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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000950132-02-000032.txt : 20020415
<SEC-HEADER>0000950132-02-000032.hdr.sgml : 20020415
ACCESSION NUMBER: 0000950132-02-000032
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20011231
FILED AS OF DATE: 20020322
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ANSYS INC
CENTRAL INDEX KEY: 0001013462
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372]
IRS NUMBER: 043219960
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-20853
FILM NUMBER: 02582506
BUSINESS ADDRESS:
STREET 1: 275 TECHNOLOGY DRIVE, SOUTHPOINTE
CITY: CANONSBURG
STATE: PA
ZIP: 15317
BUSINESS PHONE: 4127643304
MAIL ADDRESS:
STREET 1: 275 TECHNOLOGY DRIVE, SOUTHPOINTE
CITY: CANONSBURG
STATE: PA
ZIP: 15317
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>d10k405.txt
<DESCRIPTION>FORM 10-K405
<TEXT>
<PAGE>
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, 2001
[ ] 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 12, 2002 as reported on the NASDAQ National Market, was approximately
$342,232,472. 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 12, 2002 was 14,701,332 shares.
===============================================================================
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year ended
December 31, 2001 are incorporated by reference into Parts I, II and IV.
Portions of the Proxy Statement for the Registrant's 2002 Annual Meeting of
Stockholders to be held on May 9, 2002 are incorporated by reference into Part
III.
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 20 through 29 of the Company's 2001 Annual Report to
Stockholders. All information presented is as of December 31, 2001, unless
otherwise indicated.
PART I
ITEM 1: BUSINESS
ANSYS, Inc., founded in 1970 as Swanson Analysis Systems, Inc., develops and
globally markets engineering simulation software used by designers and engineers
across a broad spectrum of industries, including aerospace, automotive,
manufacturing, nuclear, electronics and biomedical. The Company develops open
and flexible simulation solutions that enable users to simulate design
performance, providing a common platform for fast, efficient and cost-effective
product development, from design concept to final-stage testing and performance
validation. The Company distributes its ANSYS(R), DesignSpace(R),
AI*Solutions(TM), ICEM CFD Engineering and CADOE products and technologies
through a network of channel partners in 37 countries, in addition to its own
direct sales offices in strategic locations throughout the world.
The Company's major product lines are described as follows:
ANSYS(R) Software Suite
- -------------------------
Incorporating design simulation and virtual prototyping into a product
development process is critical for all product development organizations.
Virtual product simulation minimizes costs and improves time-to-market by
allowing all necessary structural, thermal, electromagnetic and fluid-flow
design tests to be conducted within a virtual environment. For more than 30
years, the Company has developed the ANSYS software suite, the most
comprehensive, technologically advanced package to address the varied simulation
needs of all industries. Product teams can determine the real-world behavior of
3-D product designs, including the effects of multiple physics for added
accuracy and product reliability.
DesignSpace(R) Software Suite
- -------------------------------
DesignSpace is a powerful, yet easy-to-use simulation software package that
gives product designers and engineers the ability to conceptualize, design and
validate all of their ideas on their desktops. This streamlined, user-friendly
simulation tool gives designers and engineers the ability to perform real-world
structural, thermal, dynamic, weight optimization, performance optimization,
vibration mode and safety factor simulations on their designs.
2
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<PAGE>
ICEM CFD Engineering Software Suite
- -----------------------------------
ICEM CFD software products are utilized in the pre- and post-processing of
engineering applications such as computational fluid dynamics (CFD) and
structural analysis. The major products in this suite include ICEM CFD, the
leading software for 3-D grid generation for CFD, and Icepak, an electronics
cooling simulation system created in collaboration with Fluent, Inc.
AI*Solutions Software Suite
- ---------------------------
Introduced in 2001, the AI*Solutions software suite combines state-of-the-art
technology from ICEM CFD Engineering with the expertise of the ANSYS software
suite to provide product development teams with the latest simulation products
and technology platforms.
CADOE Software Suite
- --------------------
During 2001, the Company acquired CADOE S.A. (CADOE), a leading-edge independent
software vendor that specializes in the computer-aided design (CAD) and
computer-aided engineering (CAE) markets. Based in Lyon, France, CADOE develops
unique and innovative industrial solutions for parametric analysis and
optimization that can be applied to many disciplines, including computational
fluid dynamics, structural analysis, electromagnetism and acoustics.
Additionally, CADOE offers a unique collaborative engineering product that
provides analysis results in a format understandable by design engineers,
facilitating collaboration between designers and analysis specialists.
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 full product line with new functional modules,
further integration with CAD and product lifecycle management (PLM) 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
and operating systems, including Windows 2000, Windows NT, Linux and most UNIX
workstations.
During 2001, the Company completed the following major product development
activities and releases:
. The release of DesignSpace 6.0. This enhanced version of DesignSpace allows
product designers and engineers to quickly move their designs through the
product development cycle. This release incorporates new enhancements such
as surface model simulation, non-linear contact and parametric simulation
that accelerate the product development cycle and lay the foundation for
collaborative engineering.
. The release of ANSYS 6.0, a new and enhanced version of the Company's
flagship multiphysics product, and all component products. ANSYS 6.0 has
enhanced virtual product simulation capabilities designed to minimize costs
and improve time to market by allowing all necessary structural, thermal,
electromagnetic and fluid-flow design tests to be conducted within a
virtual environment. Product teams can better determine the real-world
behavior of 3-D product designs, including the effects of multiple physics
for added accuracy and product reliability. This release also incorporates
a new Probabilistic Analysis Method Wizard that simplifies the determining
process for the appropriate probabilistic analysis method, and a Shell
Section builder that eases the definition of layered composite elements.
3
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<PAGE>
. The introduction of the AI*Solutions software suite includes the
following new products:
. AI*Workbench, an open and flexible application development
technology platform that enables customers and partners to create
customer- and industry-specific engineering simulation solutions
to meet their specific needs.
. AI*EMAX, a family of high-frequency electromagnetic analysis
products for the electronics industry that supports the
functionality to analyze RF/microwave passive components and
circuits, electromagnetic interference and compatibility
(EMI/EMC), antenna design, and object identification.
. AI*Environment, the next generation of general pre- and
post-processing tools for mechanical engineering. AI*Environment
includes the industry's leading meshing technologies from the
Company's ICEM CFD Engineering subsidiary.
The Company's total research and development expense was $16.9 million, $14.5
million and $13.5 million in 2001, 2000 and 1999, or 19.9%, 19.5% and 21.3% of
total revenue, respectively. As of December 31, 2001, the Company's product
development staff consisted of 169 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 2001, the Company enhanced its ISO 9001 quality system and achieved ISO
9001:2000 certification. This standard applies to the ANSYS, DesignSpace and
AI*Solutions software suite products, and covers all product-related activities,
from establishing product requirements to customer service practices and
procedures.
In accordance with the ISO 9001:2000 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 products through its global ASD and
reseller network, as well as through its own strategic direct sales offices.
This network provides the Company with a cost-effective, highly specialized
channel of distribution and technical support. Approximately 57% of the
Company's total revenue in 2001 was derived through the ASD and reseller
network.
At December 31, 2001, the ASD network consisted of 30 independent distributors
in 37 countries, including 13 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 expanding product lines and provide an acceptable level of training,
consultation and customer support.
4
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<PAGE>
The Company also has a direct sales management infrastructure in place to
develop an 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 strategic locations through the presence of
direct sales offices. As of December 31, 2001, a Vice President of Sales and
Support, with a supporting North American Vice President of Sales, a European
Vice President of Sales, and an International Vice President of Sales, headed
the Company's sales management organization. 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 2001, the Company continued to invest in its existing domestic and
international strategic sales offices and established a new sales office in
India during the latter part of 2001. In total, the Company's direct sales
offices employ 96 persons, who are responsible for the sales, marketing
initiatives and administrative activities in those geographic areas designed to
support the Company's overall revenue growth and market share expansion
strategies.
During 2001, 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, 2001, the Company had signed agreements with over 200 resellers.
The resellers are required to have appropriately trained marketing and technical
personnel.
The Company's products have an installed base of approximately 74,000 seats at
commercial sites and approximately 126,000 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 10% of the Company's revenue in 2001.
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, 2001 ("2001 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.
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, CAD and PLM providers. The Company believes
these relationships allow accelerated incorporation of advanced technology into
the ANSYS, DesignSpace, AI*Solutions, ICEM CFD and CADOE product families,
provide 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, Dassault Systemes and
Electronic Data Systems to provide direct links between products. These links
facilitate the transfer of electronic data models between the CAD system and
ANSYS products.
In 2001, the Company announced a strategic OEM partnership with SAS LLC, a
provider of NASTRAN simulation software and services. This global alliance will
be focused on the joint development of a new NASTRAN computer-aided engineering
solution that will be distributed exclusively by the Company. The solution will
integrate the technologies of ANSYS, Inc., CADOE S.A., ICEM CFD Engineering and
SAS LLC to provide users with a comprehensive NASTRAN product.
The Company has established relationships with leading suppliers of computer
hardware, including Hewlett-Packard, Compaq, SGI, Sun Microsystems, 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 platforms.
The Company's Enhanced Solution Partner 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
Partners' products is accompanied by the sale of an ANSYS product.
5
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<PAGE>
The Company has a software license agreement with Livermore Software Technology
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.
The Company has a software license agreement with International Technology
Group, Inc. (ITI) under which ITI provides CADfix software and associated tools
and utilities aimed at improving the success of transferring geometry from
multiple CAD programs to ANSYS software products. Under this agreement, ITI
assists in the integration of CADfix software with the Company's products and
provides updates and problem resolution in return for a share of revenue from
sales of CADfix for ANSYS.
The Company also partners with SimUtility, Inc. to provide the e-CAE ASP program
via e-CAE.com. This program provides a mechanism for running large ANSYS
simulations on parallel compute servers at a remote data center site using the
Internet or dedicated lines. The system has been developed to allow users the
ability to submit jobs in a "batch" style of computing, with specific controls
on job execution parameters, and is ideal for users who require occasional
"surge" capacity for time critical simulations or periodic simulations of large
models.
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 and PLM suppliers such as Parametric Technology
Corporation, Electronic Data Systems 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.
The Company believes that the principal competitive factors affecting its market
include ease of use; breadth and depth of functionality; 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.
6
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<PAGE>
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 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 through the ASDs and the reseller channel,
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 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 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.
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 was awarded a patent by the U.S. Patent and
Trademark Office for its web-based reporting technology.
The employees of the Company have signed covenant agreements 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 are 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 does not believe 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.
7
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<PAGE>
EMPLOYEES
As of December 31, 2001, the Company had approximately 450 full-time employees.
At that date, there were also approximately 30 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 feet
office facility in Canonsburg, Pennsylvania, which was leased for an annual rent
of approximately $1,227,000 in 2001. This annual rent will increase to
approximately $1,354,000 in 2002. The Company also leases office space in
various locations throughout the world. The Company'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 its business activities. These proceedings currently
include customary audit activities by various taxing authorities. Each of these
matters is subject to various uncertainties, and it is possible that these
matters may be resolved unfavorably to the Company.
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 2001.
8
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<PAGE>
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 49
and the section captioned "Corporate Information" appearing in the Company's
2001 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 2001 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 20
through 29 of the Company's 2001 Annual Report to Stockholders, including the
Important Factors Regarding Future Results.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has no long-term debt obligations. Approximately 7% of the Company's
total assets as of December 31, 2001 were denominated in currencies other than
the U.S. Dollar. Accordingly, the Company has no material exposure to foreign
currency exchange risk. This materiality assessment is based on the assumption
that the foreign currency exchange rates could change unfavorably by 10%. The
Company has no foreign currency exchange contracts.
Based on the nature of the Company's business, it has no direct exposure to
commodity price risk.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to pages 30
through 47 of the Company's 2001 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 2002 Proxy
Statement and is set forth under "Information Regarding Directors" and
"Executive Officers" therein.
ITEM 11: EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Company's 2002 Proxy Statement and is set forth under "Executive Compensation"
therein.
9
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<PAGE>
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Company's 2002 Proxy Statement and is set forth under "Principal and Management
Stockholders" therein.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
Company's 2002 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
and report of independent accountants are incorporated by reference
to pages 30 through 47 of the Company's 2001 Annual Report to
Stockholders:
- Report of Independent Accountants
- Consolidated Balance Sheets as of December 31, 2001 and 2000
- Consolidated Statements of Income for the years ended
December 31, 2001, 2000 and 1999
- Consolidated Statements of Cash Flows for the years ended
December 31, 2001, 2000 and 1999
- Consolidated Statements of Stockholders' Equity for the
years ended December 31, 2001, 2000 and 1999
- Notes to Consolidated Financial Statements
2. Financial Statement Schedules: The following financial statement
schedule and report of independent accountants are filed on pages 14
through 15 of this Annual Report on Form 10-K and should be read in
conjunction with the consolidated financial statements.
Report of Independent Accountants on Financial Statement Schedule
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 on Form 10-K.
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the fourth quarter of
fiscal year 2001.
10
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<PAGE>
(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 13 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.
11
===============================================================================
<PAGE>
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 18, 2002 By: /s/ James E. Cashman III
--------------------------------------------
James E. Cashman III
President and Chief Executive Officer
Date: March 18, 2002 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 Annual
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 18, 2002
- ------------------------ (Principal Executive Officer)
James E. Cashman III
/s/ Maria T. Shields Chief Financial Officer, Vice President, March 18, 2002
- -------------------- 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 18, 2002
/s/ Jacqueline C. Morby Director March 18, 2002
- -----------------------
Jacqueline C. Morby
/s/ Roger J. Heinen, Jr.
- ------------------------
Roger J. Heinen, Jr. Director March 18, 2002
/s/ John F. Smith Director March 18, 2002
- -----------------
John F. Smith
/s/ Patrick Zilvitis Director March 18, 2002
- --------------------
Patrick Zilvitis
/s/ Bradford C. Morley Director March 18, 2002
- ----------------------
Bradford C. Morley
</TABLE>
12
===============================================================================
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Exhibit
----------- -------
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 ANSYS, Inc. 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 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). *
10.5 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).
10.6 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). *
10.7 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). *
10.8 Agreement and Plan of Merger among ANSYS, Inc.,
GenesisOne Acquisition Corporation, Pacific Marketing
and Consulting, Inc. (PMAC) and the PMAC stockholders
(filed as Exhibit 2.1 to the Company's Current Report
on Form 8-K, dated September 13, 2000 and incorporated
herein by reference).
10.9 Employment Agreement between the Registrant and James
E. Cashman III dated as of March 29, 2001; filed
herewith. *
13.1 Annual Report to Stockholders for the fiscal year ended
December 31, 2001 (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 Consent of PricewaterhouseCoopers LLP relating to the
report of independent accountants on the consolidated
financial statements of ANSYS, Inc.; filed herewith.
23.2 Consent of PricewaterhouseCoopers LLP relating to the
report of independent accountants on the financial
statements of the ANSYS, Inc. Employee Stock Purchase
Plan; filed herewith.
24.1 Powers of Attorney. Contained on page 11 of this Annual
Report on Form 10-K and incorporated herein by
reference.
99 ANSYS, Inc. Employee Stock Purchase Plan Annual Report
---------- on Form 11-K.
* Indicates management contract or compensatory plan,
contract or arrangement.
===============================================================================
<PAGE>
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors of
ANSYS, Inc.
Our audits of the consolidated financial statements referred to in our report
dated January 30, 2002 appearing in the 2001 Annual Report to Shareholders of
ANSYS, Inc. (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 30, 2002
===============================================================================
<PAGE>
SCHEDULE II
ANSYS, INC.
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Balance at Additions - Deductions - Balance
Beginning Charges to Costs Returns and at End
Description of Year and Expenses Write-Offs of Year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31, 2001
Allowance for doubtful accounts $2,350,000 $368,000 $1,108,000 $1,610,000
Year ended December 31, 2000
Allowance for doubtful accounts $1,700,000 $739,000 $ 89,000 $2,350,000
Year ended December 31, 1999
Allowance for doubtful accounts $1,900,000 $464,000 $ 664,000 $1,700,000
</TABLE>
15
===============================================================================
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.9
<SEQUENCE>3
<FILENAME>dex109.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT (CASHMAN)
<TEXT>
<PAGE>
EXHIBIT 10.9
February 7, 2002
James E. Cashman III
c/o ANSYS, Inc.
Southpointe
275 Technology Drive
Canonsburg, PA 15317
Dear Jim:
Per our discussions and on behalf of the Board of Directors, I am pleased to
confirm the following details of your compensation package:
BASE SALARY: For FY2002, you will be paid a base salary
of $300,000.00 per annum, effective January 1, 2002.
BONUS: Your annual target bonus for achieving agreed upon
objectives is $200,000.00. Such objectives will be
specified by the Board of Directors of ANSYS, Inc.
(The Board) and shall be mutually agreed upon. Your
performance against agreed upon objectives will be
reviewed semi annually (July 2002 and January 2003)
to determine appropriate bonus payment amount. The
Board may, in its discretion, award additional
bonus compensation for exceptional performance.
STOCK OPTIONS: You will be granted eighty thousand (80,000) stock
option shares.
VACATION: You are eligible for 20 days of vacation per annum.
Unused vacation time in any year, not to exceed 20
days on an aggregate and cumulative basis, may
accumulate for later use, subject to the
establishment of arrangements mutually satisfactory
to you and The Board. Upon termination, you shall
receive Base Salary in respect of each day of
accrued, but, unused vacation time, not to exceed
20 days.
CAR ALLOWANCE: You are eligible for a car allowance of $600.00 per
month and you shall be reimbursed for all gas, oil,
maintenance and insurance.
LIFE INSURANCE: ANSYS, Inc. will purchase on your behalf a term life
insurance policy providing a death benefit of
$2,000,000.00 in the event of your death and naming
such person or persons as you may designate as loss
payee or payees. The obligation to purchase and
maintenance of such life insurance policy, however,
shall be contingent upon your satisfactory
completion of all requirements in connection
therewith including without limitation a physical
examination. The annual premium payments for such
policy shall not exceed $10,000.00.
================================================================================
<PAGE>
JAMES E. CASHMAN III (CONTINUED) PAGE 2
TERMINATION: In the event of your "mutual consent" termination or
"involuntary" termination, except for "cause",
(definitions provided on attached document), ANSYS,
Inc. shall make payments at the rate of $300,000.00
per annum, subject to withholding to the extent
applicable, with such payments to be made
semi-monthly, in equal installments until the first
anniversary of the date of termination. ANSYS, Inc.
shall continue existing benefits (other than plans
that you may not participate as a matter of law
following the termination of employment) until the
first anniversary of the date of termination.
Additional termination contingencies to qualify for
provisions outlined in this document, include your
full and complete cooperation on all matters
pertaining to ANSYS, Inc. business, including but
not exclusive of press announcements, and legal
proceedings, etc. You will be held to all of the
provisions of the ANSYS, Inc. Employee Agreement
Regarding Inventions, Confidentiality and
Competitive Activities signed, by you, on September
9, 1997.
CHANGE OF CONTROL: In the case of (a) the dissolution or liquidation of
the Company, (b) a merger, reorganization or
consolidation in which the Company is acquired by
another person or entity (other than a holding
company formed by the Company), (c) the sale of all
or substantially all of the assets of the Company
to another person or entity, or (d) the sale of all
of the outstanding stock of the Company to an
unrelated person or entity (in each case, a
"Transaction"), all assigned Stock Options shall
become fully vested upon the effective day of the
Transaction. These Stock Options shall terminate on
the effective date of the Transaction, unless
provision is made in the Transaction in the sole
discretion of the parties thereto for the
assumption of these Stock Options or the
substitution for these Stock Options of a new stock
option of the successor person or entity or a
parent or subsidiary thereof, with appropriate
adjustment as to the number and kind of shares and
the per share exercise price. In the event of such
termination, the Company shall give to the Optionee
written notice thereof at least fifteen (15) days
prior to the effective date of the Transaction.
During this fifteen-day period, the Optionee may
deliver to the Company a notice of exercise with
respect to all or any portion of such Stock
Options, including any portion that will become
fully vested upon the effective day of the
Transaction; provided, however, that (i) such
exercise shall be subject to the consummation of
the Transaction and (ii) the Optionee shall not be
required to deliver to the Company the exercise
price for such exercised stock option until the
effective date of such Transaction. After such
effective date and the termination of stock options
as set forth above, the Optionee may not exercise
Stock Options.
COMPENSATION REVIEW: The Board will review your base salary and bonus
amounts at least annually (and not later than the
anniversary of this document) and may at their sole
discretion adjust the same for the ensuing year.
Jim, your contribution to the success of ANSYS, Inc. and the Board of
Director's desire to ensure you are rewarded for your efforts has driven the
development of the above outlined provisions. Please recognize our appreciation
for all you have and will continue to do for ANSYS, Inc.
Sincerely,
/s/ Peter J. Smith
Chairman
================================================================================
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.1
<SEQUENCE>4
<FILENAME>dex131.txt
<DESCRIPTION>ANNUAL REPORT
<TEXT>
<PAGE>
EXHIBIT 13.1
FINANCIAL HIGHLIGHTS
Year Ended December 31,
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
(in thousands, except per share data) 2001 2000 1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $ 84,836 $ 74,467 $ 63,139 $ 56,553 $ 50,547
- --------------------------------------------------------------------------------------------
Operating income 18,548 19,579 17,243 15,206 10,731
- --------------------------------------------------------------------------------------------
Net income 13,692 16,310 14,751 11,349 7,400
- --------------------------------------------------------------------------------------------
Net income per
common share - basic .94 1.03 .90 .71 .47
- --------------------------------------------------------------------------------------------
Weighted average
shares - basic 14,554 15,804 16,366 16,052 15,742
- --------------------------------------------------------------------------------------------
Net income per
common share - diluted .89 1.00 .88 .68 .45
- --------------------------------------------------------------------------------------------
Weighted average
shares - diluted 15,438 16,269 16,689 16,581 16,518
- --------------------------------------------------------------------------------------------
Net income before acquisition-related
amortization /(1)/ 17,144 17,723 14,751 11,349 7,400
- --------------------------------------------------------------------------------------------
Adjusted earnings per share - diluted /(1)/ 1.11 1.09 .88 .68 .45
- --------------------------------------------------------------------------------------------
Total assets /(2)/ $ 117,762 $101,120 $ 89,174 $ 72,146 $ 59,498
- --------------------------------------------------------------------------------------------
Working capital 40,033 40,046 52,655 38,049 23,761
- --------------------------------------------------------------------------------------------
Long-term obligations - - - - -
- --------------------------------------------------------------------------------------------
Stockholders' equity 74,393 69,364 65,631 52,367 40,414
- --------------------------------------------------------------------------------------------
</TABLE>
/(1)/ Adjusted net income and adjusted earnings per share represent net income
and earnings per share determined in accordance with generally accepted
accounting principles, excluding amortization expense, net of related income
tax benefit, associated with intangible assets and goodwill resulting from
business combinations accounted for under the purchase method.
/(2)/ Certain amounts have been reclassified from previously reported amounts
for 1997-2000 to conform to 2001 presentation.
<PAGE>
2001 FINANCIAL CONTENT
Management's Discussion and Analysis of
Financial Condition and Results of Operations 20
Report of Independent Accountants 30
Consolidated Balance Sheets 31
Consolidated Statements of Income 32
Consolidated Statements of Cash Flows 33
Consolidated Statements of Stockholders' Equity 34
Notes to Consolidated Financial Statements 36
Quarterly Financial Information (Unaudited) 48
Corporate Information 49
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
ANSYS Inc. (the "Company" or "ANSYS"), founded in 1970 as Swanson
Analysis Systems, Inc., develops and globally markets engineering simulation
software and technologies widely used by engineers and designers across a broad
spectrum of industries, including aerospace, automotive, manufacturing,
electronics and biomedical. Headquartered at Southpointe in Canonsburg,
Pennsylvania, the Company employs approximately 450 people and focuses on the
development of open and flexible solutions that enable users to analyze designs
directly on the desktop, providing a common platform for fast, efficient and
cost-conscious product development, from design concept to final-stage testing
and validation. The Company distributes its ANSYS/(R)/, DesignSpace/(R)/,
AI*Solutions and ICEM CFD Engineering products through a network of channel
partners in 37 countries, in addition to its own direct sales offices in 18
strategic locations throughout the world. The following discussion should be
read in conjunction with the audited consolidated financial statements and
notes thereto included elsewhere in this Annual Report.
The Company's discussion and analysis of its financial condition and
results of operations are based upon ANSYS Inc.'s consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires ANSYS to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an ongoing basis, ANSYS
evaluates its estimates, including those related to bad debts, investments,
intangible assets, income taxes, and contingencies and litigation. ANSYS bases
its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
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 26.
ACQUISITIONS
In November 2001, ANSYS acquired CADOE S.A. ("CADOE"), a company based
in Lyon, France. The acquisition of CADOE's stock included an up-front payment
of approximately $3.9 million in cash, $900,000 of which was placed in escrow.
The escrowed funds will be released upon the completion of certain product
development milestones and the resolution of any outstanding indemnification
claims. The total up-front purchase price was allocated to the assets and
liabilities of CADOE based upon their estimated fair market values. The
allocation of the purchase price was based on an independent valuation and
included an allocation of $2,480,000 to identifiable intangibles (including
$1,990,000 to the core technology and $490,000 to non-compete agreements) and
$1,289,000 to goodwill. The identified intangibles are being amortized over
four to ten years. In accordance with the provisions of Statement of Financial
Accounting Standards No. 142, "Goodwill and Intangible Assets" (See Recently
Issued Accounting Pronouncements), the goodwill is not being amortized. The
acquisition agreement provides for additional future cash payments if the
acquired business achieves certain performance criteria in 2002, 2003 and 2004.
If the performance criteria are achieved, the future cash payments could equal
or exceed the up-front purchase price.
In August 2000, ANSYS acquired Pacific Marketing and Consulting, Inc., a
California corporation (hereafter "ICEM CFD"). The total up-front purchase
price was allocated to the assets and liabilities of ICEM CFD based upon their
estimated fair market values. The allocation of the purchase price was based on
an independent valuation and included an allocation of $5,542,000 to
identifiable intangibles (including $2,345,000 to existing software, $1,790,000
to non-compete agreements and $1,407,000 to customer list) and $12,201,000 to
goodwill. The identified intangibles are being amortized over three to five
years. The acquisition agreement also provides for additional future payments
if the acquired business achieves certain performance criteria. Such payments in
2001 included $183,000 in cash and 15,465 shares of ANSYS Inc. common stock. The
acquisition agreement also provides for a final payment based upon performance
of the acquired business in 2001. In the first quarter of 2002, ANSYS made final
payments of $2,591,000 in cash and 98,847 shares of ANSYS Inc. common stock. The
additional payments resulted in an increase in goodwill associated with this
acquisition.
The acquisitions of CADOE and ICEM CFD were accounted for as purchases
and, accordingly, their operating results have been included in ANSYS Inc.'s
consolidated financial statements since the dates of acquisition.
<PAGE>
RESULTS OF OPERATIONS
As previously discussed, the Company completed the acquisition of ICEM CFD
in August of 2000. Accordingly, the results of operations for 2001 reflect a
full year of activity for ICEM CFD versus only four months for 2000. The
acquisition of CADOE in November of 2001 did not have a material impact on the
results of operations for 2001.
For purposes of the following discussion and analysis, the table below
sets forth certain consolidated financial data for the years 2001, 2000 and
1999.
- ---------------------------------------------------------------------
Year Ended December 31,
- ---------------------------------------------------------------------
(in thousands) 2001 2000 1999
- ---------------------------------------------------------------------
Revenue:
- ---------------------------------------------------------------------
Software licenses $ 45,318 $ 43,528 $ 37,675
- ---------------------------------------------------------------------
Maintenance and service 39,518 30,939 25,464
- ---------------------------------------------------------------------
Total revenue 84,836 74,467 63,139
- ---------------------------------------------------------------------
Cost of sales:
- ---------------------------------------------------------------------
Software licenses 4,726 4,278 3,530
- ---------------------------------------------------------------------
Maintenance and service 6,627 4,407 3,088
- ---------------------------------------------------------------------
Total cost of sales 11,353 8,685 6,618
- ---------------------------------------------------------------------
Gross profit 73,483 65,782 56,521
- ---------------------------------------------------------------------
Operating expenses:
- ---------------------------------------------------------------------
Selling and marketing 19,726 17,950 15,326
- ---------------------------------------------------------------------
Research and development 16,893 14,502 13,475
- ---------------------------------------------------------------------
Amortization 5,271 2,234 855
- ---------------------------------------------------------------------
General and administrative 13,045 11,517 9,622
- ---------------------------------------------------------------------
Total operating expenses 54,935 46,203 39,278
- ---------------------------------------------------------------------
Operating income 18,548 19,579 17,243
- ---------------------------------------------------------------------
Other income 1,434 3,579 2,626
- ---------------------------------------------------------------------
Income before income tax provision 19,982 23,158 19,869
- ---------------------------------------------------------------------
Income tax provision 6,290 6,848 5,118
- ---------------------------------------------------------------------
Net income $ 13,692 $ 16,310 $ 14,751
- ---------------------------------------------------------------------
<PAGE>
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000
REVENUE: The Company's total revenue increased 13.9% from $74.5 million in 2000
to $84.8 million in 2001. Reported revenue in 2001 was affected by a
modification of the Company's revenue recognition policy related to
noncancellable annual software leases.
The Company currently recognizes revenue for annual software leases in
accordance with Technical Practice Aid ("TPA") 5100.53, "Fair Value of PCS in a
Short-Term Time-Based License and Software Revenue Recognition," issued by the
American Institute of Certified Public Accountants, which requires all revenue
from annual software lease licenses to be recognized ratably over the lease
period. Prior to the revenue recognition modification to comply with the TPA,
the Company recognized a portion of the license fee from annual leases upon
inception or renewal of the lease, while the remaining portion was recognized
ratably over the lease period. The Company estimates that revenue would have
been approximately $88.5 million, or an 18.8% increase over the prior year, had
this modification not been made.
Software license revenue totaled $45.3 million in 2001 as compared to
$43.5 million in 2000, an increase of 4.1%. Excluding the impact of the revenue
recognition policy modification discussed above, software license revenue would
have increased approximately 9.3% to $47.6 million. This increase was primarily
the result of increased license sales of ICEM CFD products.
Maintenance and service revenue increased 27.7% from $30.9 million in 2000
to $39.5 million in 2001. Reported maintenance and service revenue would have
been approximately $40.9 million, or 32.3% higher than the prior year, had the
revenue recognition modification not occurred. This increase primarily resulted
from maintenance contracts sold in association with the paid-up license sales
of ANSYS and DesignSpace products in both the current and prior year, as well
as higher engineering consulting and maintenance revenue from ICEM CFD.
Of the Company's total revenue in 2001, approximately 52.4% and 47.6%
were attributable to international and domestic sales, respectively, as
compared to 51.6% and 48.4% in 2000.
COSTS OF SALES AND GROSS PROFIT: The Company's total cost of sales increased
30.7% to $11.4 million, or 13.4% of total revenue, in 2001 from $8.7 million,
or 11.7% of total revenue, in 2000. The increase was principally attributable
to costs associated with engineering consulting services provided by ICEM CFD.
As a result of the foregoing, the Company's gross profit increased 11.7%
to $73.5 million in 2001 from $65.8 million in 2000.
SELLING AND MARKETING: Selling and marketing expenses increased 9.9% in 2001 to
$19.7 million, or 23.3% of total revenue, from $18.0 million, or 24.1% of total
revenue, in 2000. The increase was primarily the result of additional headcount
and facility costs associated with both the acquisition of ICEM CFD, as well as
the addition of personnel within the ANSYS direct sales organization. Higher
third-party commission costs associated with direct sales to certain of the
Company's major account customers also contributed to the increase. The Company
anticipates that it will continue to make significant investments in its global
sales and marketing organization to strengthen its competitive position, to
enhance major account sales activities and to support its worldwide sales
channels and marketing strategies.
RESEARCH AND DEVELOPMENT: Research and development expenses increased 16.5% in
2001 to $16.9 million, or 19.9% of total revenue, from $14.5 million, or 19.5%
of total revenue, in 2000. The increase in 2001 was principally the result of
higher salaries and related headcount costs associated with both the
acquisition of ICEM CFD, as well as the hiring of additional development
personnel within the ANSYS product creation organization. These increases were
partially offset by the capitalization of approximately $457,000 of internal
labor costs, a significant portion of which related to the releases of ANSYS
6.0 and DesignSpace 6.0. The Company has traditionally invested significant
resources in research and development activities and intends to continue to
make significant investments in the future.
<PAGE>
AMORTIZATION: Amortization expense increased to $5.3 million in 2001 compared
to $2.2 million in 2000. The increase resulted from a full year of amortization
of goodwill and intangible assets, associated with the acquisition of ICEM CFD,
as compared with four months of amortization in 2000. As a result of the
adoption of new accounting standards related to goodwill and intangible assets,
goodwill will not be amortized in 2002, but will be subject to an annual review
for impairment. Goodwill amortization amounted to $3.3 million and $1.1 million
in 2001 and 2000, respectively. This change does not affect amortization of
other intangible assets.
GENERAL AND ADMINISTRATIVE: General and administrative expenses increased 13.3%
in 2001 to $13.0 million, or 15.4% of total revenue, as compared to $11.5
million, or 15.5% of total revenue, in 2000. The increase was primarily the
result of a $2.0 million charge related to the settlement of a dispute with a
former distributor, as well as a full year of general and administrative costs
incurred by ICEM CFD. These increases were partially offset by reductions in
both consulting fees and bad debt expenses.
OTHER INCOME: Other income decreased to $1.4 million in 2001 as compared to
$3.6 million in 2000. The decrease was primarily attributable to a declining
interest rate environment as compared to the prior year, as well as a $500,000
impairment charge related to an investment accounted for under the cost method.
INCOME TAX PROVISION: The Company's effective tax rate was 31.5% in 2001 as
compared to 29.6% in 2000. The effective rate increased from the prior year as
a result of non-deductible amortization expense associated with certain
intangible assets related to the acquisition of ICEM CFD. These effective tax
rates are less than the federal and state combined statutory rate as a result
of the utilization of a foreign sales corporation, as well as the generation of
research and experimentation credits.
NET INCOME: The Company's net income decreased 16.1% to $13.7 million, or $0.89
diluted earnings per share, in 2001 as compared to net income of $16.3 million,
or $1.00 diluted earnings per share, in 2000. The weighted average common and
common equivalent shares used in computing diluted earnings per share were 15.4
million in 2001 compared with 16.3 million in 2000. Excluding the effects of
acquisition-related amortization and the impact of the revenue recognition
modification discussed above, net income increased 10.9% in 2001 to $19.6
million, or $1.27 diluted earnings per share. Excluding only the effects of
acquisition-related amortization, net income decreased 3.3% in 2001 to $17.1
million, or $1.11 diluted earnings per share.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
REVENUE: The Company's total revenue increased 17.9% from $63.1 million in 1999
to $74.5 million in the year 2000. The increase in total revenue was primarily
the result of increased sales of both paid-up licenses and related maintenance
contracts associated with the paid-up licenses, as well as contributions from
the acquisition of ICEM CFD.
Software license revenue totaled $43.5 million in 2000 as compared to
$37.7 million in 1999, an increase of 15.5%. The increase was primarily the
result of increased sales of paid-up licenses related to the Company's ANSYS
and DesignSpace products, as well as approximately $2.7 million related to the
acquisition of ICEM CFD.
Maintenance and service revenue increased 21.5% from $25.5 million in 1999
to $30.9 million in 2000. The increase primarily resulted from maintenance
contracts sold in association with the increased paid-up license sales
discussed above. Approximately $1.7 million in maintenance and service revenue
from the acquisition of ICEM CFD also contributed to the increase.
Of the Company's total revenue in 2000, approximately 51.6% and 48.4% were
attributable to international and domestic sales, respectively, as compared to
54.4% and 45.6% in 1999.
<PAGE>
COSTS OF SALES AND GROSS PROFIT: The Company's total cost of sales increased
31.2% to $8.7 million, or 11.7% of total revenue, in 2000 from $6.6 million, or
10.5% of total revenue, in 1999. The increase was principally attributable to
higher salaries and related expenses associated with increased headcount to
support the growth in license and service sales, costs related to consulting
services provided by ICEM CFD, as well as increased royalty costs.
As a result of the foregoing, the Company's gross profit increased 16.4%
to $65.8 million in 2000 from $56.5 million in 1999.
SELLING AND MARKETING: Selling and marketing expenses increased 17.1% in 2000
to $18.0 million, or 24.1% of total revenue, from $15.3 million, or 24.3% of
total revenue, in 1999. The increase was primarily the result of additional
headcount and facility costs associated with both the acquisition of ICEM CFD,
as well as the addition of personnel within the ANSYS direct sales
organization. Increased consulting costs related to sales training initiatives
for both the direct and indirect sales channels and costs associated with the
Company's biennial international users' conference also contributed to the
increase.
RESEARCH AND DEVELOPMENT: Research and development expenses increased 7.6% in
2000 to $14.5 million, or 19.5% of total revenue, from $13.5 million, or 21.3%
of total revenue, in 1999. The increase in 2000 was principally the result of
development costs associated with the acquisition of ICEM CFD, as well as
higher consulting costs. These increases were partially offset by the
capitalization of approximately $213,000 of internal labor costs related to the
commercial release of ANSYS 5.7.
AMORTIZATION: Amortization expense increased to $2.2 million in 2000 compared
to $855,000 in 1999. The increase resulted from amortization associated with
the acquisition of ICEM CFD.
GENERAL AND ADMINISTRATIVE: General and administrative expenses increased 19.7%
in 2000 to $11.5 million, or 15.5% of total revenue, as compared to $9.6
million, or 15.2% of total revenue, in 1999. The increase resulted primarily
from additional headcount and facility costs, as well as increased professional
fees associated with the acquisition of ICEM CFD. Higher legal fees and bad
debt expense in connection with a dispute with a former distributor also
contributed to the increase.
OTHER INCOME: Other income increased to $3.6 million in 2000 as compared to
$2.6 million in 1999. The increase was primarily attributable to a higher
interest rate environment as compared to the prior year and a $151,000 one-time
gain related to the sale of investment securities.
INCOME TAX PROVISION: The Company's effective tax rate was 29.6% in 2000 as
compared to 25.8% in 1999. The 1999 rate was favorably impacted by a one-time
tax benefit related to an amended prior year tax return. These effective tax
rates are less than the federal and state combined statutory rate as a result
of the utilization of a foreign sales corporation, as well as the generation of
research and experimentation credits.
NET INCOME: The Company's net income increased 10.6% to $16.3 million, or $1.00
diluted earnings per share, in 2000 as compared to net income of $14.8 million,
or $.88 diluted earnings per share, in 1999. The weighted average common and
common equivalent shares used in computing diluted earnings per share were 16.3
million in 2000 compared with 16.7 million in 1999. Excluding the effects of
amortization associated with the acquisition of ICEM CFD, net income increased
20.1% in 2000 to $17.7 million, or $1.09 diluted earnings per share.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2001, the Company had cash, cash equivalents and
short-term investments totaling $53.4 million and working capital of $40.0
million, as compared to cash, cash equivalents and short-term investments of
$47.5 million and working capital of $40.0 million at December 31, 2000. The
short-term investments are generally investment grade and liquid, 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 $23.6 million in 2001,
$22.9 million in 2000 and $18.3 million in 1999. The increase in cash generated
from operations in 2001 compared to 2000 was primarily the result of improved
accounts receivable collections. The increase in 2000 compared to 1999 was
mainly 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, as well as to sustain share repurchase
activity under the Company's ongoing stock repurchase program.
Cash provided by investing activities was $9.0 million in 2001. In 2000
and 1999 investing activities used cash of $7.4 million and $13.0 million,
respectively. In 2001, cash provided by net maturities of investments was
partially offset by cash outflows related to the acquisition of CADOE, S.A., as
well as capital expenditures. The Company's use of cash in 2000 primarily
related to the acquisition of ICEM CFD and capital expenditures, including
hardware and software costs associated with the Company's investment in a
comprehensive customer relationship management system. In 1999, the Company's
use of cash 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 $2.5 million for capital
expenditures in the year 2002, 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 $10.4 million in 2001, $19.6 million in
2000 and $1.5 million in 1999. In each of the three years, cash outlays related
to the purchase of treasury stock were partially offset by proceeds from the
issuance of common stock under the employee stock purchase and option plans.
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.
<PAGE>
CRITICAL ACCOUNTING POLICIES
ANSYS believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements. ANSYS recognizes revenue in accordance with SOP 97-2,
Software Revenue Recognition, and related interpretations. Revenue for
perpetual licenses is recognized upon delivery of the authorization keys to the
end user, 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. Revenue is recorded at the net price
to ANSYS for sales through the ANSYS distribution network. The Company
estimates the value of post-contract customer support sold together with
perpetual licenses by reference to published price lists which generally
represent the prices at which customers could purchase renewal contracts for
such services. ANSYS maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments.
If the financial condition of ANSYS customers, including ANSYS distributors,
were to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required. ANSYS capitalizes internal
labor costs associated with the development of product enhancements subsequent
to the determination of technological feasibility. 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. 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. Intangible assets acquired in connection with business
combinations are recorded at appraised fair values at the time of the
acquisition by reference to independent valuations.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
ANSYS adopted Statement of Financial Accounting Standards (SFAS) No. 141,
"Business Combinations," for all business combinations initiated after June 30,
2001. This standard requires that all business combinations be accounted for
using the purchase method and it further clarifies the criteria for recognition
of intangible assets separately from goodwill.
Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets," for existing goodwill and other intangible assets,
including the non-amortization provisions of this standard arising from
business combinations after June 30, 2001. This standard eliminates the
amortization of goodwill and intangible assets with indefinite useful lives and
requires annual testing for impairment. This standard also requires the
assignment of assets acquired and liabilities assumed, including goodwill, to
reporting units for purposes of the annual impairment test. As of December 31,
2001, ANSYS had net unamortized goodwill of $16.9 million and amortization
expense associated with goodwill of $3.3 million, $1.1 million and $0.1 million
for the years ended December 31, 2001, 2000 and 1999, respectively. The Company
has evaluated the impact of the adoption of this standard on the consolidated
financial statements and does not expect the adoption to have a material impact
on the Company's financial position.
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.
<PAGE>
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 is
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. 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.
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.
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.
<PAGE>
DEPENDENCE ON DISTRIBUTORS: The Company continues to distribute most of its
products through its global network of 30 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 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, Electronic Data Systems 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.
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 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 of America. 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 condition or results of operations.
<PAGE>
In November 2000, the United States enacted the FSC Repeal and
Extraterritorial Income Exclusion Act (the "Act") in response to a challenge
from the World Trade Organization ("WTO") that the existing tax benefits
provided by foreign sales corporations were prohibited tax subsidies. The Act
generally repeals the foreign sales corporation and implements an
extraterritorial income ("ETI") tax benefit. Recently, the European Union
stated that it did not believe the ETI provisions bring U.S. tax law into
WTO-compliance and asked the WTO to rule on the matter. On January 14, 2002,
the WTO ruled in favor of the European Union's charge. As a result, there may
be further related changes to U.S. export tax law in connection with this
ruling. Any such prospective changes regarding tax benefits associated with the
Company's export sales may adversely impact the Company's effective tax rate
and decrease its net income in future periods.
DEPENDENCE ON PROPRIETARY TECHNOLOGY: The Company's success is highly dependent
upon its proprietary technology. Although the Company was awarded a patent by
the U.S. Patent and Trademark Office for its web-based reporting technology,
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 represent a significant 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 properly and timely integrate 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. These proceedings currently include customary audit
activities by various taxing authorities. 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.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ANSYS, INC.:
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, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States of America. 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 of America, 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 our
opinion.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
January 30, 2002
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
December 31, December 31,
- --------------------------------------------------------------------------------------
(in thousands, except share data) 2001 2000
- --------------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------------
Current assets:
- --------------------------------------------------------------------------------------
Cash and cash equivalents $ 28,545 $ 6,313
- --------------------------------------------------------------------------------------
Short-term investments 24,903 41,227
- --------------------------------------------------------------------------------------
Accounts receivable, less allowance for doubtful
accounts of $1,610 in 2001 and $2,350 in 2000 15,352 14,403
- --------------------------------------------------------------------------------------
Other receivables and current assets 12,803 9,164
- --------------------------------------------------------------------------------------
Deferred income taxes 1,799 695
- --------------------------------------------------------------------------------------
Total current assets 83,402 71,802
- --------------------------------------------------------------------------------------
Long-term investment 500 500
- --------------------------------------------------------------------------------------
Property and equipment, net 4,915 5,152
- --------------------------------------------------------------------------------------
Capitalized software costs, net 817 574
- --------------------------------------------------------------------------------------
Goodwill, net 16,937 12,529
- --------------------------------------------------------------------------------------
Other intangibles, net 6,499 5,668
- --------------------------------------------------------------------------------------
Deferred income taxes 4,692 4,895
- --------------------------------------------------------------------------------------
Total assets $ 117,762 $ 101,120
- --------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------------
Current liabilities:
- --------------------------------------------------------------------------------------
Accounts payable $ 624 $ 459
- --------------------------------------------------------------------------------------
Accrued bonuses 4,578 4,869
- --------------------------------------------------------------------------------------
Other accrued expenses and liabilities 13,047 6,631
- --------------------------------------------------------------------------------------
Deferred revenue 25,120 19,797
- --------------------------------------------------------------------------------------
Total current liabilities 43,369 31,756
- --------------------------------------------------------------------------------------
Stockholders' equity:
- --------------------------------------------------------------------------------------
Preferred stock, $.01 par value; 2,000,000 shares authorized - -
- --------------------------------------------------------------------------------------
Common stock, $.01 par value; 50,000,000 shares
authorized; 16,584,758 shares issued 166 166
- --------------------------------------------------------------------------------------
Additional paid-in capital 37,822 37,588
- --------------------------------------------------------------------------------------
Less treasury stock, at cost: 2,071,123 shares held
in 2001 and 1,451,692 shares held in 2000 (23,953) (15,127)
- --------------------------------------------------------------------------------------
Retained earnings 60,429 46,737
- --------------------------------------------------------------------------------------
Accumulated other comprehensive income (loss) (71) -
- --------------------------------------------------------------------------------------
Total stockholders' equity 74,393 69,364
- --------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 117,762 $ 101,120
- --------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
(in thousands, except per share data) 2001 2000 1999
- -------------------------------------------------------------------------------
Revenue:
- -------------------------------------------------------------------------------
Software licenses $ 45,318 $ 43,528 $ 37,675
- -------------------------------------------------------------------------------
Maintenance and service 39,518 30,939 25,464
- -------------------------------------------------------------------------------
Total revenue 84,836 74,467 63,139
- -------------------------------------------------------------------------------
Cost of sales:
- -------------------------------------------------------------------------------
Software licenses 4,726 4,278 3,530
- -------------------------------------------------------------------------------
Maintenance and service 6,627 4,407 3,088
- -------------------------------------------------------------------------------
Total cost of sales 11,353 8,685 6,618
- -------------------------------------------------------------------------------
Gross profit 73,483 65,782 56,521
- -------------------------------------------------------------------------------
Operating expenses:
- -------------------------------------------------------------------------------
Selling and marketing 19,726 17,950 15,326
- -------------------------------------------------------------------------------
Research and development 16,893 14,502 13,475
- -------------------------------------------------------------------------------
Amortization 5,271 2,234 855
- -------------------------------------------------------------------------------
General and administrative 13,045 11,517 9,622
- -------------------------------------------------------------------------------
Total operating expenses 54,935 46,203 39,278
- -------------------------------------------------------------------------------
Operating income 18,548 19,579 17,243
- -------------------------------------------------------------------------------
Other income 1,434 3,579 2,626
- -------------------------------------------------------------------------------
Income before income tax provision 19,982 23,158 19,869
- -------------------------------------------------------------------------------
Income tax provision 6,290 6,848 5,118
- -------------------------------------------------------------------------------
Net income $ 13,692 $ 16,310 $ 14,751
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net income per basic common share:
- -------------------------------------------------------------------------------
Basic earnings per share $ .94 $ 1.03 $ .90
- -------------------------------------------------------------------------------
Weighted average shares - basic 14,554 15,804 16,366
- -------------------------------------------------------------------------------
Net income per diluted common share:
- -------------------------------------------------------------------------------
Diluted earnings per share $ .89 $ 1.00 $ .88
- -------------------------------------------------------------------------------
Weighted average shares - diluted 15,438 16,269 16,689
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
(in thousands) 2001 2000 1999
- -------------------------------------------------------------------------------
Cash flows from operating activities:
- -------------------------------------------------------------------------------
Net income $ 13,692 $ 16,310 $ 14,751
- -------------------------------------------------------------------------------
Adjustments to reconcile net income
to net cash provided by operating
activities:
- -------------------------------------------------------------------------------
Depreciation and amortization 7,631 4,333 2,762
- -------------------------------------------------------------------------------
Deferred income tax provision (benefit) (800) (69) 855
- -------------------------------------------------------------------------------
Provision for bad debts 368 739 464
- -------------------------------------------------------------------------------
Impairment of investment 500 - -
- -------------------------------------------------------------------------------
Changes in operating assets and
liabilities:
- -------------------------------------------------------------------------------
Accounts receivable (1,602) (2,574) (2,039)
- -------------------------------------------------------------------------------
Other receivables and current assets (3,483) (1,417) (2,216)
- -------------------------------------------------------------------------------
Accounts payable, accrued expenses and
liabilities 2,009 2,279 735
- -------------------------------------------------------------------------------
Deferred revenue 5,323 3,249 3,029
- -------------------------------------------------------------------------------
Net cash provided by operating
activities 23,638 22,850 18,341
- -------------------------------------------------------------------------------
Cash flows from investing activities:
- -------------------------------------------------------------------------------
Cash paid for business acquisition, net
of cash acquired (3,981) (7,481) -
- -------------------------------------------------------------------------------
Other acquisition payments (333) (400) (100)
- -------------------------------------------------------------------------------
Acquisition-related loan - (1,366) -
- -------------------------------------------------------------------------------
Capital expenditures (2,070) (3,173) (1,758)
- -------------------------------------------------------------------------------
Capitalization of internally developed
software costs (457) (213) (591)
- -------------------------------------------------------------------------------
Purchases of short-term investments (34,969) (32,688) (38,331)
- -------------------------------------------------------------------------------
Maturities of short-term investments 51,293 38,191 27,738
- -------------------------------------------------------------------------------
Repayment of stockholder loan - 250 -
- -------------------------------------------------------------------------------
Purchase of long-term investment (500) (500) -
- -------------------------------------------------------------------------------
Net cash provided by (used in)
investing activities 8,983 (7,380) (13,042)
- -------------------------------------------------------------------------------
Cash flows from financing activities:
- -------------------------------------------------------------------------------
Proceeds from issuance of common stock
under Employee Stock Purchase Plan 205 163 159
- -------------------------------------------------------------------------------
Proceeds from exercise of stock options 5,090 1,814 872
- -------------------------------------------------------------------------------
Purchase of treasury stock (15,715) (21,588) (2,550)
- -------------------------------------------------------------------------------
Net cash used in financing activities (10,420) (19,611) (1,519)
- -------------------------------------------------------------------------------
Effect of exchange rate fluctuations 31 53 32
- -------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 22,232 (4,088) 3,812
- -------------------------------------------------------------------------------
Cash and cash equivalents, beginning of year 6,313 10,401 6,589
- -------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 28,545 $ 6,313 $ 10,401
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Supplemental disclosures of cash flow
information:
- -------------------------------------------------------------------------------
Cash paid during the year for:
Income taxes $ 5,235 $ 4,615 $ 3,894
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated
Other Notes Total Total
Common Stock Additional Treasury Stock Compre- Receivable Stock- Compre-
--------------- Paid-in ---------------- Retained hensive from holders' hensive
(in thousands) Shares Amount Capital Shares Amount Earnings Income Stockholders Equity Income
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December
31, 1998 16,396 $ 164 $ 36,657 - $ - $ 15,676 $ 120 $ (250) $ 52,367
- -----------------------------------------------------------------------------------------------------------------------------------
Treasury stock
acquired - - - 382 (2,550) - - - (2,550)
- -----------------------------------------------------------------------------------------------------------------------------------
Exercise of stock
options 168 2 727 (43) 175 - - - 904
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of common
stock under
Employee Stock
Purchase Plan 21 - 159 - - - - - 159
- -----------------------------------------------------------------------------------------------------------------------------------
Net income for the
year - - - - - 14,751 - - 14,751 $ 14,751
- -----------------------------------------------------------------------------------------------------------------------------------
Other comprehensive
income - - - - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December
31, 1999 16,585 166 37,543 339 (2,375) 30,427 120 (250) 65,631 14,751
- -----------------------------------------------------------------------------------------------------------------------------------
Treasury stock
acquired - - - 2,010 (21,588) - - - (21,588)
- -----------------------------------------------------------------------------------------------------------------------------------
Acquisition of ICEM
CFD Engineering - - (106) (619) 6,644 - - - 6,538
- -----------------------------------------------------------------------------------------------------------------------------------
Exercise of stock
options - - 124 (259) 2,056 - - - 2,180
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of common
stock under
Employee Stock
Purchase Plan - - 27 (19) 136 - - - 163
- -----------------------------------------------------------------------------------------------------------------------------------
Repayment of note
receivable from
stockholder - - - - - - - 250 250
- -----------------------------------------------------------------------------------------------------------------------------------
Net income for the
year - - - - - 16,310 - - 16,310 16,310
- -----------------------------------------------------------------------------------------------------------------------------------
Other comprehensive
income (loss) - - - - - - (120) - (120) (120)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December
31, 2000 16,585 166 37,588 1,452 (15,127) 46,737 - - 69,364 16,190
- -----------------------------------------------------------------------------------------------------------------------------------
Treasury stock
acquired - - - 1,241 (15,715) - - - (15,715)
- -----------------------------------------------------------------------------------------------------------------------------------
Acquisition of ICEM
CFD Engineering - - 29 (15) 161 - - - 190
- -----------------------------------------------------------------------------------------------------------------------------------
Exercise of stock
options - - 256 (584) 6,472 - - - 6,728
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of
common stock
under Employee
Stock Purchase
Plan - - (51) (23) 256 - - - 205
- -----------------------------------------------------------------------------------------------------------------------------------
Net income for the
year - - - - - 13,692 - - 13,692 13,692
- -----------------------------------------------------------------------------------------------------------------------------------
Other
comprehensive
income (loss) - - - - - - (71) - (71) (71)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December
31, 2001 16,585 $ 166 $ 37,822 2,071 $(23,953) $60,429 $ (71) $ - $ 74,393 $ 13,621
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
ANSYS Inc. (the "Company" or "ANSYS"), founded in 1970 as Swanson Analysis
Systems, Inc., develops and globally markets engineering simulation software
and technologies widely used by engineers and designers across a broad spectrum
of industries, including aerospace, automotive, manufacturing, electronics and
biomedical.
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. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
REVENUE RECOGNITION: Revenue is derived principally from the licensing of
computer software products and from related maintenance contracts. ANSYS
recognizes revenue in accordance with SOP 97-2, "Software Revenue Recognition,"
and related interpretations. Revenue for perpetual licenses is recognized upon
delivery of the authorization keys to the end user, 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.
Revenue is recorded at the net price to ANSYS for sales through the ANSYS
distribution network. The Company estimates the value of post-contract
customer support sold together with perpetual licenses by reference to
published price lists which generally represent the prices at which customers
could purchase renewal contracts for such services. Revenue from monthly
leases is recognized monthly as earned. 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.
The Company recognizes revenue for annual software leases in accordance with
Technical Practice Aid ("TPA") 5100.53, "Fair Value of PCS in a Short-Term
Time-Based License and Software Revenue Recognition," issued by the American
Institute of Certified Public Accountants, which requires all revenue from
annual software lease licenses to be recognized ratably over the lease period.
Prior to the revenue recognition modification to comply with the TPA, the
Company recognized a portion of the license fee from annual leases upon
inception or renewal of the lease, while the remaining portion was recognized
ratably over the lease period.
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.
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.
<PAGE>
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: Goodwill represents the excess of the
purchase price over the fair value of net assets acquired. Intangible assets
consist of the ANSYS trade name, non-compete agreements, customer lists and
acquired software and technology. 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.
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No.141, "Business Combinations," for all business combinations initiated after
June 30, 2001 and the non-amortization provisions of SFAS No. 142, "Goodwill
and Other Intangibles," for goodwill relating to business combinations
initiated after June 30, 2001. Therefore, goodwill relating to business
combinations completed during the second half of 2001 has not been amortized in
2001. See Recently Issued Accounting Pronouncements for additional information.
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 2001, sales by distributors comprised approximately 57% of the
Company's total revenue, with two distributors accounting for approximately 13%
and 9% of total revenue. During 2000, sales by distributors comprised
approximately 62% of the Company's total revenue, with two distributors
accounting for approximately 11% and 10% of total revenue. 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.
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.
<PAGE>
FOREIGN CURRENCIES: 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 the
balance sheet date. Gains and losses resulting from foreign exchange
transactions are included in the results of operations.
The financial statements of the Company's foreign subsidiaries are
translated from the functional currency, generally the local currency, to U.S.
Dollars. Assets and liabilities are translated at the exchange rates on the
balance sheet date. Results of operations are translated at average exchange
rates. The resulting exchange difference is recorded as a component of
accumulated other comprehensive income.
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.
RECLASSIFICATIONS: Certain reclassifications have been made to the 2000 and
1999 financial statements to conform to the 2001 presentation.
3. ACQUISITIONS
In November 2001, ANSYS acquired CADOE, S.A. ("CADOE"), a company based in
Lyon, France. The acquisition of CADOE's stock included an up-front payment of
approximately $3.9 million in cash, $900,000 of which was placed in escrow.
The escrowed funds will be released upon the completion of certain product
development milestones and the resolution of any outstanding indemnification
claims. The total up-front purchase price was allocated to the assets and
liabilities of CADOE based upon their estimated fair market values. The
allocation of the purchase price was based on an independent valuation and
included an allocation of $2,480,000 to identifiable intangibles (including
$1,990,000 to the core technology and $490,000 to non-compete agreements) and
$1,289,000 to goodwill. The identified intangibles are being amortized over
four to ten years. In accordance with the provisions of Statement of Financial
Accounting Standards No. 142, "Goodwill and Intangible Assets" (see Note 17),
the goodwill is not being amortized. The acquisition agreement provides for
additional future cash payments if the acquired business achieves certain
performance criteria in 2002, 2003 and 2004. If the performance criteria are
achieved, the future cash payments could equal or exceed the up-front purchase
price.
In August 2000, ANSYS acquired Pacific Marketing and Consulting, Inc., a
California corporation (hereafter "ICEM CFD"). The total up-front purchase
price was allocated to the assets and liabilities of ICEM CFD based upon their
estimated fair market values. The allocation of the purchase price was based on
an independent valuation and included an allocation of $5,542,000 to
identifiable intangibles (including $2,345,000 to existing software, $1,790,000
to non-compete agreements and $1,407,000 to customer list) and $12,201,000 to
goodwill. The identified intangibles are being amortized over three to five
years. The acquisition agreement also provides for additional future payments
if the acquired business achieves certain performance criteria. Such payments
in 2001 included $183,000 in cash and 15,465 shares of ANSYS Inc. common stock.
The acquisition agreement also provides for a final payment based upon
performance of the acquired business in 2001. In the first quarter of 2002,
ANSYS made final payments of $2,591,000 in cash and 98,847 shares of ANSYS Inc.
common stock. The additional payments resulted in an increase in goodwill
associated with this acquisition.
<PAGE>
The acquisitions of CADOE and ICEM CFD were accounted for as purchases and,
accordingly, their operating results have been included in ANSYS Inc.'s
consolidated financial statements since the dates of acquisition.
On a pro forma basis, the results of operations as if the acquisition of
CADOE had occurred on January 1, 2001 and 2000, are not materially different
from the reported amounts.
The following unaudited pro forma information presents the results of
operations of the Company as if the ICEM CFD acquisition had occurred on
January 1, 2000 and 1999. The unaudited pro forma consolidated results are not
necessarily indicative of results that would have occurred had the acquisition
been in effect for the years presented.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
(in thousands) Year ended December 31, 2000 Year ended December 31,1999
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Total revenue $80,405 $70,875
- -------------------------------------------------------------------------------------------------
Net income 13,837 12,508
- -------------------------------------------------------------------------------------------------
Net income per share
- -------------------------------------------------------------------------------------------------
Basic .85 .74
- -------------------------------------------------------------------------------------------------
Diluted .83 .72
- -------------------------------------------------------------------------------------------------
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
(in thousands) December 31, 2001 December 31, 2000
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Equipment $ 9,048 $ 7,995
- -------------------------------------------------------------------------------------------------------------------
Computer software 4,275 3,556
- -------------------------------------------------------------------------------------------------------------------
Furniture 1,057 993
- -------------------------------------------------------------------------------------------------------------------
Leasehold improvements 873 845
- -------------------------------------------------------------------------------------------------------------------
15,253 13,389
- -------------------------------------------------------------------------------------------------------------------
Less: accumulated depreciation and amortization (10,338) (8,237)
- -------------------------------------------------------------------------------------------------------------------
$ 4,915 $ 5,152
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Depreciation and amortization expense related to property and equipment was
approximately $2,360,000, $1,994,000 and $1,907,000 for the years ended
December 31, 2001, 2000, and 1999, respectively.
5. OTHER INTANGIBLE ASSETS
Other intangible assets consists of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
(in thousands) Estimated Useful Lives December 31, 2001 December 31, 2000
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Trade name 10 years $ 1,824 $ 1,824
- -------------------------------------------------------------------------------------------------------------
Non-compete agreements 2-5 years 2,280 1,790
- -------------------------------------------------------------------------------------------------------------
Customer list 5 years 1,407 1,407
- -------------------------------------------------------------------------------------------------------------
Acquired software/core technology 3-10 years 4,335 2,345
- -------------------------------------------------------------------------------------------------------------
9,846 7,366
- -------------------------------------------------------------------------------------------------------------
Less: accumulated amortization (3,347) (1,698)
- -------------------------------------------------------------------------------------------------------------
$ 6,499 $ 5,668
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
6. INCOME TAXES
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
(in thousands) December 31, 2001 December 31, 2000 December 31, 1999
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
- --------------------------------------------------------------------------------------------------------------
Federal $ 5,562 $ 5,701 $ 3,297
- --------------------------------------------------------------------------------------------------------------
State 318 246 90
- --------------------------------------------------------------------------------------------------------------
Foreign 1,210 942 876
- --------------------------------------------------------------------------------------------------------------
Deferred:
- --------------------------------------------------------------------------------------------------------------
Federal (696) (34) 869
- --------------------------------------------------------------------------------------------------------------
State (104) (7) (14)
- --------------------------------------------------------------------------------------------------------------
Total $ 6,290 $ 6,848 $ 5,118
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The reconciliation of the U.S. federal statutory tax rate to the consolidated
effective tax rate is as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
December 31, 2001 December 31, 2000 December 31, 1999
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 35.0% 35.0%
- ----------------------------------------------------------------------------------------------------------------------------------
State income taxes, net of federal benefit 1.0 0.7 0.3
- ----------------------------------------------------------------------------------------------------------------------------------
Research and experimentation credit (1.5) (1.7) (2.0)
- ----------------------------------------------------------------------------------------------------------------------------------
Non-deductible goodwill 3.5 1.0 -
- ----------------------------------------------------------------------------------------------------------------------------------
Foreign sales corporation (6.6) (5.0) (5.7)
- ----------------------------------------------------------------------------------------------------------------------------------
Other 0.1 (0.4) (1.8)
- ----------------------------------------------------------------------------------------------------------------------------------
31.5% 29.6% 25.8%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The components of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
(in thousands) December 31, 2001 December 31, 2000
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
- ----------------------------------------------------------------------------------------------------
Goodwill 3,259 $ 3,578
- ----------------------------------------------------------------------------------------------------
Tradename 279 274
- ----------------------------------------------------------------------------------------------------
Capitalized software 3,170 3,831
- ----------------------------------------------------------------------------------------------------
Allowance for doubtful accounts 515 827
- ----------------------------------------------------------------------------------------------------
Deferred revenue 1,213 175
- ----------------------------------------------------------------------------------------------------
Other 529 348
- ----------------------------------------------------------------------------------------------------
8,965 9,033
- ----------------------------------------------------------------------------------------------------
Deferred tax liabilities:
- ----------------------------------------------------------------------------------------------------
Accounts receivable mark-to-market - 206
- ----------------------------------------------------------------------------------------------------
Property and equipment 91 88
- ----------------------------------------------------------------------------------------------------
Acquisition-related intangible assets 345 1,198
- ----------------------------------------------------------------------------------------------------
Other 2,038 1,951
- ----------------------------------------------------------------------------------------------------
2,474 3,443
- ----------------------------------------------------------------------------------------------------
Net deferred tax assets $ 6,491 $ 5,590
- ----------------------------------------------------------------------------------------------------
</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.
<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
requires the Company to contribute 5% of each participant's eligible
compensation. The 401(k) feature of the Profit-Sharing Plan permits 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. There is
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 $2,121,000
in 2001, $1,712,000 in 2000 and $1,266,000 in 1999.
8. NON-COMPETE AND EMPLOYMENT AGREEMENTS
In accordance with the acquisition of ICEM CFD. (see Note 3) the existing
stockholders agreed to non-competition clauses restricting certain competitive
business activities for periods of two or five years, depending on the
involvement of each stockholder in the daily operations of the business.
Additionally, the existing CADOE stockholders agreed to similar non-competition
clauses for a period of four years in connection with the acquisition of CADOE
by ANSYS.
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.
The Company also has an agreement with the Chief Executive Officer. This
agreement provides for, among other things, severance payments totaling
$300,000, in equal semi-monthly installments, through the first anniversary of
the termination date if the Chief Executive Officer is terminated without cause
<PAGE>
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, as amended, authorize the grant of
up to 868,110 and 4,250,000 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.
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.
<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 31,1998 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
- ----------------------------------------------------------------------------------------------------------------------
Issued/granted - - - -
- ----------------------------------------------------------------------------------------------------------------------
Exercised (4) .40 (101) .40-10.00
- ----------------------------------------------------------------------------------------------------------------------
Cancelled - - (9) 10.00
- ----------------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 2000 - - 240 .40-11.00
- ----------------------------------------------------------------------------------------------------------------------
Issued/granted - - - -
- ----------------------------------------------------------------------------------------------------------------------
Exercised - - (97) .40-11.00
- ----------------------------------------------------------------------------------------------------------------------
Cancelled - - - -
- ----------------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 2001 - - 143 $ .40-10.00
- ----------------------------------------------------------------------------------------------------------------------
Exercisable at:
- ----------------------------------------------------------------------------------------------------------------------
December 31, 1999 - - 286
- ----------------------------------------------------------------------------------------------------------------------
December 31, 2000 - - 240
- ----------------------------------------------------------------------------------------------------------------------
December 31, 2001 - - 143
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<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, 1998 1,749 $ 6.00-13.13
- ----------------------------------------------------------------------------------------------------------------------
Issued/granted 697 6.88-11.00
- ----------------------------------------------------------------------------------------------------------------------
Exercised (68) 6.00-9.63
- ----------------------------------------------------------------------------------------------------------------------
Cancelled (261) 6.00-13.00
- ----------------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 1999 2,117 6.00-13.13
- ----------------------------------------------------------------------------------------------------------------------
Issued/granted 805 9.88-11.88
- ----------------------------------------------------------------------------------------------------------------------
Exercised (158) 6.00-11.75
- ----------------------------------------------------------------------------------------------------------------------
Cancelled (241) 6.00-11.75
- ----------------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 2000 2,523 6.00-13.13
- ----------------------------------------------------------------------------------------------------------------------
Issued/granted 774 10.63-26.56
- ----------------------------------------------------------------------------------------------------------------------
Exercised (485) 6.00-11.75
- ----------------------------------------------------------------------------------------------------------------------
Cancelled (103) 6.00-18.70
- ----------------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 2001 2,709 $ 6.00 - $26.56
- ----------------------------------------------------------------------------------------------------------------------
Exercisable at:
- ----------------------------------------------------------------------------------------------------------------------
December 31, 1999 577
- ----------------------------------------------------------------------------------------------------------------------
December 31, 2000 891
- ----------------------------------------------------------------------------------------------------------------------
December 31, 2001 974
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<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 2001, 2000 and 1999, 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) 2001 2000 1999
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income - as reported $ 13,692 $16,310 $ 14,751
- ------------------------------------------------------------------------------
Net income - pro forma 11,295 14,132 12,653
- ------------------------------------------------------------------------------
Net income per basic common share - as reported $ .94 $ 1.03 $ .90
- ------------------------------------------------------------------------------
Net income per basic common share - pro forma .78 .89 .77
- ------------------------------------------------------------------------------
Net income per diluted common share - as reported .89 1.00 .88
- ------------------------------------------------------------------------------
Net income per diluted common share - pro forma .73 .87 .76
- -----------------------------------------------------------------------------
</TABLE>
The weighted-average fair value of options granted was $10.13 per share in
2001, $6.22 per share in 2000 and $5.01 per share in 1999.
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 3.80% to a high of 5.01%. 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 64% and expected term of
five years.
10. STOCK REPURCHASE PROGRAM
On October 25, 2001, the Company announced that its Board of Directors had
amended its common stock repurchase program to acquire up to an additional one
million shares, or four million shares in total under the program that was
initially announced in February 2000. Under this program, ANSYS repurchased
374,700 and 2,010,000 shares in 2001 and 2000, respectively. In addition to
the repurchases under this program, the Company also purchased 866,300 shares
in a privately negotiated transaction during 2001.
<PAGE>
11. 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 sold under the Purchase Plan. The Purchase Plan is administered by the
Compensation Committee. Offerings under the Purchase Plan commence on each
February 1 and August 1, 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,
2001, 125,658 shares of common stock had been issued under the Purchase Plan of
which 102,284 were issued as of December 31, 2000.
12. 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 scheduled rent increases at the end of
the fifth and tenth years. The Company incurred lease rental expense related to
this facility of $1,227,000 in 2001, 2000 and 1999. Minimum lease payments for
the next five years under the facility lease are $1,354,000 per annum in 2002
through 2006.
The Company has also entered into various noncancellable operating leases
for equipment and sales offices. Lease rental expense related to these leases
totaled $1,232,000, $908,000 and $998,000 for the years ended December 31,
2001, 2000 and 1999, respectively. Future minimum lease payments under
noncancellable operating leases for equipment and sales offices in effect at
December 31, 2001 are $567,000 in 2002, $531,000 in 2003, $273,000 in 2004,
$103,000 in 2005 and $77,000 in 2006.
<PAGE>
13. 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 $939,000, $884,000 and
$524,000 for the years ended December 31, 2001, 2000 and 1999, respectively.
14. GEOGRAPHIC INFORMATION
Revenue by geographic area is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Other
United Other Interna-
(in thousands) States Canada Germany Europe Japan tional Total
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31, 2001 $38,693 $1,659 $10,434 $15,094 $11,000 $7,956 $84,836
- --------------------------------------------------------------------------------------------
Year ended December 31, 2000 34,304 1,757 8,595 14,752 8,843 6,216 74,467
- --------------------------------------------------------------------------------------------
Year ended December 31, 1999 27,673 1,151 7,091 14,924 7,678 4,622 63,139
- --------------------------------------------------------------------------------------------
</TABLE>
15. CONTINGENCIES
The Company had an outstanding irrevocable standby letter of credit for
$1,378,000 at December 31, 2001. This letter of credit was issued as a
guarantee for damages that could be awarded related to a legal matter in which
the Company was involved. 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 during the period.
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) 2001 2000 1999
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 13,692 $ 16,310 $ 14,751
- ------------------------------------------------------------------------------------------------
Weighted average shares outstanding - basic 14,554 15,804 16,366
- ------------------------------------------------------------------------------------------------
Basic earnings per share $ .94 $ 1.03 $ 0.90
- ------------------------------------------------------------------------------------------------
Effect of dilutive securities:
- ------------------------------------------------------------------------------------------------
Shares issuable upon exercise of dilutive
outstanding restricted stock and stock options 884 465 323
- ------------------------------------------------------------------------------------------------
Weighted average shares outstanding - diluted 15,438 16,269 16,689
- ------------------------------------------------------------------------------------------------
Diluted earnings per share $ .89 $ 1.00 $ 0.88
- ------------------------------------------------------------------------------------------------
Anti-dilutive shares/options 541 201 570
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
17. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
ANSYS adopted Statement of Financial Accounting Standards (SFAS) No. 141,
"Business Combinations," for all business combinations initiated after June 30,
2001. This standard requires that all business combinations be accounted for
using the purchase method and it further clarifies the criteria for recognition
of intangible assets separately from goodwill.
Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets," for existing goodwill and other intangible assets,
including the non-amortization provisions of this standard arising from
business combinations after June 30, 2001. This standard eliminates the
amortization of goodwill and intangible assets with indefinite useful lives and
requires annual testing for impairment. This standard also requires the
assignment of assets acquired and liabilities assumed, including goodwill, to
reporting units for purposes of the annual impairment test. As of December 31,
2001, ANSYS had net unamortized goodwill of $16.9 million and amortization
expense associated with goodwill of $3.3 million, $1.1 million and $0.1 million
for the years ended December 31, 2001, 2000 and 1999, respectively. The
Company has evaluated the impact of the adoption of this standard on the
consolidated financial statements and does not expect the adoption to have a
material impact on the Company's financial position.
<PAGE>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Fiscal Quarter Ended
- ------------------------------------------------------------------------------------------------
December 31, September 30, June 30, March 31,
(in thousands, except per share data) 2001 2001 2001 2001
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 25,073 $ 20,610 $ 20,931 $ 18,222
- ------------------------------------------------------------------------------------------------
Gross profit 22,040 17,899 17,985 15,559
- ------------------------------------------------------------------------------------------------
Operating income 7,662 3,367 4,705 2,814
- ------------------------------------------------------------------------------------------------
Net income 5,098 2,654 3,569 2,371
- ------------------------------------------------------------------------------------------------
Net income per common share - basic .35 .18 .25 .16
- ------------------------------------------------------------------------------------------------
Net income per common share - diluted .33 .17 .24 .15
- ------------------------------------------------------------------------------------------------
Adjusted earnings per share - diluted /(1)/ .38 .23 .29 .21
- ------------------------------------------------------------------------------------------------
Common stock price per share/(2)/:
- ------------------------------------------------------------------------------------------------
High 27.73 19.15 18.72 13.63
- ------------------------------------------------------------------------------------------------
Low 16.80 14.65 11.70 10.13
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Fiscal Quarter Ended
- ------------------------------------------------------------------------------------------------
December 31, September 30, June 30, March 31,
- ------------------------------------------------------------------------------------------------
(in thousands, except per share data) 2000 2000 2000 2000
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 24,152 $ 16,682 $ 16,253 $ 17,380
- ------------------------------------------------------------------------------------------------
Gross profit 21,345 14,601 14,459 15,377
- ------------------------------------------------------------------------------------------------
Operating income 5,751 3,805 4,789 5,234
- ------------------------------------------------------------------------------------------------
Net income 4,459 3,272 4,092 4,487
- ------------------------------------------------------------------------------------------------
Net income per common share - basic .28 .21 .26 .28
- ------------------------------------------------------------------------------------------------
Net income per common share - diluted .27 .21 .25 .27
- ------------------------------------------------------------------------------------------------
Adjusted earnings per share - diluted /(1)/ .33 .24 .25 .27
- ------------------------------------------------------------------------------------------------
Common stock price per share/(2)/:
- ------------------------------------------------------------------------------------------------
High 12.06 12.44 11.88 14.31
- ------------------------------------------------------------------------------------------------
Low 9.44 9.38 9.00 9.88
- ------------------------------------------------------------------------------------------------
</TABLE>
/(1)/ Adjusted earnings per share represents earnings per share determined in
accordance with generally accepted accounting principles, excluding
amortization expense, net of related income tax benefit, associated with
intangible assets and goodwill resulting from business combinations accounted
for under the purchase method.
/(2)/ 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 7, 2002, there were 236 shareholders of record and approximately
3,400 beneficial shareholders of the Company's common stock.
<PAGE>
CORPORATE INFORMATION
Shareholder Information
Requests for information about the Company should be directed to:
Mark Dozzo, Treasurer, ANSYS Inc., Southpointe,
275 Technology Drive, Canonsburg, PA 15317, U.S.A.
Telephone: 724.514.1782
REPORT ON FORM 10-K
Stockholders may obtain additional financial information about ANSYS Inc.
from the Company's Annual 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
ANSS
NASDAQ
COUNSEL
Goodwin Procter LLP, Boston, MA
ANNUAL MEETING
The Annual Meeting of Stockholders will be held on May 9, 2002 at 2:00 p.m.
at the Southpointe Club, 360 Southpointe Blvd., Canonsburg, PA 15317, U.S.A.
TRANSFER AGENT
Mellon Investor 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, AI*EMAX, AI*NASTRAN, AI*Environment, CADOE and DesignSpace are
Trademarks or registered Trademarks of subsidiaries of ANSYS Inc. located in
the United States or other countries. All other trademarks and registered
trademarks are the property of their respective owners.
HEADQUARTERS
ANSYS INC.
Southpointe
275 Technology Drive
Canonsburg, PA 15317
U.S.A.
1.866.ANSYS.AI
HTTP://WWW.ANSYS.COM
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>5
<FILENAME>dex21.txt
<DESCRIPTION>SUBSIDIARIES OF REGISTRANT
<TEXT>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
- ------------------------------
SAS IP, Inc., a Wyoming corporation
ASN Systems Limited, a United Kingdom company
ANSYS Foreign Sales Corporation, a Barbados corporation
ANSYS Software Engineering Technology (Beijing) Co., Ltd., a China wholly-
owned foreign enterprise
ICEM CFD Engineering, Inc., a Delaware corporation
ANSYS Software Private Limited, an India corporation
CADOE S.A., a France corporation
===============================================================================
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>6
<FILENAME>dex231.txt
<DESCRIPTION>CONSENT OF PRICEWATERHOUSECOOPERS LLP
<TEXT>
<PAGE>
EXHIBIT 23.1
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. of our report dated January
30, 2002 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 30, 2002 relating to the financial statement schedule, which
appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
March 22, 2002
===============================================================================
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>7
<FILENAME>dex232.txt
<DESCRIPTION>CONSENT OF PRICEWATERHOUSECOOPERS LLP
<TEXT>
<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. of our report dated March
15, 2002 relating to the financial statements of the ANSYS Inc. Employee Stock
Purchase Plan, which appears in this Form 11-K.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
March 22, 2002
===============================================================================
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>8
<FILENAME>dex99.txt
<DESCRIPTION>EMPLOYEE STOCK PURCHASE PLAN
<TEXT>
<PAGE>
EXHIBIT 99
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
As of January 31, 2002 and 2001
and for Each of the Three Years in the Period Ended January 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-20853
ANSYS, INC. 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.
EMPLOYEE STOCK PURCHASE PLAN
INDEX OF FINANCIAL STATEMENTS
Page No.
--------
Report of Independent Accountants 3
Statements of Financial Condition as of January 31, 2002 and 2001 4
Statements of Changes in Plan Equity for Each of the Three Years in
the Period Ended January 31, 2002 5
Notes to Financial Statements 6-7
Signature 8
===============================================================================
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator of the
ANSYS, Inc. Employee Stock Purchase Plan:
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 ANSYS, Inc. Employee Stock Purchase Plan at
January 31, 2002 and 2001, and changes in plan equity for each of the three
years in the period ended January 31, 2002 in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Plan'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 of America, 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 our opinion.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
March 15, 2002
===============================================================================
<PAGE>
ANSYS, INC.
EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF FINANCIAL CONDITION
January 31, 2002 and 2001
2002 2001
---- ----
Assets:
Cash $ 161,201 $ 101,848
------------------------------
Total assets $ 161,201 $ 101,848
==============================
Liabilities and Plan Equity:
Payable to ANSYS Inc. for
stock issued to participants $ 160,687 $ 101,005
------------------------------
Total liabilities 160,687 101,005
Plan equity 514 843
------------------------------
Total liabilities and Plan equity $ 161,201 $ 101,848
==============================
The accompanying notes are an integral part of the financial statements.
===============================================================================
<PAGE>
ANSYS, INC.
EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF CHANGES IN PLAN EQUITY
for the Years Ended
<TABLE>
<CAPTION>
January 31, 2002 January 31, 2001 January 31, 2000
-------------------------------------------------------------
<S> <C> <C> <C>
ADDITIONS:
Contributions:
Employee $ 263,168 $ 187,929 $ 176,006
Employer 45,157 30,977 34,487
-------------------------------------------------------------
Total additions 308,325 218,906 210,493
DEDUCTIONS:
Stock distributions 301,044 206,511 191,043
Participant withdrawals 7,610 13,002 18,580
-------------------------------------------------------------
Total deductions 308,654 219,513 209,623
-------------------------------------------------------------
Net (decrease) increase in Plan equity (329) (607) 870
Plan equity, beginning of year 843 1,450 580
-------------------------------------------------------------
Plan equity, end of year $ 514 $ 843 $ 1,450
=============================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
===============================================================================
<PAGE>
ANSYS, INC.
EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF PLAN:
The purpose of the ANSYS Inc. Employee Stock Purchase Plan (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 that 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 that
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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
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 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.
Securities Transactions:
Securities transactions are accounted for on the date the securities are
issued, which is generally the last day of each six-month offering period.
Securities are issued directly by the Company from shares held in treasury or
unissued shares designated for the Plan, and a corresponding liability from the
Plan to the Company is recorded. This liability is typically settled in the
month following the close of each six-month offering period. The Plan does not
hold any securities or other deposits as temporary investments. Shares issued
during the plan years ended January 31, 2002, 2001 and 2000 were 23,374, 19,630
and 20,728, respectively.
Participant contributions which result from the inability to purchase a
fractional share, under the terms of the Plan, are carried forward to the next
offering period.
===============================================================================
<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 18,
2002.
ANSYS, INC.
EMPLOYEE STOCK PURCHASE PLAN
Date: March 18, 2002 By: /s/ James E. Cashman III
------------------------------------------------
James E. Cashman III
President and Chief Executive Officer
Date: March 18, 2002 By: /s/ Maria T. Shields
------------------------------------------------
Maria T. Shields
Chief Financial Officer,
Vice President, Finance and Administration
===============================================================================
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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