<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 January 31, 1997
[ ] 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 March 3, 1997 was 7,714,859.
<PAGE> 2
ANSOFT CORPORATION FORM 10-Q
INDEX
Part I FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - January 31, 1997
and April 30, 1996 1
Consolidated Statements of Operations - Three and nine months
ended January 31, 1997 and 1996 2
Consolidated Statements of Cash Flows - Nine months
ended January 31, 1997 and 1996 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 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>
January 31, April 30,
1997 1996
----------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 584 $10,728
Accounts receivable 2,791 1,666
Marketable Securities held to maturity 454 119
Deferred Taxes 700 700
Prepaid expenses and other assets 510 91
------- -------
Total current assets 5,039 13,304
Plant and Equipment 1,211 724
Marketable Securities held to maturity 11,110 1,340
Other asset 3 13
Intangible asset 2,783 10
------- -------
Total assets $20,146 $15,391
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Line of Credit $ 6,023 $ --
Accounts payable 246 345
Accrued expenses 511 131
Accrued wages 130 209
Deferred revenue 748 415
------- -------
Total current liabilities 7,658 1,100
Total liabilities 7,658 1,100
------- -------
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 7,715 and 7,636
shares, respectively 77 76
Additional paid-in capital 17,338 17,204
Accumulated deficit (4,927) (2,989)
------- -------
Total stockholders' equity 12,488 14,291
------- -------
Total liabilities and stockholders'
equity $20,146 $15,391
======= =======
</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 January 31, Nine months ended January 31,
1997 1996 1997 1996
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Revenues:
License $3,010 $2,066 $ 7,821 $5,636
Service and other 565 157 1,406 377
------ ------ ------- ------
Total revenue 3,575 2,223 9,227 6,013
Costs and expenses:
Sales and marketing 1,977 1,249 5,325 3,426
Research and development 720 415 1,967 1,258
General and administrative 578 370 1,363 922
In process research and development -- -- 3,054 --
------ ------ ------- ------
Total costs and expenses 3,275 2,034 11,709 5,606
------ ------ ------- ------
Income (loss) from
operations 300 189 (2,482) 408
Interest income 244 -- 676 --
Interest expense (77) (2) (131) (6)
------ ------ ------- ------
Income (loss) before income
taxes 467 187 (1,937) 402
Income taxes -- -- -- --
------ ------ ------- ------
Net income (loss) $ 467 $ 187 $(1,937) $ 402
====== ====== ======= ======
Net income (loss) per share $ 0.06 $ 0.03 $ (0.25) $ 0.06
====== ====== ======= ======
Weighted average shares
outstanding 8,184 6,832 7,864 6,850
====== ====== ======= ======
</TABLE>
See accompanying notes to the consolidated financial statements.
Page 2
<PAGE> 5
ANSOFT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine months ended January 31,
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,937) $ 402
Adjustments to reconcile net loss to
net cash provided by operating activities:
Purchased in process research and development 3,054 --
Depreciation 208 144
Amortization 292 18
Changes in assets and liabilities:
Accounts receivable (1,124) (235)
Prepaid expenses and other assets (62) (12)
Other long-term assets 10 --
Accounts payable (99) (13)
Accrued wages and expenses (190) 64
Deferred revenue 90 155
-------- -----
Net cash provided by operating activities 242 523
-------- -----
Cash flows from investing activities:
Purchases of plant and equipment (481) (280)
Acquisition of the EBU, net (5,600) --
Purchases of marketable securities
held to maturity (10,463) --
-------- -----
Net cash used in investing activities (16,544) (280)
-------- -----
Cash flows from financing activities:
Proceeds from line of credit 6,023 --
Payments on note payable -- (16)
Proceeds from the issuance of common stock, net 135 380
Proceeds from related party stockholders, net -- 103
-------- -----
Net cash provided by financing activities 6,158 467
-------- -----
Net increase (decrease) in cash and
cash equivalents (10,144) 710
Cash and cash equivalents at beginning of period 10,728 116
-------- -----
Cash and cash equivalents at end of period 584 826
======== =====
Supplemental disclosures of cash flow information:
Cash paid for interest $ 131 $ 5
======== =====
Cash paid for income taxes $ 36 $ 2
======== =====
</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>
Nine months ended January 31,
1997 1996
------------ ------------
(In thousands)
<S> <C> <C>
Revenue..................................... $ 9,879 $8,727
Net income (loss)........................... $(1,831) $1,178
Net income (loss) per share................. $ (0.23) $ 0.17
</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 2% 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 January 31, 1997, the outstanding balance was $ 6 million and the interest
rate charged was 6%. The availability of the unused line of credit,
approximately $775,000 as of January 31, 1997, 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 January 31, Nine months ended January 31,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
License 84% 93% 85% 94%
Service and other 16 7 15 6
--- --- --- ---
Total revenue 100 100 100 100
Costs and expenses:
Sales and marketing 55 56 58 57
Research and development 21 19 21 21
General and administrative 16 17 15 15
In process research and development -- -- 33 --
--- --- --- ---
Total costs and expenses 92 92 127 93
--- --- --- ---
Income (loss) from
operations 8 8 (27) 7
Interest income 7 -- 7 --
Interest expense (2) -- (1) --
--- --- --- ---
Income (loss) before income
taxes 13 8 (21) 7
Income taxes -- -- -- --
--- --- --- ---
Net income (loss) 13% 8% (21)% 7%
=== === === ===
</TABLE>
Comparison of The Three and Nine Months Ended January 31, 1997 and 1996
Revenue. Total revenue for the three month period ended January 31,
1997 increased 61% over the same period in the previous fiscal year. Total
revenue for the nine month period ended January 31, 1997 increased 53% 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 40% and 29% of the Company's total
revenue in the three month period ended January 31, 1997 and 1996,
respectively. International revenue accounted for 37% and 32% of the Company's
total revenue in the nine month period ended January 31, 1997 and 1996,
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
("HP") for wolrdwide distribution of its HFSS product. Revenue from the HP
agreement accounted for 11% and 15% revenue in the three month period ended
January 31, 1997 and 1996, respectively. Revenue from the HP agreement
accounted for 12% and 13% revenue in the nine month period ended January 31,
1997 and 1996, respectively. The HP Agreement expired 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 58% to $2.0 million in the three month period
ended January 31, 1997, as compared to $1.2 million in the same period in the
previous fiscal year. Sales and marketing expenses increased by 55% to $5.3
million in the nine month period ended January 31, 1997, as compared to $3.4
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 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
73% to $720,000 in the three month period ended January 31, 1997, as compared
to $415,000 in the same period in the previous fiscal year. Research and
development expenses increased 56% to $2.0 million in the nine month period
ended January 31, 1997, as compared to $1.3 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 56% to $578,000 in the three month period ended January 31, 1997, as
compared to $370,000 in the same period in the previous fiscal year. General
and administrative expenses increased 48% to $1.4 million in the nine month
period ended January 31, 1997, as compared to $922,000 in the same period in
the previous fiscal year. The increase is primarily attributed to amortization
expense of $136,000 per quarter 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 January 31, 1997, the Company had $584,000 in cash and cash
equivalents. Net cash provided by operating activities was $242,000 in the nine
month period ending January 31, 1997. Net cash used in investing activities was
$16.5 million in the nine month period ending January 31, 1997, consisting
primarily of the purchase of marketable securities held to maturity of $10.5
million and the acquisition of the EBU for $5.6 million. Net cash provided by
financing activities consisted primarily of $6.0 million in proceeds received
on the Company's line of credit which was used primarily as part of the cash
payment for the acquisition.
As of January 31, 1997, the Company had a net working capital of $(2.6)
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 January 31,
1997, $6.0 million was outstanding under the line of credit with approximately
$775,000 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 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:
Exhibit No.
11.1 Statement regarding computation of per share earnings.
27.1 Financial Data Schedule.
(b) The Company filed the following reports on Form 8-K during the period from
October 31, 1996 to January 31, 1997.
None
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 March 5, 1997
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 January 31, Nine months ended January 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ 467 $ 187 $(1,937) $ 402
====== ====== ======= ======
Common and Common Equivalent Shares:
Weighted average number of shares of
common stock outstanding 7,689 6,118 7,658 6,118
Weighted average common
equivalent shares outstanding 495 714 206 732
------ ------ ------- ------
Weighted average number of shares of
common and common equivalent
stock outstanding 8,184 6,832 7,864 6,850
====== ====== ======= ======
Net income (loss) per share $ 0.06 $ 0.03 $ (0.25) $ 0.06
====== ====== ======= ======
</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 IMFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME FOR THE 9-MONTHS ENDED JANUARY 31, 1997 AND THE
BALANCE SHEET AT JANUARY 31, 1997 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> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 584
<SECURITIES> 11,564
<RECEIVABLES> 2,916
<ALLOWANCES> 125
<INVENTORY> 0
<CURRENT-ASSETS> 5,039
<PP&E> 1,211
<DEPRECIATION> 208
<TOTAL-ASSETS> 20,146
<CURRENT-LIABILITIES> 7,658
<BONDS> 0
0
0
<COMMON> 77
<OTHER-SE> 12,411
<TOTAL-LIABILITY-AND-EQUITY> 20,146
<SALES> 7,821
<TOTAL-REVENUES> 9,227
<CGS> 0
<TOTAL-COSTS> 11,709
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,937)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,937)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,937)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
