. Accounts receivable in
foreign currencies at year-end are translated at the effective exchange rate on
that date. Gains and losses resulting from foreign exchange transactions are
included in the results of operations.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the amounts of revenue and expenses during the
reported periods. Actual results could differ from these estimates.
EARNINGS PER SHARE: Net income per basic common share is computed using the
weighted average number of common shares outstanding during each period. Net
income per diluted common share is computed using the weighted average number of
common and common equivalent shares outstanding during each period. Common
equivalent shares are not included in the per share calculations where their
inclusion would be anti-dilutive.
3. Property and Equipment
- --------------------------------------------------------------------------------
Property and equipment consists of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
(in thousands) December 31, 1999 December 31, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
Equipment $ 6,106 $ 4,815
- --------------------------------------------------------------------------------------
Computer software 2,562 2,340
- --------------------------------------------------------------------------------------
Furniture 923 877
- --------------------------------------------------------------------------------------
Leasehold improvements 829 824
- --------------------------------------------------------------------------------------
10,420 8,856
- --------------------------------------------------------------------------------------
Less: accumulated depreciation and amortization (6,891) (5,108)
- --------------------------------------------------------------------------------------
$ 3,529 $ 3,748
- --------------------------------------------------------------------------------------
</TABLE>
Depreciation and amortization expense related to property and equipment was
approximately $1,907,000, $2,040,000, and $1,626,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
4. Other Intangible Assets
- --------------------------------------------------------------------------------
Other intangible assets consists of the following:
<TABLE>
<CAPTION>
(in thousands) Estimated Useful Lives December 31, 1999 December 31, 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Trade name 10 years $ 1,824 $ 1,824
- --------------------------------------------------------------------------------------------------
Non-compete agreements 5-8 years 1,000 2,000
- --------------------------------------------------------------------------------------------------
2,824 3,824
- --------------------------------------------------------------------------------------------------
Less: accumulated amortization (1,306) (1,958)
- --------------------------------------------------------------------------------------------------
$ 1,518 $ 1,866
- --------------------------------------------------------------------------------------------------
</TABLE>
26 ANSYS, Inc. 1999 Annual Report
<PAGE>
5. Other Comprehensive Income
- --------------------------------------------------------------------------------
Other comprehensive income is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
(in thousands) December 31, 1999 December 31, 1998 December 31, 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized gains (losses) on $ - $ - $ (491)
securities
- --------------------------------------------------------------------------------------------------------
Tax effect - - 167
- --------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) $ - $ - $ (324)
- --------------------------------------------------------------------------------------------------------
</TABLE>
6. Income Taxes
The provision (benefit) for income taxes is comprised of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
(in thousands) December 31, 1999 December 31, 1998 December 31, 1997
- --------------------------------------------------------------------------------------------------------
Current:
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal $ 3,297 $ 3,357 $ 2,699
- --------------------------------------------------------------------------------------------------------
State 90 220 73
- --------------------------------------------------------------------------------------------------------
Foreign 876 854 745
- --------------------------------------------------------------------------------------------------------
Deferred:
- --------------------------------------------------------------------------------------------------------
Federal 869 1,235 725
- --------------------------------------------------------------------------------------------------------
State (14) 122 -
- --------------------------------------------------------------------------------------------------------
Total $ 5,118 $ 5,788 $ 4,242
- --------------------------------------------------------------------------------------------------------
</TABLE>
The reconciliation of the federal statutory tax rate to the consolidated
effective tax rate is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
December 31, 1999 December 31, 1998 December 31, 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 34.0% 34.0%
- --------------------------------------------------------------------------------------------------------
State income taxes, net of federal benefit 0.3 0.8 0.4
- --------------------------------------------------------------------------------------------------------
Research and experimentation credit (2.0) (1.2) (0.9)
- --------------------------------------------------------------------------------------------------------
Other (7.5) .2 2.9
- --------------------------------------------------------------------------------------------------------
25.8% 33.8% 36.4%
- --------------------------------------------------------------------------------------------------------
</TABLE>
The components of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
(in thousands) December 31, 1999 December 31, 1998
- --------------------------------------------------------------------------------------------------------
Deferred tax assets:
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Goodwill $ 3,762 $ 4,145
- --------------------------------------------------------------------------------------------------------
Capitalized software 3,948 4,483
- --------------------------------------------------------------------------------------------------------
Allowance for doubtful accounts 638 675
- --------------------------------------------------------------------------------------------------------
Accrued expenses and liabilities 89 159
- --------------------------------------------------------------------------------------------------------
Other 817 473
- --------------------------------------------------------------------------------------------------------
9,254 9,935
- --------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
- --------------------------------------------------------------------------------------------------------
Accounts receivable mark-to-market 390 585
- --------------------------------------------------------------------------------------------------------
Property and equipment 62 169
- --------------------------------------------------------------------------------------------------------
Other 1,823 1,347
- --------------------------------------------------------------------------------------------------------
2,275 2,101
- --------------------------------------------------------------------------------------------------------
Net deferred tax assets $ 6,979 $ 7,834
- --------------------------------------------------------------------------------------------------------
</TABLE>
Based upon the Company's current and historical taxable income and the
anticipated level of future taxable income, management believes it is more
likely than not that all of the deferred tax assets will be realized.
Accordingly, no valuation allowance has been established against the deferred
tax assets.
ANSYS, Inc. 1999 Annual Report 27
<PAGE>
7. Pension and Profit-Sharing Plans
- --------------------------------------------------------------------------------
The Company maintains both a money purchase pension plan (the "Pension Plan")
and a 401(k) / profit-sharing plan (the "Profit-Sharing Plan") for all
qualifying full-time employees. The Pension Plan is a noncontributory plan and
required the Company to contribute 20% of each participant's compensation in
1997. A plan amendment, effective January 1, 1998, reduced the Company
contribution to 5% of each participant's compensation.
In 1997, the Profit-Sharing Plan was noncontributory. An amendment to this
plan, effective January 1, 1998, invoked the 401(k) feature of the plan, thereby
permitting employee contributions up to 10% of eligible compensation. The
Company makes matching contributions on behalf of each participant in an amount
equal to 100% of the employee contribution up to a maximum of 5% of employee
compensation. The employee vesting period was also amended to a five year
graduated vesting schedule for employer contributions. Under the profit-sharing
provisions of the plan, the Company contribution is determined annually by the
Board of Directors, subject to a maximum limitation of 5% of eligible
compensation.
Total expense related to the Pension and Profit-Sharing plans was $1,266,000
in 1999, $1,144,000 in 1998 and $2,566,000 in 1997.
8. Non-Compete and Employment Agreements
- --------------------------------------------------------------------------------
During 1997, the Company exercised an option for a non-compete agreement
related to activities in the Company's United Kingdom and Netherlands
territories. The agreement precludes the former ASD from engaging in any
competitive business activities previously undertaken pursuant to the former ASD
agreement.
The Company has entered into an employment agreement with the Chairman of the
Board of Directors. In the event the Chairman is terminated without cause, his
employment agreement provides for severance at the annual rate of $300,000 for
the later of a period of one year after termination or when he accepts other
employment. The Chairman is subject to a one-year restriction on competition
following termination of employment under the circumstances described in the
contract.
9. Stock Option and Grant Plans
- --------------------------------------------------------------------------------
The Company has two stock option and grant plans -- the 1994 Stock Option
and Grant Plan ("1994 Stock Plan") and the 1996 Stock Option and Grant Plan
("1996 Stock Plan"). The 1994 and 1996 Stock Plans authorize the grant of up to
868,110 and 3,250,000 shares, respectively, of the Company's common stock in the
form of: (i) incentive stock options ("ISOs"), (ii) nonqualified stock options
or (iii) the issuance or sale of common stock with or without vesting or other
restrictions. Additionally, the 1996 Stock Plan permits the grant of common
stock upon the attainment of specified performance goals and the grant of the
right to receive cash dividends with the holders of the common stock as if the
recipient held a specified number of shares of the common stock. No further
grants may be made under the 1994 Stock Plan.
28 ANSYS, Inc. 1999 Annual Report
<PAGE>
The 1994 and 1996 Stock Plans provide that: (i) the exercise price of an ISO
must be no less than the fair value of the stock at the date of grant and (ii)
the exercise price of an ISO held by an optionee who possesses more than 10% of
the total combined voting power of all classes of stock must be no less than
110% of the fair market value of the stock at the time of grant. The Board of
Directors has the authority to set expiration dates no later than ten years from
the date of grant (or five years for an optionee who meets the 10% criteria),
payment terms and other provisions for each grant. Shares associated with
unexercised options or repurchased shares of common stock become available for
options or issuances under the 1996 Stock Plan. The Compensation Committee of
the Board of Directors may, at its sole discretion, accelerate or extend the
date or dates on which all or any particular award or awards granted under the
1994 and 1996 Stock Plans may vest or be exercised. In the event of a merger,
liquidation or sale of substantially all of the assets of the Company, the Board
of Directors has the discretion to accelerate the vesting of the options granted
under the 1994 and 1996 Stock Plans, except that options granted to Independent
Directors vest automatically. Under certain scenarios, other optionees may also
automatically vest upon the occurrence of such an event. In addition, the 1994
and 1996 Stock Plans and the grants issued thereunder terminate upon the
effectiveness of any such transaction or event, unless a provision is made in
connection with such transaction for the assumption of grants theretofore made.
Under the 1996 Stock Plan, at the discretion of the Compensation Committee, any
option may include a "reload" feature. Such feature allows an optionee
exercising an option to receive, in addition to the number of shares of common
stock due on the exercise, an additional option with an exercise price equal to
the fair market value of the common stock on the date such additional option is
granted.
In addition, the 1996 Stock Plan provides for the automatic grant of non-
qualified options to Independent Directors. Under such provisions, options to
purchase that number of shares of common stock determined by dividing $200,000
by the option exercise price will be granted to each individual when he or she
first becomes a member of the Board of Directors, provided that he or she is not
an employee of the Company. In addition, in 1998 the Board of Directors amended
the 1996 Stock Plan to provide that on the date five business days following
each annual meeting of stockholders of the Company, each Independent Director
who is then serving will be granted an option to purchase 12,000 shares of
common stock at the option exercise price. Options granted to Independent
Directors under the foregoing provisions will vest in annual installments over
four years, commencing with the date of grant, and will expire ten years after
the grant, subject to earlier termination if the optionee ceases to serve as a
director. The exercisability of these options will be accelerated upon the
occurrence of a merger, liquidation or sale of substantially all of the assets
of the Company.
During 1994, the Company issued 1,289,750 shares of restricted common stock
to certain officers, employees and members of the Board of Directors. In
addition, during 1996 the Company issued 135,860 shares of restricted common
stock to an officer and during 1995 issued 30,000 shares of restricted common
stock to members of the Board of Directors. Substantially all shares of
restricted stock and all of the options under both the 1994 and 1996 Stock Plans
were issued at the estimated market value of the Company's common stock at the
time of issuance. The recipients of the restricted stock are required to
continue in the employment or service of the Company for periods up to five
years after the date of issuance for ownership to vest and provide for
repurchase of unvested restricted stock by the Company at the original purchase
price in the event of the termination of employment prior to vesting. Upon
termination of employment, the Company repurchased 18,150, 14,950 and 3,950
shares of restricted stock from employees in 1999, 1998 and 1997, respectively.
29 ANSYS, Inc. 1999 Annual Report
<PAGE>
Restricted stock purchases, grants and option activity under the 1994 and 1996
Stock Plans, and the issuance of restricted stock to members of the Board of
Directors under separate agreements, are summarized as follows:
<TABLE>
<CAPTION>
1994 Stock Option and Grant Plan Restricted Stock Stock Options
- --------------------------------------------------------------------------------------------------------
Number of Range of Number of Range of
(in thousands, except for range of issue price) Shares Issue Price Options Issue Price
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1996 1,575 $ .01-2.40 839 $ .40-11.00
- --------------------------------------------------------------------------------------------------------
Issued/granted - - - -
- --------------------------------------------------------------------------------------------------------
Exercised (204) .10-.40 (99) .40-1.275
- --------------------------------------------------------------------------------------------------------
Repurchased/cancelled (4) .10 (86) .40-10.00
- --------------------------------------------------------------------------------------------------------
Outstanding at December 31, 1997 1,367 .01-2.40 654 .40-11.00
- --------------------------------------------------------------------------------------------------------
Issued/granted - - - -
- --------------------------------------------------------------------------------------------------------
Exercised (507) .01-.40 (56) .40-1.275
- --------------------------------------------------------------------------------------------------------
Repurchased/cancelled (23) .10-.40 (72) .40-10.00
- --------------------------------------------------------------------------------------------------------
Outstanding at December 31, 1998 837 .01-2.40 526 .40-11.00
- --------------------------------------------------------------------------------------------------------
Issued/granted - - - -
- --------------------------------------------------------------------------------------------------------
Exercised (815) .10-2.40 (143) .40-2.40
- --------------------------------------------------------------------------------------------------------
Repurchased/cancelled (18) .01-.40 (33) .40-10.00
- --------------------------------------------------------------------------------------------------------
Outstanding at December 31, 1999 4 $ .40 350 $ .40-11.00
- --------------------------------------------------------------------------------------------------------
Exercisable at:
- --------------------------------------------------------------------------------------------------------
December 31, 1997 53 156
- --------------------------------------------------------------------------------------------------------
December 31, 1998 90 292
- --------------------------------------------------------------------------------------------------------
December 31, 1999 - 286
- --------------------------------------------------------------------------------------------------------
<CAPTION>
1996 Stock Option and Grant Plan Stock Options
- --------------------------------------------------------------------------------------------------------
(in thousands, except for range of issue price) Number of Options Range of Issue Price
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1996 414 $11.75-$13.125
- --------------------------------------------------------------------------------------------------------
Issued/granted 759 6.25-9.625
- --------------------------------------------------------------------------------------------------------
Exercised - -
- --------------------------------------------------------------------------------------------------------
Repurchased/cancelled (146) 6.25-13.125
- --------------------------------------------------------------------------------------------------------
Outstanding at December 31, 1997 1,027 6.25-13.125
- --------------------------------------------------------------------------------------------------------
Issued/granted 919 6.00-11.313
- --------------------------------------------------------------------------------------------------------
Exercised (40) 6.25-9.625
- --------------------------------------------------------------------------------------------------------
Repurchased/cancelled (157) 6.25-13.00
- --------------------------------------------------------------------------------------------------------
Outstanding at December 31, 1998 1,749 6.00-13.13
- --------------------------------------------------------------------------------------------------------
Issued/granted 697 6.88-11.00
- --------------------------------------------------------------------------------------------------------
Exercised (68) 6.00-9.625
- --------------------------------------------------------------------------------------------------------
Repurchased/cancelled (261) 6.00-13.00
- --------------------------------------------------------------------------------------------------------
Outstanding at December 31, 1999 2,117 $ 6.00-13.13
- --------------------------------------------------------------------------------------------------------
Exercisable at:
- --------------------------------------------------------------------------------------------------------
December 31, 1997 95
- --------------------------------------------------------------------------------------------------------
December 31, 1998 270
- --------------------------------------------------------------------------------------------------------
December 31, 1999 577
- --------------------------------------------------------------------------------------------------------
</TABLE>
30 ANSYS, Inc. 1999 Annual Report
<PAGE>
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." The Company has adopted the disclosure-only
provisions of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation." Accordingly, no compensation expense has been
recognized for restricted stock or options which have been issued under the 1994
and 1996 Stock Plans. Had compensation cost for the Company's two stock option
and grant plans been determined based upon the fair value at the grant date for
the option awards in 1999, 1998 and 1997, consistent with the provisions of SFAS
No. 123, the Company's net income and basic and diluted earnings per share would
have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
(in thousands, except per share data) 1999 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income - as reported $14,751 $11,349 $ 7,400
- ----------------------------------------------------------------------------------------
Net income - pro forma 14,386 10,947 7,048
- ----------------------------------------------------------------------------------------
Net income per basic common share - as reported $ 0.90 $ 0.71 $ 0.47
- ----------------------------------------------------------------------------------------
Net income per basic common share - pro forma 0.88 0.68 0.45
- ----------------------------------------------------------------------------------------
Net income per diluted common share - as reported 0.88 0.68 0.45
- ----------------------------------------------------------------------------------------
Net income per diluted common share - pro forma 0.86 0.66 0.43
- ----------------------------------------------------------------------------------------
</TABLE>
The weighted-average fair value of options granted was $8.43 per share in
1999, $8.83 per share in 1998 and $6.65 per share in 1997.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the risk-free interest rates ranging
from a low of 4.82% to a high of 6.26%. The interest rates used were determined
by using the five year Treasury Note rate at the date of grant. The following
assumptions were also used to determine the fair value of each option grant:
dividend yields of 0%; expected volatility of 65% and expected term of 5 years.
10. Employee Stock Purchase Plan
- --------------------------------------------------------------------------------
The Company's 1996 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors on April 19, 1996 and was subsequently
approved by the Company's stockholders. Up to 210,000 shares of common stock may
be issued under the Purchase Plan. The Purchase Plan is administered by the
Compensation Committee. The first offering under the Purchase Plan commenced on
August 1, 1996 and closed on January 31, 1997. Subsequent offerings commence on
each February 1 and August 1 thereafter, and have a duration of six months. An
employee who owns or is deemed to own shares of stock representing in excess of
5% of the combined voting power of all classes of stock of the Company may not
participate in the Purchase Plan.
During each offering, an eligible employee may purchase shares under the
Purchase Plan by authorizing payroll deductions of up to 10% of his cash
compensation during the offering period. The maximum number of shares which may
be purchased by any participating employee during any offering period is limited
to 960 shares (as adjusted by the Compensation Committee from time to time).
Unless the employee has previously withdrawn from the offering, his accumulated
payroll deductions will be used to purchase common stock on the last business
day of the period at a price equal to 85% of the fair market value of the common
stock on the first or last day of the offering period, whichever is lower. Under
applicable tax rules, an employee may purchase no more than $25,000 worth of
common stock in any calendar year. At December 31, 1999, 82,654 shares of common
stock had been issued under the Purchase Plan of which 61,926 were issued as of
December 31, 1998.
ANSYS, Inc. 1999 Annual Report 31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Leases
- --------------------------------------------------------------------------------
In January 1996, the Company entered into a lease agreement with an unrelated
third party for a new corporate office facility, which the Company occupied in
February 1997. The lease agreement is for ten years, with an option for five
additional years, and includes a rental acceleration at the end of the fifth and
tenth years. The Company incurred lease rental expense related to this facility
of $1,227,000 in 1999 and 1998, and $1,022,000 in 1997. Minimum lease payments
for the next five years under the facility lease are $1,227,000 per annum in
2000 and 2001, and $1,354,000 per annum in 2002, 2003 and 2004.
Prior to February 1997, the Company had operated from facilities which it had
leased from a joint venture held by a corporate officer. The Company incurred
lease rental expense related to this lease agreement of $138,000 for the year
ended December 31, 1997.
The Company has also entered into various noncancellable operating leases for
equipment and sales offices. Lease rental expense related to these leases
totaled $998,000, $1,136,000 and $1,125,000 for the years ended December 31,
1999, 1998 and 1997, respectively. Future minimum lease payments under
noncancellable operating leases for equipment and sales offices in effect at
December 31, 1999 are $415,000 in 2000, $250,000 in 2001, $73,000 in 2002 and
$53,000 in 2003.
12. Royalty Agreements
- --------------------------------------------------------------------------------
The Company has entered into various renewable nonexclusive license agreements
under which the Company has been granted access to the licensor's patent
technology and the right to sell the patent technology in the Company's product
line. Royalties are payable to developers of the software at various rates and
amounts generally based upon unit sales or revenue. Royalty fees, which are
included in cost of sales, were approximately $524,000, $489,000, and $422,000
for the years ended December 31, 1999, 1998 and 1997, respectively.
13. Related Party Transactions
- --------------------------------------------------------------------------------
In connection with his initial employment, the Company's Chairman of the Board
of Directors purchased 626,000 restricted shares of common stock in July 1994
for a cash purchase price of $250,000 with proceeds from a loan from the Company
evidenced by a promissory note bearing interest at 8.23% and maturing on July 8,
2006. The promissory note is collateralized by a pledge of the shares purchased
with the proceeds of the loan. The shares purchased by the Chairman are fully
vested. Subsequent to December 31, 1999, the note and all related interest were
repaid in full.
14. Geographic Information
- --------------------------------------------------------------------------------
Revenue by geographic area is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Other Other
(in thousands) United States Canada Germany Europe Japan International Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1999 $27,673 $ 1,151 $ 7,091 $14,924 $ 7,678 $ 4,622 $63,139
- --------------------------------------------------------------------------------------------------------
Year ended December 31, 1998 24,282 1,509 5,704 13,986 7,565 3,507 56,553
- --------------------------------------------------------------------------------------------------------
Year ended December 31, 1997 22,881 771 5,113 11,258 6,878 3,646 50,547
- --------------------------------------------------------------------------------------------------------
</TABLE>
32 ANSYS, Inc. 1999 Annual Report
<PAGE>
NOTES TO CONSOLIDTED FINANCIAL STATEMENTS
15. Contingencies
- --------------------------------------------------------------------------------
The Company has been involved in litigation related to the expiration of an
ASD distribution agreement. In February 2000, a court rejected the Company's
claims for unpaid fees and ruled in favor of the defendant. The Company and its
outside counsel believe there may be other legal alternatives with respect to
this case and are currently considering such alternatives. Due to the
uncertainty regarding the means by which the Company will proceed with this
case, a reasonable estimate of loss cannot be currently made and, as such, no
provision has been made in the accompanying financial statements. If the Company
does not seek additional legal recourse, it may be required to pay the
defendant's legal costs which may total up to $500,000.
The Company had an outstanding irrevocable standby letter of credit for
$1,537,000 at December 31, 1999. This letter of credit, which expires on April
8, 2000, was issued as a guarantee for court-awarded damages related to the
litigation discussed above. The fair value of the letter of credit approximates
the contract value based on the nature of the fee arrangements with the issuing
bank. No material losses on this commitment have been incurred, nor are any
anticipated.
16. Earnings Per Share
- --------------------------------------------------------------------------------
Basic earnings per common share ("EPS") amounts are computed by dividing
earnings by the average number of common shares outstanding. Diluted EPS amounts
assume the issuance of common stock for all potentially dilutive equivalents
outstanding.
The details of basic and diluted earnings per common share are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
(in thousands, except per share data) 1999 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $14,751 $11,349 $ 7,400
- -----------------------------------------------------------------------------------------
Weighted average shares outstanding - basic(1) 16,366 16,052 15,742
- -----------------------------------------------------------------------------------------
Basic earnings per share $ 0.90 $ 0.71 $ 0.47
- -----------------------------------------------------------------------------------------
Effect of dilutive securities:
- -----------------------------------------------------------------------------------------
Shares issuable upon exercise of dilutive
outstanding restricted stock and stock options 323 529 776
- -----------------------------------------------------------------------------------------
Weighted average shares outstanding - diluted 16,689 16,581 16,518
- -----------------------------------------------------------------------------------------
Diluted earnings per share $ 0.88 $ 0.68 $ 0.45
- -----------------------------------------------------------------------------------------
Anti-dilutive shares/options 570 1,200 642
- -----------------------------------------------------------------------------------------
</TABLE>
/(1)/ Weighted average shares outstanding - basic excludes unvested restricted
stock.
17. Recently Issued Accounting Pronouncements
- --------------------------------------------------------------------------------
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which defines derivatives, requires that
all derivatives be carried at fair value and provides for hedge accounting when
certain conditions are met. The Standard was effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. In June 1999, the FASB delayed
the effective date of this statement for one year through the issuance of
Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities
- - Deferral of the Effective Date of SFAS No. 133 and an Amendment of SFAS No.
133." The Company will implement Statement No. 133 during the year 2000 and
believes that the adoption of this Statement will not have a material effect on
its consolidated financial statements.
18. Subsequent Event -- Share Repurchase Program
- --------------------------------------------------------------------------------
On February 8, 2000, the Company announced that its Board of Directors had
approved a share repurchase program. The approval authorizes the Company to
repurchase up to 1 million shares, or approximately 6% of the Company's issued
and outstanding common stock.
ANSYS, Inc. 1999 Annual Report 33
<PAGE>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Fiscal Quarter Ended
- -----------------------------------------------------------------------------------------------------------
December 31, September 30, June 30, March 31,
(in thousands, except per share data) 1999 1999 1999 1999
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $17,598 $14,279 $15,394 $15,868
- -----------------------------------------------------------------------------------------------------------
Gross profit 15,834 12,699 13,745 14,243
- -----------------------------------------------------------------------------------------------------------
Operating income 4,858 3,928 3,883 4,574
- -----------------------------------------------------------------------------------------------------------
Net income 4,125 3,366 3,543 3,717
- -----------------------------------------------------------------------------------------------------------
Net income per basic share .25 .20 .22 .23
- -----------------------------------------------------------------------------------------------------------
Net income per diluted share .25 .20 .21 .22
- -----------------------------------------------------------------------------------------------------------
Common stock price per share(1):
- -----------------------------------------------------------------------------------------------------------
High 11.88 10.38 10.25 10.94
- -----------------------------------------------------------------------------------------------------------
Low 8.75 8.81 6.50 6.88
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
Fiscal Quarter Ended
- -----------------------------------------------------------------------------------------------------------
December 31, September 30, June 30, March 31,
(in thousands, except per share data) 1998 1998 1998 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $15,257 $13,507 $13,562 $14,227
- -----------------------------------------------------------------------------------------------------------
Gross profit 13,730 11,992 12,079 12,686
- -----------------------------------------------------------------------------------------------------------
Operating income 4,241 3,577 3,552 3,835
- -----------------------------------------------------------------------------------------------------------
Net income 3,152 2,710 2,720 2,767
- -----------------------------------------------------------------------------------------------------------
Net income per basic share .20 .17 .17 .17
- -----------------------------------------------------------------------------------------------------------
Net income per diluted share .19 .16 .16 .17
- -----------------------------------------------------------------------------------------------------------
Common stock price per share(1):
- -----------------------------------------------------------------------------------------------------------
High 11.50 11.25 11.75 10.44
- -----------------------------------------------------------------------------------------------------------
Low 5.75 6.25 9.00 7.00
- -----------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/ The Company's common stock trades on the Nasdaq National Market tier of
The Nasdaq Stock Market under the symbol: ANSS. The common stock prices shown
are based on the Nasdaq daily closing stock price.
The Company has not paid cash dividends on its common stock as it has retained
earnings for use in its business. The Company intends to review its policy with
respect to the payment of dividends from time to time; however, there can be no
assurance that any dividends will be paid in the future.
On February 23, 2000, there were 290 shareholders of record and approximately
3,300 beneficial shareholders of the Company's common stock.
34 ANSYS, Inc. 1999 Annual Report
<PAGE>
CORPORATE INFORMATION
HEADQUARTERS
[email protected]
T 724.746.3304
F 724.514.9494
Toll Free USA and Canada:
1.800.WE.R.FEA.1
(1.800.937.3321)
Toll Free Mexico:
95.800.9373321
REGIONAL OFFICES
North America
[email protected]
T 724.514.3122
F 724.514.3115
International
[email protected]
T 724.514.3086
F 724.514.3115
Europe
[email protected]
T 44.118.9880229
F 44.118.9880925
http://www.ansys.com
SHAREHOLDER INFORMATION
Requests for information about the Company should be directed to: Investor
Relations, ANSYS, Inc., Southpointe, 275 Technology Drive, Canonsburg, PA 15317
Telephone: 724.514.1782
REPORT ON FORM 10-K
Stockholders may obtain additional financial information about ANSYS, Inc. from
the Company's Report on Form 10-K filed with the Securities and Exchange
Commission. Copies are available from the Company without charge upon written
request.
STOCK LISTING
[LOGO OF NASDAQ]
COUNSEL
Goodwin, Procter, & Hoar L.L.P., Boston, MA
ANNUAL MEETING
The Annual Meeting of Stockholders will be held on May 2, 2000 at 2:00 p.m. at
the Southpointe Club, 360 Southpointe Blvd., Canonsburg, PA 15317.
TRANSFER AGENT
Chase Mellon Shareholder Services, Ridgefield Park, NJ
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, Pittsburgh, PA
ANSYS, Inc. is an Equal Opportunity Employer. As such, it is the Company's
policy to promote equal employment opportunity and to prohibit discrimination on
the basis of race, color, religion, sex, age, national origin, disability or
status as a veteran in all aspects of employment including recruiting, hiring
training or promoting personnel. In fulfilling this commitment, the Company
shall comply with the letter and spirit of the laws, regulations and Executive
Orders governing equal opportunity in employment: including the Civil Rights
Act of 1964, Executive Order 11246, Revised Order Number 4 and amendments
thereto.
ANSYS and DesignSpace are registered in the U.S. Patent and Trademark Office.
DesignSpace Expert, ANSYS/Multiphysics and ANSYS/Professional are trademarks of
SAS IP, Inc., a wholly owned subsidiary of ANSYS, Inc. All other trademarks and
registered trademarks are the property of their respective owners.
[RECYCLE LOGO] This entire report is printed on recycled paper.
ANSYS, Inc. 1999 Annual Report 35
<PAGE>
EXHIBIT 21
Subsidiaries of the Registrant
- ------------------------------
SAS IP, Inc., a Wyoming Corporation
ASN Systems Limited, a UK Subsidiary
ANSYS Foreign Sales Corporation, a Barbados Corporation
ANSYS Software Engineering Technology (Beijing) Co., Ltd., a China Wholly-Owned
Foreign Enterprise
<PAGE>
EXHIBIT 23.1
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors of
ANSYS, Inc. and Subsidiaries
Our audits of the consolidated financial statements referred to in our report
dated January 27, 2000 appearing in the 1999 Annual Report to Shareholders of
ANSYS, Inc. and Subsidiaries (which report and consolidated financial statements
are incorporated by reference in this Annual Report on Form 10-K) also included
an audit of the financial statement schedule listed in Item 14(a)(2) of this
Form 10-K. In our opinion, this financial statement schedule presents fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/S/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
January 27, 2000
<PAGE>
EXHIBIT 23.2
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-4278) of ANSYS, Inc. and Subsidiaries of our
report dated January 27, 2000 relating to the consolidated financial statements,
which appears in the Annual Report to Shareholders, which is incorporated in
this Annual Report on Form 10-K. We also consent to the incorporation by
reference of our report dated January 27, 2000 relating to the financial
statement schedule, which appears in this Form 10-K.
/S/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
March 16, 2000
<PAGE>
EXHIBIT 23.3
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8, (No. 333-4278) of ANSYS, Inc. and Subsidiaries of our
report dated March 16, 2000 relating to the financial statements of the 1996
Employee Stock Purchase Plan of ANSYS, Inc. and Subsidiaries, which appears in
this Form 11-K.
/s/ PricewaterhouseCoopers LLP
- -------------------------------
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
March 16, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN THE FORM 10-K FOR THE FISCAL YEAR ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 10,401
<SECURITIES> 46,731
<RECEIVABLES> 12,218
<ALLOWANCES> 1,700
<INVENTORY> 0
<CURRENT-ASSETS> 70,915
<PP&E> 3,529
<DEPRECIATION> 0
<TOTAL-ASSETS> 83,891
<CURRENT-LIABILITIES> 18,260
<BONDS> 0
0
0
<COMMON> 166
<OTHER-SE> 65,465
<TOTAL-LIABILITY-AND-EQUITY> 83,891
<SALES> 37,675
<TOTAL-REVENUES> 63,139
<CGS> 3,530
<TOTAL-COSTS> 6,618
<OTHER-EXPENSES> 39,278
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 19,869
<INCOME-TAX> 5,118
<INCOME-CONTINUING> 14,751
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,751
<EPS-BASIC> .90
<EPS-DILUTED> .88
</TABLE>
<PAGE>
EXHIBIT 99
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
As of January 31, 2000 and 1999
and for Each of the Three Years in the Period Ended
January 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-20853
1996 EMPLOYEE STOCK PURCHASE PLAN
(Full title of Plan)
ANSYS, Inc.
Southpointe
275 Technology Drive
Canonsburg, PA 15317
(Name of issuer of securities held pursuant to the plan
and the address of its principal executive office)
<PAGE>
ANSYS, INC. AND SUBSIDIARIES
1996 Employee Stock Purchase Plan
Index of Financial Statements
Page No.
--------
Report of Independent Accountants 3
Statements of Financial Condition as of January 31, 2000 and 1999 4
Statements of Changes in Plan Equity for Each of the Three Years in
the Period Ended January 31, 2000 5
Notes to Financial Statements 6-7
Signature 8
2
<PAGE>
Report of Independent Accountants
To the Board of Directors of
Ansys Inc. and Subsidiaries:
In our opinion, the accompanying Statements of Financial Condition and related
Statements of Changes in Plan Equity present fairly, in all material respects,
the financial position of the 1996 Employee Stock Purchase Plan of ANSYS, Inc.
and Subsidiaries at January 31, 2000 and 1999, and the results of their
operations for each of the three years in the period ended January 31, 2000 in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
March 16, 2000
3
<PAGE>
ANSYS, INC. AND SUBSIDIARIES
1996 EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF FINANCIAL CONDITION
January 31, 2000 and 1999
2000 1999
---- ----
Assets:
Cash $ 95,186 $ 95,661
------------------------------
Total assets $ 95,186 $ 95,661
==============================
Liabilities and Plan equity:
ANSYS, Inc. Stock Due
To Participants $ 93,736 $ 95,081
------------------------------
Total liabilities 93,736 95,081
Plan equity 1,450 580
------------------------------
Total liabilities and Plan equity $ 95,186 $ 95,661
==============================
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ANSYS, INC. AND SUBSIDIARIES
1996 EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF CHANGES IN PLAN EQUITY
for the Years Ended
<TABLE>
<CAPTION>
January 31, 2000 January 31, 1999 January 31, 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C>
ADDITIONS:
Contributions:
Employee $ 176,006 $ 162,259 $ 255,553
Employer 34,487 36,187 45,621
--------------------------------------------------------------------------------
Total additions 210,493 198,446 301,174
DEDUCTIONS:
Stock distributions 191,043 186,845 449,992
Participant withdrawals 18,580 22,231 38,879
--------------------------------------------------------------------------------
Total deductions 209,623 209,076 488,871
--------------------------------------------------------------------------------
Net increase (decrease) in Plan equity 870 (10,630) (187,697)
Plan equity, beginning of year 580 11,210 198,907
--------------------------------------------------------------------------------
Plan equity, end of year $ 1,450 $ 580 $ 11,210
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
ANSYS, INC. AND SUBSIDIARIES
1996 EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF PLAN:
The purpose of the 1996 Employee Stock Purchase Plan of ANSYS, Inc. and
Subsidiaries (the "Plan"), which became effective August 1, 1996, is to provide
eligible employees of ANSYS, Inc. and certain of its subsidiaries (the
"Company") with opportunities to purchase shares of common stock upon favorable
terms. The aggregate maximum number of shares for which options may be issued
under the Plan is 210,000 shares of common stock, subject to adjustments for
changes in the Company's capitalization. The Plan is administered by the
Compensation Committee of the Board of Directors (the "Compensation Committee").
Participation in the Plan is voluntary. Offerings under the Plan commence on
each February 1 and August 1 and have a duration of six months. The Compensation
Committee may establish a different period of six months or less for any
offering. Generally, all employees who are employed for more than 20 hours per
week as of the first day of the applicable offering period are eligible to
participate in the Plan. An employee who owns or is deemed to own shares of
stock representing in excess of 5% of the combined voting power of all classes
of stock of the Company may not participate in the Plan.
During each offering, an eligible employee may purchase shares under the Plan by
authorizing payroll deductions of up to 10% per pay period to be deducted from
such employee's total cash compensation. The maximum number of shares which may
be purchased by any participating employee during any offering period is limited
to 960 shares (as adjusted by the Compensation Committee from time to time).
Unless the employee has previously withdrawn from the offering, such employee's
accumulated payroll deductions will be used to purchase common stock at a price
equal to 85% of the fair market value of the common stock on the first or last
day of the offering period, whichever is lower. The Company will contribute the
remaining 15% of the fair market value of the common stock. Under applicable tax
rules, an employee may purchase no more than $25,000 worth of common stock in
any calendar year.
6
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
Administrative Expenses:
The Company pays all expenses incident to the operation of the Plan, including
the costs of record keeping, accounting fees, legal fees, the costs of delivery
of stock certificates to participants and the costs of shareholder
communications. The Company does not pay any expenses, broker's or other
commissions or taxes incurred in connection with the purchases of common stock,
or the sale of shares of common stock.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires the plan administrator to make estimates and
assumptions that affect certain reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements. Estimates may also affect the changes in Plan equity during the
reporting period. Actual results may differ from those estimates.
7
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Board
of Directors of ANSYS, Inc. has duly caused this Annual Report to be signed on
behalf of the Plan by the undersigned hereunto duly authorized, on March 20,
2000.
ANSYS, INC. AND SUBSIDIARIES
1996 EMPLOYEE STOCK PURCHASE PLAN
Date: March 20, 2000 By: /s/ James E. Cashman III
----------------------------------------------
James E. Cashman III
President and Chief Executive Officer
Date: March 20, 2000 By: /s/ Maria T. Shields
----------------------------------------------
Maria T. Shields
Chief Financial Officer,
Vice President, Finance and Administration
8
