<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 July 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 September 5, 1997 was 8,994,987.
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ANSOFT CORPORATION
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - July 31, 1997
and April 30, 1997 1
Consolidated Statements of Operations - Three months
ended July 31, 1997 and 1996 2
Consolidated Statements of Cash Flows - Three months
ended July 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 5
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
</TABLE>
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANSOFT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
July 31, April 30,
1997 1997
------- -------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 834 $ 312
Accounts receivable 4,277 4,129
Marketable securities -- 55
Deferred income taxes 450 320
Prepaid expenses and other assets 532 282
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Total current assets 6,093 5,098
Plant and equipment 2,166 1,995
Marketable securities 4,785 7,095
Other asset 78 3
Deferred taxes - non current 840 800
Intangible asset 6,647 6,960
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Total assets $20,609 $21,951
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Line of Credit $ 2,487 $ 4,208
Accounts payable 416 149
Accrued expenses 335 1,017
Accrued wages 175 500
Deferred revenue 1,282 1,160
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Total current liabilities 4,695 7,034
Total liabilities 4,695 7,034
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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 8,989 and 7,636
shares, respectively 90 90
Additional paid-in capital 24,315 24,310
Net unrecognized gain (loss) on
marketable securities 203 (44)
Accumulated deficit (8,694) (9,439)
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Total stockholders' equity 15,914 14,917
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Total liabilities and stockholders' equity $20,609 $21,951
======= =======
</TABLE>
See accompanying notes to the consolidated financial statements.
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ANSOFT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended July 31,
1997 1996
------ ------
<S> <C> <C>
Revenues:
License $4,016 $ 1,961
Service and other 1,319 357
------ -------
Total revenue 5,335 2,318
Costs and expenses:
Sales and marketing 2,557 1,429
Research and development 1,510 498
General and administrative 470 294
Amortization 314 --
In process research and development (1) -- 3,054
------ -------
Total costs and expenses 4,851 5,275
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Income (loss) from operations 484 (2,957)
Interest income, net 91 220
------ -------
Income (loss) before income taxes 575 (2,737)
Income taxes benefit 170 --
------ -------
Net income (loss) $ 745 $(2,737)
====== =======
Net income (loss) per share $ 0.08 $ (0.35)
====== =======
Weighted average shares
outstanding 9,621 7,907
====== =======
</TABLE>
(1) On July 24, 1996, Ansoft acquired MSC's EBU. The allocation of the
estimated fair value of the net assets acquired resulted in an in process
research and development charge of $3.1 million because certain acquired
technology had not reached technological feasibility.
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ANSOFT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three months ended July 31,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 745 $ (2,737)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Purchased in process research and development -- 3,054
Depreciation 120 58
Amortization 313 6
Changes in assets and liabilities:
Accounts receivable (148) (155)
Prepaid expenses and other assets (250) 7
Other long-term assets (75) 10
Deferred taxes (170) --
Accounts payable 267 (25)
Accrued wages and expenses (1,007) (152)
Deferred revenue 122 --
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Net cash provided by operating activities (83) 66
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Cash flows from investing activities:
Purchases of plant and equipment (291) (145)
Acquisition of the EBU, net -- (5,600)
Sale (purchase) of marketable securities
available for sale, net 2,612 (7,949)
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Net cash used in investing activities 2,321 (13,694)
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Cash flows from financing activities:
Proceeds from (payments on) line of credit, net (1,721) 3,300
Payments on note payable -- --
Proceeds from the issuance of common stock, net 5 6
------- --------
Net cash provided by (used in) financing activities (1,716) 3,306
------- --------
Net increase (decrease) in cash and
cash equivalents 522 (10,322)
Cash and cash equivalents at beginning of period 312 10,728
------- --------
Cash and cash equivalents at end of period $ 834 $ 406
======= ========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 69 $ --
======= ========
Cash paid for income taxes $ 13 $ 8
======= ========
</TABLE>
See accompanying notes to the consolidated financial statements.
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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, 1997 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) 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
July 31, 1997, the outstanding balance was $2.5 million and the interest rate
charged was 6.5%. The availability of the unused line of credit, approximately
$684,000 as of July 31, 1997, is subject to certain borrowing base requirements.
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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 and acquired 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, 1997.
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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 July 31,
1997 1996
---- ----
<S> <C> <C>
Revenues:
License 75% 85%
Service and other 25 15
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Total revenue 100 100
Costs and expenses:
Sales and marketing 48 62
Research and development 28 21
General and administrative 9 12
Amortization 6 --
In process research and development -- 132
----- -----
Total costs and expenses 91 227
----- -----
Income (loss) from
operations 9 (127)
Interest income, net 2 9
----- -----
Income (loss) before income
taxes 11 (118)
Income taxes 3 --
----- -----
Net income (loss) 14% (118)%
===== =====
</TABLE>
Comparison of The Three Months Ended July 31, 1997 and 1996
Revenue. Total revenue for the first quarter of fiscal 1997 increased 130%
over the same quarter 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. The increase in service
and other revenue is 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 as
well as an increase in revenue recognized under research and development cost
sharing agreements.
International revenue accounted for 55% and 38% of the Company's total
revenue in the first quarter of fiscal 1997 and 1996, respectively.
The Company has a non-exclusive distribution agreement with Hewlett-Packard
("HP") for worldwide distribution of its HFSS product. Revenue from the HP
agreement accounted for 7% and 16% revenue in the first quarter of fiscal 1997
and 1996, respectively. The HP Agreement expired in January 1997, and will not
be renewed. HP has the non-exclusive right to sell the HFSS product through
January 1998. The Company expects that HP will account for a decreasing
percentage of its total revenues over the next six months. The Company directly
markets its HFSS product 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 consolidated financial
condition or results of operations.
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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 for the first quarter of fiscal 1997 increased 79% over the
same quarter 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 fiscal 1997 acquisitions. Sales and marketing expenses
represented 48% and 62% of total revenue in the first quarter of fiscal 1997
and 1996, respectively. 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 for the
first quarter of fiscal 1997 increased 203% over the same quarter 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. Research and
development expenses represented 28% and 21% of total revenue in the first
quarter of fiscal 1997 and 1996, respectively. The Company anticipates that it
will continue to devote substantial resources to product research and
development.
General and Administrative Expenses. General and administrative expenses
for the first quarter of fiscal 1997 increased 60% over the same quarter in the
previous fiscal year. The increase is due to additional costs required to
support the increase in operations, including the hiring of additional
administrative personnel, along with other general cost increases. General and
administrative expenses represented 9% and 12% of total revenue in the first
quarter of fiscal 1997 and 1996, respectively.
Amortization. Amortization expense of $314,000 was recognized as a result
of the amortization of the intangible assets acquired during fiscal 1997.
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 July 31, 1997, the Company had $834,000 in cash and cash equivalents.
Net cash used in operating activities was $83,000 in the first quarter of fiscal
1998. Net cash provided by investing activities was $2.3 million, consisting
primarily of the sale of marketable securities of $2.6 million. Net cash
provided by financing activities consisted primarily of the repayment of $1.7
million on the Company's line of credit.
As of July 31, 1997, the Company had a net working capital of $1.4 million.
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 July 31, 1997,
$2.5 million was outstanding under the line of credit with approximately
$684,000 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.
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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
April 30, 1997 to July 31, 1997.
<TABLE>
<CAPTION>
Date
of Report Item Reported
--------- -------------
<S> <C>
June 26, 1997 Item 7. Financial Statements and Exhibits.
</TABLE>
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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 September 12, 1997
ANSOFT CORPORATION
By: /s/ NICHOLAS CSENDES
-------------------------------------
Nicholas Csendes
President and Chief Executive Officer
By: /s/ ANTHONY L. RYAN
-------------------------------------
Anthony L. Ryan
Chief Financial Officer
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EXHIBIT 11.1
STATEMENT RE PER SHARE EARNINGS (1)
<TABLE>
<CAPTION>
Three months ended July 31,
1997 1996
------ --------
<S> <C> <C>
Net income (loss) $ 745 $(2,737)
====== =======
Common and Common Equivalent Shares:
Weighted average number of shares of
common stock outstanding 8,989 7,636
Weighted average common
equivalent shares outstanding 632 271
------ -------
Weighted average number of shares of
common and common equivalent
stock outstanding 9,621 7,907
------ -------
Net income (loss) per common share $ 0.08 $ (0.35)
====== =======
</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 3-MOS ENDED JULY 31, 1997 AND THE
BALANCE SHEET AT JULY 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> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 834
<SECURITIES> 4,785
<RECEIVABLES> 4,277
<ALLOWANCES> 125
<INVENTORY> 0
<CURRENT-ASSETS> 6,093
<PP&E> 2,166
<DEPRECIATION> 120
<TOTAL-ASSETS> 20,609
<CURRENT-LIABILITIES> 4,695
<BONDS> 0
0
0
<COMMON> 90
<OTHER-SE> 15,824
<TOTAL-LIABILITY-AND-EQUITY> 20,609
<SALES> 4,016
<TOTAL-REVENUES> 5,335
<CGS> 0
<TOTAL-COSTS> 4,851
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 575
<INCOME-TAX> (170)
<INCOME-CONTINUING> 745
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> 745
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
