<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended October 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0000849433
ANSOFT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 72-1001909
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
Four Station Square, Suite 660
Pittsburgh, Pennsylvania 15219-1119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 261-3200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
The number of shares of the registrant's Common Stock outstanding as of the
close of business on December 9, 1996 was 7,690,859.
<PAGE> 2
ANSOFT CORPORATION
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Part I FINANCIAL INFORMATION Page
----
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - October 31, 1996
and July 31, 1996 1
Consolidated Statements of Operations - Three and six months
ended October 31, 1996 and 1995 2
Consolidated Statements of Cash Flows - Six months
ended October 31, 1996 and 1995 3
Notes to the Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
</TABLE>
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANSOFT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
October 31, July 31,
1996 1996
----------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 386 $ 406
Accounts receivable 2,487 1,820
Marketable Securities held to maturity 554 554
Deferred Taxes 700 700
Prepaid expenses and other assets 364 395
------- -------
Total current assets 4,491 3,875
Plant and Equipment 1,146 1,026
Marketable Securities held to maturity 9,273 8,554
Other asset -- 3
Intangible asset 2,918 3,058
------- -------
Total assets $17,828 $16,516
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Line of Credit $ 4,169 $ 3,300
Accounts payable 258 320
Accrued expenses 467 592
Accrued wages 282 87
Deferred revenue 724 657
------- -------
Total current liabilities 5,900 4,956
Total liabilities 5,900 4,956
------- -------
Stockholders' equity:
Preferred stock, par value $.01 per share;
1,000 shares authorized, no shares
outstanding -- --
Common stock, par value $.01 per share;
10,000 authorized shares; issued and
outstanding 7,661 and 7,641
shares, respectively 77 76
Additional paid-in capital 17,245 17,210
Accumulated deficit (5,394) (5,726)
------- -------
Total stockholders' equity 11,928 11,560
------- -------
Total liabilities and stockholders'
equity $17,828 $16,516
======= =======
</TABLE>
See accompanying notes to the consolidated financial statements.
Page 1
<PAGE> 4
ANSOFT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended October 31, Six months ended October 31,
1996 1995 1996 1995
------ ------ ------- ------
<S> <C> <C> <C> <C>
Revenues:
License $2,850 $1,790 $ 4,811 $3,570
Service and other 484 131 841 220
------ ------ ------- ------
Total revenue 3,334 1,921 5,652 3,790
Costs and expenses:
Sales and marketing 1,919 1,067 3,348 2,177
Research and development 749 440 1,247 843
General and administrative 491 289 785 552
In process research and development -- -- 3,054 --
------ ------ ------- ------
Total costs and expenses 3,159 1,796 8,434 3,572
------ ------ ------- ------
Income (loss) from
operations 175 125 (2,782) 218
Interest income 212 -- 378 --
Interest expense (54) (2) -- (4)
------ ------ ------- ------
Income (loss) before income
taxes 333 123 (2,404) 214
Income taxes -- -- -- --
------ ------ ------- ------
Net income (loss) $ 333 $ 123 $(2,404) $ 214
====== ====== ======= ======
Net income (loss) per share $ 0.04 $ 0.02 $ (0.31) $ 0.03
====== ====== ======= ======
Weighted average shares
outstanding 8,170 6,861 7,878 6,877
====== ====== ======= ======
</TABLE>
See accompanying notes to the consolidated financial statements.
Page 2
<PAGE> 5
ANSOFT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six months ended October 31,
1996 1995
-------- -----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,404) $ 214
Adjustments to reconcile net loss to
net cash provided by operating activities:
Purchased in process research and development 3,054 --
Depreciation 133 90
Amortization 153 12
Changes in assets and liabilities:
Accounts receivable (821) (134)
Prepaid expenses and other assets (45) (1)
Other long-term assets 13 --
Accounts payable (88) 17
Accrued wages and expenses (81) 17
Deferred revenue 66 69
-------- -----
Net cash provided by (used in) operating activities (20) 284
-------- -----
Cash flows from investing activities:
Purchases of plant and equipment (340) (173)
Acquisition of the EBU, net (5,600) --
Purchases of marketable securities
held to maturity (8,592) --
-------- -----
Net cash used in investing activities (14,532) (173)
-------- -----
Cash flows from financing activities:
Proceeds from line of credit 4,169 --
Payments on note payable -- (11)
Proceeds from the issuance of common stock, net 41 30
Proceeds from related party stockholders, net -- (39)
-------- -----
Net cash provided by (used in) financing activities 4,210 (20)
-------- -----
Net increase (decrease) in cash and
cash equivalents (10,342) 91
Cash and cash equivalents at beginning of period 10,728 116
-------- -----
Cash and cash equivalents at end of period 386 207
-------- -----
Supplemental disclosures of cash flow information:
Cash paid for interest $ 54 $ 4
======== =====
Cash paid for income taxes $ 10 $ 1
======== =====
</TABLE>
See accompanying notes to the consolidated financial statements.
Page 3
<PAGE> 6
ANSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. In the opinion of management,
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of financial position and results of operations have been
made. Operating results for interim periods are not necessarily indicative of
results which may be expected for a full year. The information included in this
Form 10-Q should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the fiscal year
ended April 30, 1996 financial statements and notes thereto included in the
Company's annual report on Form 10-K filed with the Commission.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and disclosure of contingent assets and liabilities. The estimates
and assumptions used in the accompanying financial statements are based on
management's evaluation of the relevant facts and circumstances as of the date
of the financial statements. Actual results may differ from those estimates.
(2) Acquisition and related Intangible Assets
On July 24, 1996, the Company acquired The MacNeal Schwendler
Corporation's ("MSC") Electronics Business Unit (the "EBU") for $5.6 million in
cash. The acquisition has been accounted for as a purchase, and the financial
results of the EBU have been included in the accompanying consolidated
financial statements since the date of the acquisition. The cost of the
acquisition has been allocated on the basis of the estimated fair value of the
assets acquired and the liabilities assumed. The allocation of the acquisition
resulted in an in process research and development charge of $3.1 million
because certain acquired technology had not reached technological feasibility.
The intangible assets of $2.5 million and $560,000 consist of the customer list
and established work force, respectively. They are being amortized on a
straight line basis over a seven and three year life, respectively, commencing
in August 1996.
The fair value of the assets and liabilities acquired are presented below:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Plant and Equipment............................................ $ 215
Other Assets................................................... 11
Accrued Liabilities............................................ (491)
Deferred Revenue............................................... (243)
In process research and development............................ 3,054
Intangible assets.............................................. 3,054
-------
Net assets acquired....................................... $ 5,600
=======
</TABLE>
The following unaudited pro forma summary presents information as if the
acquisition of the EBU occurred at the beginning of the period presented. The
EBU has no separate legal status as it was an integral part of MSC's overall
operations. As a result, separate financial statements have not been maintained
for the EBU. Historically, MSC did not allocate general and administrative
costs to the EBU, so any such allocation at this time would be arbitrary. The
pro forma information is provided for information purposes only. It is based on
historical information and does not necessarily reflect the actual results that
would have occurred, nor is it necessarily indicative of future results of
operations of the combined enterprise.
Page 4
<PAGE> 7
<TABLE>
<CAPTION>
Six months ended October 31,
1996 1995
------- ------
(In thousands)
<S> <C> <C>
Revenue........................... $ 6,304 $5,282
Net income (loss)................. $(2,298) $ 510
Net income (loss) per share....... $ (0.29) $ 0.07
</TABLE>
(3) Borrowings
The Company has available a secured line of credit from a domestic
financial institution at an interest rate varying from a minimum of 1% below
the Broker's Call Rate to a maximum equaling the Broker's Call Rate. The line
of credit is secured by the marketable securities held with the institution. As
of October 31, 1996, the outstanding balance was $4.2 million and the interest
rate charged was 6.25%. The availability of the unused line of credit,
approximately $1.2 million as of October 31, 1996, is subject to certain
borrowing base requirements.
Page 5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company develops, markets and supports EDA software, based upon
electromagnetic principles, for the design of electronic, communications and
electromechanical components and systems. The Company was incorporated in 1984
and commenced commercial shipments of its first software product, focused on
the electronic component industry, in 1987. The Company subsequently offered
solutions in both electromechanical ("EM") and signal integrity ("SI")
products. The SI products are targeted at two markets: High Speed and High
Frequency. The importance of any individual product has diminished as the
Company has introduced new products.
Revenue consists primarily of fees for licenses of the Company's software
products and fees for customer service and support. Revenue from the sale of
software licenses is recognized upon shipment of the products and fulfillment
of acceptance terms, if any. No significant obligations, including the
performance of services essential to the functionality of the software, remain
unfulfilled at the time revenue is recognized on software licenses, and with
respect to any remaining insignificant obligations, either the related revenue
is unbundled and deferred, based on the estimated fair value of related
services, or the related estimated costs are accrued. When the Company receives
advance payment for software products, such payments are recorded as deferred
revenue and recognized as revenue when products are shipped and other
obligations, if any, have been satisfied. Other revenue from customer training,
support and other services is recognized as the service is performed.
Costs directly attributable to the cost of license and service revenue are
not material in any reported period. Accordingly, the Company has not
separately disclosed these costs.
The discussion in this Form 10-Q contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company that involve risks and uncertainties. The Company's
future results could differ materially from the results presented herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed from time to time in the Company's public reports
filed with the Securities and Exchange Commission, including the risks
discussed in the "Risk Factors" section included in the Company's Registration
Statement on Form S-1 as declared effective by the Securities and Exchange
Commission on April 3, 1996 and the report on Form 10-K for the fiscal year
ended April 30, 1996.
Page 6
<PAGE> 9
Results of Operations
The following table sets forth the percentage of total revenue of each
item in the Company's statements of operations:
<TABLE>
<CAPTION>
Three months ended October 31, Six months ended October 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
License 85% 93% 85% 94%
Service and other 15 7 15 6
--- --- --- ---
Total revenue 100 100 100 100
Costs and expenses:
Sales and marketing 58 56 59 57
Research and development 22 22 22 22
General and administrative 15 15 14 15
In process research and development -- -- 54 --
--- --- --- ---
Total costs and expenses 95 93 149 94
--- --- --- ---
Income (loss) from operations 5 7 (49) 6
Interest income 6 -- 8 --
Interest expense (1) (1) (1) --
--- --- --- ---
Income (loss) before income taxes 10 6 (42) 6
Income taxes -- -- -- --
--- --- --- ---
Net income (loss) 10% 6% (42)% 6%
=== === === ===
</TABLE>
Comparison of The Three and Six Months Ended October 31, 1996 and 1995
Revenue. Total revenue for the three month period ended October 31,
1996 increased 74% over the same period in the previous fiscal year. Total
revenue for the six month period ended October 31, 1996 increased 49% over the
same period in the previous fiscal year. The revenue growth is attributed to
the continued growth of the installed base of customers licensing the Company's
existing products and to the expanded suite of products offered by Ansoft as a
result of the acquisition of the EBU. In addition, the increase in service and
other revenue was attributed to increased purchased annual maintenance
agreements and reflects the continued growth of the installed base of customers
and increased focus on marketing annual maintenance agreements and to a lesser
extent, revenue recognized on the research and development cost sharing
agreements.
International revenue accounted for 35% and 32% of the Company's total
revenue in the three month period ended October 31, 1996 and 1995,
respectively. International revenue accounted for 36% and 34% of the Company's
total revenue in the six month period ended October 31, 1996 and 1995,
respectively. The Company expects that international revenues will account for
an increasing portion of its revenues in the future.
The Company has an exclusive distribution agreement with Hewlett-Packard
(the "HP agreement") for worldwide distribution of its HFSS product. Revenue
from the HP agreement accounted for 11% and 15% revenue in the three month
period ended October 31, 1996 and 1995, respectively. Revenue from the HP
agreement accounted for 13% and 12% revenue in the six month period ended
October 31, 1996 and 1995, respectively. The HP Agreement will expire in January
1997, and will not be renewed. HP has the right to sell the HFSS product through
January 1998. Since January 1994, the Company has directly marketed its
Maxwell(R) Eminence product, which expands on the functionality of HFSS, to
target the commercial wireless communications and defense/aerospace markets
through its worldwide direct sales force and its international distributors.
Management believes that the expiration of the HP agreement will not have a
material adverse effect on the future financial condition or results of
operations.
Page 7
<PAGE> 10
Sales and Marketing. Sales and marketing expenses consist of salaries,
commissions paid to internal sales and marketing personnel and international
distributors, promotional costs and related operating expenses. Sales and
marketing expenses increased by 79% to $1.9 million in the three month period
ended October 31, 1996, as compared to $1.1 million in the same period in the
previous fiscal year. Sales and marketing expenses increased by 54% to $3.3
million in the six month period ended October 31, 1996, as compared to $2.2
million in the same period in the previous fiscal year. The increase is
attributed to increased marketing efforts, including advertising in trade
publications and increased participation in industry trade shows and the
increase in salesforce as a result of the EBU acquisition. The Company expects
to increase sales and marketing expenditures both domestically and
internationally as part of its continuing effort to expand its markets,
introduce new products, build marketing staff and programs and expand its
international presence.
Research and Development Expenses. Research and development expenses
include all costs associated with the development of new products and
enhancements to existing products. Research and development expenses increased
70% to $749,000 in the three month period ended October 31, 1996, as compared to
$440,000 in the same period in the previous fiscal year. Research and
development expenses increased 48% to $1.2 million in the six month period ended
October 31, 1996, as compared to $843,000 in the same period in the previous
fiscal year. The increase is due to increased costs associated with continuing
product development and enhancement of existing products in addition to the
increased personnel as a result of the EBU acquisition. The Company anticipates
that it will continue to devote substantial resources to product research and
development.
General and Administrative Expenses. General and administrative expenses
increased 67% to $491,000 in the three month period ended October 31, 1996, as
compared to $289,000 in the same period in the previous fiscal year. General
and administrative expenses increased 42% to $785,000 in the six month period
ended October 31, 1996, as compared to $552,000 in the same period in the
previous fiscal year. The increase is primarily attributed to amortization
expense of $136,000 incurred as a result of the amortization of the intangible
assets acquired, and to a lesser extent, additional costs required to support
the increase in operations, including the hiring of additional administrative
personnel, along with other general cost increases.
In Process Research and Development Expenses. On July 24, 1996, the
Company acquired MSC's EBU for $5.6 million in cash. The cost of the
acquisition has been allocated on the basis of the estimated fair value of the
assets acquired and the liabilities assumed. The allocation of the acquisition
resulted in an in process research and development charge of $3.1 million
because certain acquired technology had not reached technological feasibility.
Liquidity and Capital Resources
As of October 31, 1996, the Company had $386,000 in cash and cash
equivalents. Net cash used by operating activities was $20,000 in the six month
period ending October 31, 1996. Net cash used in investing activities was $14.5
million in the six month period ending October 31, 1996, consisting primarily
of the purchase of marketable securities held to maturity of $8.6 million and
the acquisition of the EBU for $5.6 million. Net cash provided by financing
activities consisted primarily of $4.2 million in proceeds received on the
Company's line of credit which was used as part of the cash payment for the
acquisition.
As of October 31, 1996, the Company had a net working capital of $(1.4)
million. The negative working capital balance resulting from the use of working
capital in connection with the acquisition of the EBU in July 1996. The Company
also has available an unused portion of a line of credit, which is
collateralized by the marketable securities of the Company. As of October 31,
1996, $4.2 million was outstanding under the line of credit with approximately
$1.2 million available for borrowing on this line of credit. The Company
believes that the available funds, together with the cash available under its
line of credit and cash flows from operations will be sufficient to meet its
anticipated cash needs for working capital and capital expenditures for at
least the next twelve months. Thereafter, if cash generated from operations is
insufficient to satisfy the Company's liquidity requirements, the Company may
seek additional funds through equity or debt financing. There can be no
assurance that additional financing will be available or that, if available,
such financing will be on terms favorable to the Company.
Page 8
<PAGE> 11
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's annual meeting of shareholders was held on August 9, 1996 at
which the actions below were taken:
1. The shareholders elected the following five directors to the Company's
Board of Directors, by the votes indicated below, to serve for the ensuing
year.
<TABLE>
<CAPTION>
Shares in Shares
Name Favor Against
---- ----- -------
<S> <C> <C>
Zoltan J. Cendes, Ph.D. 6,853,354 25,700
Nicholas Csendes 6,853,354 25,700
Thomas A.N. Miller 6,853,354 25,700
Jacob K. White, Ph.D. 6,853,354 25,700
John N. Whelihan 6,851,354 25,700
</TABLE>
2. The appointment of KPMG Peat Marwick, LLP as the Company's independent
auditors for the fiscal year ending April 30, 1997 was ratified as
follows: 6,870,104 shares were voted in favor, 5,150 shares were voted in
opposition, and 3,800 votes abstained.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits filed as part of this Quarterly Report on Form 10-Q are
listed below and are incorporated herein by reference:
<TABLE>
<CAPTION>
Exhibit No.
<S> <C>
11.1 Statement regarding computation of per share earnings.
27.1 Financial Data Schedule.
</TABLE>
(b) The Company filed the following reports on Form 8-K during the period from
July 31, 1996 to October 31, 1996.
<TABLE>
<CAPTION>
Date
of Report Item Reported
--------- -------------
<S> <C>
August 9, 1996 Item 5. Other Events.
October 8, 1996 Item 6. Exhibits and Reports.
</TABLE>
Page 9
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date December 11, 1996
ANSOFT CORPORATION
By: /s/ Nicholas Csendes
--------------------------
Nicholas Csendes
President and Chief Executive Officer
By: /s/ Thomas A.N. Miller
--------------------------
Thomas A.N. Miller
Chief Financial Officer and Director
Page 10
<PAGE> 1
EXHIBIT 11.1
STATEMENT RE PER SHARE EARNINGS (1)
<TABLE>
<CAPTION>
Three months ended October 31, Six months ended October 31,
1996 1995 1996 1995
------ ------ ------- ------
<S> <C> <C> <C> <C>
Net income (loss) $ 333 $ 123 $(2,404) $ 214
====== ====== ======= ======
Common and Common Equivalent Shares:
Weighted average number of shares of
common stock outstanding 7,647 6,118 7,642 6,118
Weighted average common
equivalent shares outstanding 523 743 235 759
------ ------ ------- ------
Weighted average number of shares of
common and common equivalent
stock outstanding 8,170 6,861 7,878 6,877
====== ====== ======= ======
Net income (loss) per share $ 0.04 $ 0.02 $ (0.31) $ 0.03
====== ====== ======= ======
</TABLE>
(1) Fully diluted net income per share has not been separately presented, as
the amounts would not be materially different from primary net income per
share.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME FOR THE 6-MOS ENDED OCTOBER 31, 1996 AND THE
BALANCE SHEET AT OCTOBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000849433
<NAME> ANSOFT CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 386
<SECURITIES> 9,827
<RECEIVABLES> 2,487
<ALLOWANCES> 125
<INVENTORY> 0
<CURRENT-ASSETS> 4,491
<PP&E> 1,146
<DEPRECIATION> 133
<TOTAL-ASSETS> 17,828
<CURRENT-LIABILITIES> 5,900
<BONDS> 0
0
0
<COMMON> 77
<OTHER-SE> 11,851
<TOTAL-LIABILITY-AND-EQUITY> 17,828
<SALES> 4,811
<TOTAL-REVENUES> 5,652
<CGS> 0
<TOTAL-COSTS> 8,434
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,404)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,404)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,404)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> (0.31)
</TABLE>
