UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 OR [ ] 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 (IRS 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) 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 ---- ---- The number of shares of the Registrant's Common Stock, par value $.01 per share, outstanding as of August 11 ,1998 was 16,381,482 shares.
ANSYS, INC. AND SUBSIDIARIES INDEX ----- <TABLE> <CAPTION> Page No. -------- <S> <C> <C> PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets June 30, 1998 and December 31, 1997 3 Condensed Consolidated Statements of Income and Comprehensive Income - Three and Six Months Ended June 30, 1998 and 4 June 30, 1997 Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 1998 and June 30, 1997 5 Notes to Condensed Consolidated Financial Statements 6 Review Report of Independent Accountants 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-13 PART II. OTHER INFORMATION Item 2. Changes in Securities 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 6. Exhibits and Reports on Form 8-K 15 SIGNATURES 16 EXHIBIT 17 INDEX </TABLE> Trademarks used in this Form 10-Q: ANSYS(R) and DesignSpace(R) are registered trademarks of SAS IP, Inc., a wholly-owned subsidiary of ANSYS, Inc. 2
PART I FINANCIAL INFORMATION Item 1. Financial Statements: ANSYS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share information) <TABLE> <CAPTION> June 30, Dec. 31, 1998 1997 -------------------- ----------------- (unaudited) <S> <C> <C> ASSETS Current assets: Cash and cash equivalents $ 5,571 $13,990 Short-term investments 31,459 13,853 Accounts receivable, less allowance for doubtful accounts of $1,500 in 1998 and $2,080 in 1997 6,072 8,034 Refundable and prepaid income taxes 470 - Other current assets 777 926 Deferred income taxes 80 125 --------- --------- Total current assets 44,429 36,928 Securities available for sale 182 182 Property and equipment, net 4,297 4,771 Capitalized software costs, net of accumulated amortization of $15,532 in 1998 and $15,471 in 1997 199 260 Other intangibles, net 2,120 2,374 Deferred income taxes 8,736 9,066 ----------- --------- Total assets $59,963 $53,581 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 180 $ 235 Accrued bonuses 1,322 2,133 Other accrued expenses and liabilities 3,206 2,562 Accrued income taxes payable - 46 Customer prepayments 452 746 Deferred revenue 8,633 7,445 ----------- --------- Total liabilities 13,793 13,167 Stockholders' equity: Preferred stock, $.01 par value, 2,000,000 shares authorized - - Common stock, $.01 par value; 50,000,000 shares authorized; 16,359,134 shares issued in 1998 and 1997 164 164 Additional paid-in capital 36,349 36,089 Less treasury stock, at cost: 6,041 shares held in 1998 and 68,800 shares held in 1997 (3) (12) Retained earnings 9,814 4,327 Accumulated other comprehensive income 120 120 Notes receivable from stockholders (274) (274) ----------- --------- Total stockholders' equity 46,170 40,414 ----------- --------- Total liabilities and stockholders' equity $59,963 $53,581 =========== ========= </TABLE> The accompanying notes are an integral part of the condensed consolidated financial statements. 3
ANSYS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (in thousands, except per share data) (Unaudited) <TABLE> <CAPTION> Three months ended Six months ended ---------------------------- ------------------------ June 30, June 30, June 30, June 30, 1998 1997 1998 1997 ---------- -------- --------- -------- <S> <C> <C> <C> <C> Revenue: Software licenses $ 8,478 $ 8,835 $17,777 $17,940 Maintenance and service 5,084 3,722 10,012 6,631 ---------- ------- --------- ------- Total revenue 13,562 12,557 27,789 24,571 Cost of sales: Software licenses 843 734 1,734 1,355 Maintenance and service 640 592 1,290 1,162 --------- ------- --------- ------- Total cost of sales 1,483 1,326 3,024 2,517 --------- ------- --------- ------- Gross profit 12,079 11,231 24,765 22,054 Operating expenses: Selling and marketing 3,174 2,746 6,223 5,724 Research and development 2,938 3,033 6,031 5,803 Amortization 222 177 443 2,430 General and administrative 2,193 1,941 4,681 3,864 --------- ------- --------- ------- Total operating expenses 8,527 7,897 17,378 17,821 --------- ------- --------- ------- Operating income 3,552 3,334 7,387 4,233 Other income 508 274 865 421 --------- ------- --------- ------- Income before income tax provision 4,060 3,608 8,252 4,654 Income tax provision 1,340 1,334 2,765 1,721 --------- ------- --------- ------- Net income 2,720 2,274 5,487 2,933 Other comprehensive income(loss), net of tax: Unrealized losses on securities (70) (180) - (200) --------- ------- --------- ------- Other comprehensive income (loss) (70) (180) - (200) Comprehensive income $ 2,650 $ 2,094 $ 5,487 $ 2,733 ========== ======= ========== ======= Net income per basic common share: Basic earnings per share $0.17 $0.15 $0.34 $0.19 Weighted average shares - basic 15,986 15,639 15,969 15,635 Net income per diluted common share: Diluted earnings per share $0.16 $0.14 $0.33 $0.18 Weighted average shares - diluted 16,793 16,635 16,727 16,603 </TABLE> The accompanying notes are an integral part of the condensed consolidated financial statements. 4
ANSYS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) <TABLE> <CAPTION> Six months ended ------------------------------- June 30, June 30, 1998 1997 --------- --------- <S> <C> <C> Cash flows from operating activities: Net income $ 5,487 $ 2,933 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,342 3,088 Deferred income tax provision(benefit) 375 (13) Provision for bad debts 295 280 Change in operating assets and liabilities: Accounts receivable 1,667 80 Income taxes (516) (677) Other current assets 149 (1,275) Accounts payable, accrued expenses and liabilities and customer prepayments (516) (796) Deferred revenue 1,188 2,849 --------- --------- Net cash provided by operating activities 9,471 6,469 --------- --------- Cash flows from investing activities: Capital expenditures (554) (1,635) Capitalization of internally developed software costs - (70) Proceeds from sales of short-term investments 5,247 - Purchase of short-term investments (22,853) (4,068) --------- --------- Net cash used in investing activities (18,160) (5,773) --------- --------- Cash flows from financing activities: Proceeds from issuance of common stock under employee stock purchase plan 94 157 Proceeds from issuance of treasury stock 176 - Proceeds from exercise of stock options - 10 Repayment of stockholder notes - 28 --------- --------- Net cash provided by financing activities 270 195 --------- --------- Net (decrease)increase in cash and cash equivalents (8,419) 891 Cash and cash equivalents, beginning of period 13,990 17,069 --------- --------- Cash and cash equivalents, end of period $ 5,571 $17,960 ========= ========= Supplemental disclosures of cash flow information: Cash paid during the period for: Income taxes $ 2,455 $ 2,420 Supplemental non cash investing and financing activities: Decrease in securities available for sale - (200) </TABLE> The accompanying notes are an integral part of the condensed consolidated financial statements. 5
ANSYS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 1998 (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements included herein have been prepared by ANSYS, Inc. (the "Company") in accordance with generally accepted accounting principles for interim financial information for commercial and industrial companies and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The financial statements as of and for the three and six months ended June 30, 1998 should be read in conjunction with the Company's consolidated financial statements (and notes thereto) included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. Accordingly, the accompanying statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements have been included, and all adjustments are of a normal and recurring nature. Operating results for the three months and six months ended June 30, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. 2. NET INCOME PER SHARE Effective December 31, 1997, the Company adopted Statement of Financial Accounting Standards No.128, "Earnings per Share." The Statement requires the disclosure of basic and diluted earnings per share and revises the method required to calculate these amounts under previous standards. Earnings per share data for the three and six month periods ended June 30, 1997 have been restated to reflect the adoption of this Statement. The adoption of this standard did not materially impact previously reported earnings per share for the three and six months periods ended June 30, 1997. The total shares issuable upon exercise of dilutive outstanding restricted stock and stock options, which are included in the calculation of diluted earnings per share, totaled 807,000 and 996,000 and 758,000 and 968,000 for the three and six month periods ending June 30, 1998 and 1997, respectively. 3. ACCUMULATED OTHER COMPREHENSIVE INCOME BALANCES (in thousands) Accumulated Unrealized Other Gains on Comprehensive Securities Income ---------- ------ Beginning balance $120 $120 Current-period change -- -- Ending balance $120 $120 ---- ---- 6
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS ---------------------------------------- To the Shareholders and Board of Directors of ANSYS, Inc. and Subsidiaries: We have reviewed the condensed consolidated balance sheet of ANSYS, Inc. and Subsidiaries as of June 30, 1998, the related condensed consolidated statements of income and comprehensive income for the three-month and six-month periods ended June 30, 1998 and 1997, and condensed consolidated cash flows for the six- month periods ended June 30, 1998 and 1997. These financial statements are the responsibility of ANSYS's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is an expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of ANSYS, Inc. and Subsidiaries as of December 31, 1997, and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended (not presented herein). In our report dated January 29, 1998, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1997, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ PricewaterhouseCoopers LLP - ----------------------------- Pittsburgh, Pennsylvania July 14, 1998 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ANSYS, Inc. (the "Company") is a leading international supplier of analysis and engineering software for optimizing the design of new products. The Company is committed to providing the most open and flexible analysis solutions to suit customer requirements for engineering software in today's competitive marketplace. In addition, the Company partners with leading design software suppliers to develop state-of-the-art computer-aided design ("CAD") integrated products. A global network of ANSYS Support Distributors ("ASDs") provides sales, support and training for customers. Additionally, the Company distributes its DesignSpace(R) products through its global network of ASDs, as well as a network of independent distributors and dealers (value-added resellers or "VARs") who support sales of DesignSpace(R) products to end users throughout the world. The following discussion should be read in conjunction with the attached unaudited condensed consolidated financial statements and notes thereto for the three-month and six-month periods ended June 30, 1998 and June 30, 1997 and with the Company's audited financial statements and notes thereto for the fiscal year ended December 31, 1997. This Form 10-Q 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 "anticipate", "intend", "believe", "plan" and other similar expressions. The Company's actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause such a difference include uncertainties regarding customer acceptance of new products, possible delays in developing, completing or shipping new or enhanced products, potential volatility of revenues and profit in any period due to, among other things, lower than expected demand for or the ability to complete large contracts, regional economies, as well as other risks and uncertainties that are detailed in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section in the 1997 Annual Report to Shareholders , and in the statement of "Certain Factors Affecting Future Results" included herein as Exhibit 99 to this Form 10-Q. Results of Operations Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997 Revenue. The Company's total revenue for the 1998 quarter increased 8.0% to $13.6 million from $12.6 million for the 1997 quarter. The increase was primarily related to an increase in maintenance revenue, which resulted from broader customer usage of maintenance and support services and the Company's continued emphasis on marketing these services. The increase in maintenance revenue was partially offset by a decrease in software license revenues, as discussed in further detail below. Software license revenue totaled $8.5 million for the 1998 quarter as compared to $8.8 million for the 1997 quarter, a 4.0% decrease. This decrease principally resulted from a 50.0% reduction in monthly lease license revenue to $1.7 8
million for the 1998 quarter from $3.3 million for the 1997 quarter. This decrease was attributable to both an increase in the renewal and sales of existing monthly leases as noncancellable annual leases, as well as the conversion of certain existing lease licenses to paid-up licenses throughout the course of the past year. The decrease in monthly lease revenue was partially offset by an increase in revenue attributable to the portion of noncancellable annual license fees which are recognized as paid-up revenue upon renewal or inception of the lease. Revenue from the sales of paid-up licenses remained stable at $4.6 million for each of the 1998 and 1997 quarters. Maintenance and service revenue increased 36.6% for the 1998 quarter to $5.1 million from $3.7 million for the 1997 quarter, as a result of broader customer usage of maintenance and support services and the Company's increased emphasis on marketing these services, as well as an increase in the renewal and sale of noncancellable annual leases. Of the Company's total revenue for the 1998 quarter, approximately 52.65% and 47.35%, respectively, were attributable to international and domestic sales, as compared to 54.2% and 45.8%, respectively, for the 1997 quarter. Cost of Sales and Gross Profit. The Company's total cost of sales increased 11.8% to $1.5 million, or 10.9% of total revenue, for the 1998 quarter from $1.3 million, or 10.6% of total revenue, for the 1997 quarter. The Company's cost of sales for software license revenue increased 14.9% for the 1998 quarter to $843,000, or 9.9% of software license revenue, from $734,000, or 8.3% of software license revenue, for the 1997 quarter. The increase was attributable to additional headcount and related costs, as well as an increase in royalty fees. The Company's cost of sales for maintenance and service revenue, which totaled $640,000 and $592,000, or 12.6% and 15.9% of maintenance and service revenue, for the 1998 and 1997 quarters, respectively, remained relatively constant in terms of total dollars. As a result of the foregoing, the Company's gross profit increased 7.6% to $12.1 million for the 1998 quarter from $11.2 million for the 1997 quarter. Selling and Marketing. Selling and marketing expenses increased 15.6% for the 1998 quarter to $3.2 million, or 23.4% of total revenue, from $2.7 million, or 21.9% of total revenue, for the 1997 quarter. During the 1998 quarter, the Company incurred increased consulting fees, sales support expenses and advertising costs, as well as increased office expenses associated with strategic office locations in the UK, Japan and China, as compared to the 1997 quarter. The Company anticipates that it will continue to make significant investments in its global sales and marketing organization to strengthen its competitive position and to support its worldwide sales channels and marketing strategies. Research and Development. Research and development expenses, totaled $2.9 million and $3.0 million for the 1998 and 1997 quarters, or 21.7% and 24.2% of total revenue, respectively. The decrease is primarily attributable to reductions in third party development fees and outside labor costs during the 1998 quarter. The Company has traditionally invested significant resources in research and development activities and 9
intends to continue to make significant investments in the future. Amortization. Amortization expense remained relatively consistent at $222,000 and $177,000 in the 1998 and 1997 quarter, respectively. General and Administrative. General and administrative expenses increased 13.0% to $2.2 million, or 16.2% of total revenue, for the 1998 quarter from $1.9 million, or 15.5% of total revenue, for the 1997 quarter. The increase is largely attributable to an increase in legal fees related to a dispute regarding the expiration of an ASD distribution agreement. Additionally, the Company has added internal finance, information technology and administrative resources to support its global operations and infrastructure. Other Income. Other income increased 85.4% to $508,000 for the 1998 quarter as compared to $274,000 for the 1997 quarter. This increase was attributable to higher interest-bearing cash and investment balances in the 1998 quarter. Income Tax Provision. The Company's effective rate of taxation was 33.0% for the 1998 quarter as compared to 37.0% for the 1997 quarter. This percentage is less than the federal and state combined statutory rate due primarily to the utilization of research and experimentation credits, as well as the use of a foreign sales corporation, which was established in the fourth quarter of 1997 and is the primary reason for the decrease in the Company's effective tax rate in the 1998 quarter. Net Income. The Company's net income in the second quarter of 1998 was $2.7 million as compared to $2.3 million in the second quarter of 1997. Diluted earnings per share increased to $0.16 in the 1998 quarter as compared to $0.14 in the 1997 quarter. The increase in diluted earnings per share was attributable to the increase in net income. The weighted average shares outstanding used in computing net income per diluted common share totaled 16,793,000 and 16,635,000 in the 1998 and 1997 quarter, respectively. Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997 Revenue. The Company's total revenue increased 13.1% for the 1998 six months to $27.8 million from $24.6 million for the 1997 six months. This increase was attributable principally to an increase in revenue from renewals and sales of leases as noncancellable annual leases, for which a portion of the annual license fee is recognized as paid-up revenue upon renewal or inception of the lease, while the remaining portion is recognized as maintenance revenue ratably over the remaining lease period. This increase, which was partially offset by decreases in monthly lease revenue and paid-up revenue as discussed in the paragraph below, was due, in part, to the active sales and licensing of noncancellable annual leases to existing and new lease customers. The increase in revenue in the 1998 six months was also attributable to increased maintenance revenue, which resulted from broader customer usage of maintenance and support 10
services and the Company's continued emphasis on marketing its maintenance services. Software license revenue totaled $17.8 million for the 1998 six months as compared to $17.9 million for the 1997 six months, a decrease of approximately 1.0%. The slight decrease resulted principally from a decrease in monthly lease revenues as existing monthly lease customers shifted to noncancellable annual leases in connection with the renewals of their leases, as well as a decrease in the sale of paid-up licenses in the Asian markets. These decreases were almost completely offset by an increase in revenue from renewals and sales of leases as noncancellable annual leases. Revenue from the sale of paid-up licenses and the portion of noncancellable annual leases classified as paid-up revenue increased 32.3% for the 1998 six months to $14.4 million from $10.9 million for the 1997 six months. This increase was partially attributable to a refinement of management's estimate relative to the allocation of noncancellable annual lease revenue between paid-up and maintenance revenue, which occurred in the first quarter of 1998. The refinement, which management believes more accurately reflects the Company's current pricing and business practices, resulted in a net revenue increase of approximately $1.3 million in the 1998 six months, of which approximately $980,000 was recorded in the first quarter of 1998. The Company also experienced a 52.4% decrease in monthly lease license revenue to $3.4 million for the 1998 six months from $7.0 million for the 1997 six months. This decrease was primarily attributable to an increase in the renewal of existing monthly leases as noncancellable annual leases, and to a lesser extent the conversion of certain existing lease licenses to paid-up licenses throughout the course of the past year. Maintenance and service revenue increased 51.0% for the 1998 six months to $10.0 million from $6.6 million for the 1997 six months, as a result of broader customer usage of maintenance and support services and the Company's increased emphasis on marketing these services, as well as an increase in the renewal and sale of noncancellable annual leases. Of the Company's total revenue for the 1998 six months, approximately 53.4% and 46.6%, respectively, were attributable to international and domestic sales, as compared to 51.4% and 48.6%, respectively, for the 1997 six months. Cost of Sales and Gross Profit. The Company's total cost of sales increased 20.1% to $3.0 million, or 10.9% of total revenue, for the 1998 six months from $2.5 million, or 10.2% of total revenue, for the 1997 six months. The Company's cost of sales for software license revenue increased 28.0% for the 1998 six months to $1.7 million, or 9.8% of software license revenue, from $1.4 million, or 7.6% of software license revenue, for the 1997 six months. The increase was due to the addition of headcount and related expenses, as well as increased costs related to manuals, packing supplies, media and royalty fees. The Company's cost of sales for maintenance and service revenue totaled $1.3 million and $1.2 million, or 12.9% and 17.5% of maintenance and service revenue, for the 1998 and 1997 six months, respectively. The increase in the 1998 period was principally attributable to increases in salaries, benefits and consulting fees as additional staff and consultants have been added to support the growth in global service revenue and related customer and ASD support needs. 11
As a result of the foregoing, the Company's gross profit increased 12.3% to $24.8 million for the 1998 six months from $22.0 million for the 1997 six months. Selling and Marketing. Selling and marketing expenses increased 8.7% for the 1998 six months to $6.2 million, or 22.4% of total revenue, from $5.7 million, or 23.3% of total revenue, for the 1997 six months. The increase in selling and marketing expenses resulted primarily from increased consulting and sales support costs incurred in connection with supporting its global sales and marketing infrastructure. Research and Development. Research and development expenses increased 3.9% for the 1998 six months to $6.0 million, or 21.7% of total revenue, from $5.8 million, or 23.6% of total revenue, for the 1997 six months. This increase resulted primarily from increased software and depreciation expense as the Company continues to invest in software and hardware tools used to develop and enhance the Company's products and increased consulting costs associated with the upcoming releases of ANSYS 5.5 and DesignSpace 4.1. Amortization. Amortization expense totaled $443,000 for the 1998 six months as compared to $2.4 million for the 1997 six months. The decrease was attributable to the full amortization of certain intangible assets, including goodwill and capitalized software, which were fully amortized in the first quarter of 1997. General and Administrative. General and administrative expenses increased 21.1% for the 1998 six months to $4.7 million, or 16.8% of total revenue, from $3.9 million, or 15.7% of total revenue, for the 1997 six months. The increase was primarily attributable to an increase in legal fees related to a dispute regarding the expiration of an ASD distribution agreement. Additionally, the Company has added internal finance, information technology and administrative resources to support its global operations and infrastructure. Other Income. Other income increased 105.5% to $865,000 for the 1998 six month period as compared to $421,000 for the 1997 six month period. This increase was attributable to higher interest-bearing cash and investment balances in 1998. Income Tax Provision. The Company's effective rate of taxation was 33.5% for the 1998 six months, as compared to 37.0% for the 1997 six months. These percentages are less than the federal and state combined statutory rate due primarily to the utilization of research and experimentation credits, as well as the use of a foreign sales corporation, which was established in the fourth quarter of 1997 and is the primary reason for the decrease in the Company's effective tax rate in the 1998 six months. Net Income. The Company's net income in the six months of 1998 totaled $5.5 million as compared to net income of $2.9 million in the 1997 six months. Diluted earnings per share increased to $0.33 in the 1998 six months as compared to diluted earnings per share of $0.18 in the 1997 six months as a result of the increase in net income. The weighted average shares used in 12
computing net income per diluted share amounts increased to 16,727,000 in the 1998 six month period from 16,603,000 in the 1997 six month period. Liquidity and Capital Resources As of June 30, 1998, the Company had cash, cash equivalents and short-term investments totaling $37.0 million and working capital of $30.6 million, as compared to cash, cash equivalents and short-term investments of $27.8 million and working capital of $23.8 million at December 31, 1997. The Company's operating activities provided cash of $9.5 million for the six months ended June 30, 1998 and $6.5 million for the six months ended June 30, 1997. The increase in the Company's cash flow from operations for the 1998 six months as compared to the 1997 six months was a result of increased earnings as well as improved management of working capital. Net cash generated by operating activities provided sufficient resources to fund increased headcount and capital needs to support the Company's expansion of its global infrastructure and continued investment in research and development activities for the six months ended June 30, 1998. Cash used in investing activities totaled $18.2 million for the six months ended June 30, 1998 and $5.8 million for the six months ended June 30, 1997. The increase is principally due to the purchase and sale of short-term investments in the six months ended June 30, 1998. The capital expenditures in 1997 were primarily related to furniture and equipment for the new corporate office facility, which the Company initially occupied in February 1997, as well as computer hardware and software to support the continued growth of the Company's development activities and the expansion of its global sales and support infrastructure. The Company currently plans additional capital spending of approximately $1.5 million throughout the remainder of 1998, however, the level of spending will be dependent upon various factors, including growth of the business and general economic conditions. Financing activities provided net cash of $270,000 for the six months ended June 30, 1998 and $195,000 for the six months ended June 30, 1997. Cash provided from financing activities for the 1998 and 1997 six month periods primarily included proceeds from issuance of treasury stock and common stock under employee stock option and purchase plans. 13
PART II OTHER INFORMATION Item 1. Legal Proceedings Not Applicable. Item 2. Changes in Securities (c) The following information is furnished in connection with securities sold by the Registrant during the period covered by this Form 10-Q which were not registered under the Securities Act. The transactions constitute sales of the Registrant's Common Stock, par value $.01 per share, upon the exercise of vested options issued pursuant to the Company's 1994 Stock Option and Grant Plan, issued in reliance upon the exemption from registration under Rule 701 promulgated under the Securities Act and issued prior to the Registrant becoming subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act of 1934, as amended. Number of Number of Aggregate Month/Year Shares Employees Exercise Price ---------- --------- --------- -------------- April 1998 16,750 3 $8,321.25 May 1998 2,000 1 $2,550.00 June 1998 563 2 $ 717.83 Item 3. Defaults upon Senior Securities Not Applicable. Item 4. Submission of Matters to a Vote of Security Holders At the Annual Meeting of Stockholders of the Company held on May 6, 1998, the stockholders of the Company (1) elected Roger J. Heinen, Jr., Roger B. Kafker and Jacqueline C. Morby as Class II Directors of the Company to hold office until the 2001 Annual Meeting of Stockholders and until such Directors' successors are duly elected and qualified and other nominations were made;(2)approved an amendment to the Company's 1996 Stock Option and Grant Plan increasing the number of shares available for issuance under the Plan from 2,250,000 to 3,250,000. The votes were as follows: Votes For Votes Withheld --------- -------------- (1) Election of Directors: Roger B. Heinen, Jr. 15,539.993 37,822 Roger B. Kafker 15,542,379 35,436 Jacqueline C. Morby 15,539,929 37,886 14
(2) Approval of Amendment to 1996 Stock Option and Grant Plan Broker Votes For Votes Against Votes Abstained Non-Votes --------- ------------- --------------- ---------- 11,448,641 2,228,449 101,625 1,799,100 Item 5. Other information Not Applicable. Item 6. Exhibits and Reports Filed on Form 8-K (a) Exhibits. 10.1 Current Form of Stock Option Agreement 15 Independent Accountants' Letter Regarding Unaudited Financial Information 27.1 Financial Data Schedule 99 Certain Factors Regarding Future Results (b) Reports on Form 8-K. Not Applicable. 15
SIGNATURES Pursuant to the requirements 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: August 12, 1998 By: /s/ Peter J. Smith ---------------------------- Peter J. Smith Chairman, President and Chief Executive Officer Date: August 12, 1998 By: /s/ John M. Sherbin II ----------------------------- John M. Sherbin II Chief Financial Officer; Senior Vice President, Finance and Administration; Secretary 16
Item 6. EXHIBIT INDEX ----------------- <TABLE> <CAPTION> Exhibit - ------- No. - --- <S> <C> 10.1* Current Form of Stock Option Agreement 15 Independent Accountants' Letter Regarding Unaudited Financial Information 27.1 Financial Data Schedule 99 Certain Factors Regarding Future Results __________ * Identifies a management contract or compensatory plan or arrangement in which an executive officer or director of the Company participates. </TABLE> 17