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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT
(Mark one)
[x] Annual report pursuant to section 13 or 15(d) of the securities
exchange act of 1934 [fee required] for the fiscal year ended April
30, 1996 or
[ ] Transition report pursuant to section 13 or 15(d) of the securities
exchange act of 1934 [no fee required]for the transition period from
________ to ________
Commission file number 0-27874
ANSOFT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 72-1001909
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
Four Station Square, Suite 660
Pittsburgh, Pennsylvania 15219-1119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 261-3200
Securities registered pursuant to Section 12(b) of the act: None
Securities registered pursuant to Section 12(g) of the act: Common stock, par
value $.01 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by 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 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. [ ]
As of July 19, 1996, the aggregate market value of voting common stock held by
non-affiliates of the registrant, based upon the last reported sale price for
the registrant's Common Stock on the Nasdaq National Market on such date, as
reported in The Wall Street Journal, was $17,767,884.38.
The number of shares of the registrant's Common Stock outstanding as of the
close of business on July 19, 1996 was 7,641,059.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the definitive Proxy Statement of Ansoft Corporation (the
"Company") to be furnished in connection with the solicitation of proxies by
the Company's Board of Directors for use at the 1996 Annual Meeting of
Stockholders (the "Proxy Statement") are incorporated by reference into Part
III of this Annual Report on Form 10-K to the extent provided herein. Except as
specifically incorporated by reference herein, the Proxy Statement is not to be
deemed filed as part of this Annual Report on Form 10-K.
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TABLE OF CONTENTS
ITEM OF FORM 10-K PAGE
- ----------------- ----
Part I
1. Business 1
2. Properties 8
3. Legal Proceedings 8
4. Submission of Matters to a Vote of Security Holders 8
4.(a) Executive Officers of the Registrant 8
Part II
5. Market for Registrant's Common Stock, Preferred Stock and
Warrants, and Related Security Holder Matters 10
6. Selected Financial Data 10
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
8. Financial Statements and Supplementary Data 18
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures 31
Part III
Part III information will appear in Item 4(a) of Part I of Form 10-K
and in the Registrant's Proxy Statement in connection with its Annual Meeting of
Stockholders. Such Proxy Statement will be filed with the Securities and
Exchange Commission and such information is incorporated herein by this
reference as of the date of such filing.
Part IV
14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 32
Signatures 35
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PART I
ITEM 1. BUSINESS
Ansoft Corporation ("Ansoft" or the "Company") develops, markets and
supports electronic design automation ("EDA") software, based upon
electromagnetic principles, for the design of electronic, communications and
electromechanical components and systems. The Company believes that its
proprietary products enable design engineers to develop smaller systems with
higher performance and greater yields than can be developed with traditional
EDA tools, and result in reduced time-to-market, lower risk of failure and
elimination of costly and time-consuming product redesign. The Company's
products are used by design engineers in the communications, semiconductor,
automotive, computer, defense/aerospace and consumer electronics industries.
Ansoft's customers include GM, Motorola, Raytheon, TRW, Mitsubishi, Texas
Instruments, Hitachi, Lucky-Goldstar, AT&T and Sun Microsystems.
The Company's products are generally marketed under the Maxwell(R) name.
The Company's electromechanical EM software analyzes the electrical performance
of product designs to increase yields and is applied in the design of sensors,
solenoids, motors and transformers for the automotive and consumer electronics
industries. The Company's signal integrity SI software analyzes the degradation
in signal integrity that results from the higher clock speeds and smaller
physical dimensions of micron and deep-submicron integrated circuits and
computer interconnects for the computer and semiconductor industries. In
addition, the Company's SI software analyzes electromagnetic radiation from
electronic systems, including radio frequency integrated circuits, antenna and
radar systems, and is used in the communications, aerospace and defense
industries.
Unless otherwise stated, the information contained in this Annual Report on
Form 10-K is as of April 30, 1996. This Form 10-K, including Management's
Discussion and Analysis of Financial Condition and Results of Operations,
contains certain statements of a forward looking nature relating to future
events or the future financial performance of the Company which are forward
looking statements under Section 21E of the Securities Exchange Act of 1934.
Persons reading this Form 10-K are cautioned that such statements are only
predictions and that actual events or results may differ materially. In
evaluating such statements, readers should specifically consider the various
factors identified in this Form 10-K, which could cause actual events or
results to differ materially from those indicated by such forward looking
statements.
Industry Overview
Since the early 1970s, design engineers have used EDA software to assist
in electronic design and development. EDA software automates the previously
manual, time-consuming, error-prone design process, resulting in dramatic
increases in productivity and efficiency. As design and manufacturing
technology has focused on increased performance, miniaturization and yield, the
applications for EDA software have expanded from computers to communication,
semiconductor, automotive, defense/aerospace and consumer electronic products.
The need to model accurately the electromagnetic interaction in
electronic, communications and electromechanical components and systems is
increasingly important as the marketplace demands higher levels of system
performance, miniaturization and yield. The Company believes that traditional
EDA tools, which are not based on electromagnetic principles and can therefore
only approximate electromagnetic interaction, cannot model such systems with
the requisite degree of accuracy.
Ansoft addresses the limitations of traditional EDA software by providing
design engineers with easy-to-use tools to model accurately electromagnetic
interaction. While Ansoft products may be used as an independent design
platform, they are also designed to
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be compatible with complementary EDA tools and to be easily integrated into the
customer's total design environment.
Ansoft Strategy
Ansoft's objective is to become a leading, worldwide supplier of EDA
software. Using its proprietary technology as a primary competitive advantage,
the Company pursues its objectives through the following strategies:
Leverage Technology Leadership. Leveraging a focused team of research and
development engineers and the Company's achievements in electromagnetics, the
Company continually seeks to design and develop new technologies, products and
interfaces. Examples of the Company's new technologies include automatic and
adaptive convergence to solutions, asymptotic waveform evaluation ("AWE") for
spectral domain solutions, transfinite elements, Basis Evaluation State-Space
Techniques and fast multipole acceleration algorithms.
Capitalize on Growing Need for Electromagnetics Analysis. Ansoft seeks to
capitalize on the increased need in the marketplace for the accurate modeling
of electromagnetic interaction. The Company uses a direct sales force, regional
engineering services and worldwide marketing to achieve product awareness, name
recognition and market penetration in domestic and international markets. To
supplement its direct sales force, the Company uses international distributors,
provides localized customer support and training for its international
customers, targets international publications, trade journals and trade shows
and offers product seminars.
Integrate with Multiple Design Environments. To broaden its installed base
and penetrate its customers' installed base, the Company designs its software
products to be integrated into customers' design environments and to be
compatible with other vendors' tools, enabling customers to select an optimal
design flow for their needs. Ansoft participates in industry standardization
efforts and supports a wide range of Unix-based workstations and Intel-based
personal computers running Microsoft Windows to enable easy adoption of its
products into its customers' computing environment.
Expand Broad Range of Product Applications. The Company offers products
which address a wide range of design problems including electromechanical
performance and yield issues in the automotive and consumer electronics
industries, IC Packaging and Signal Integrity issues in the semiconductor and
computer industries and electromagnetic interference issues in the
communications and defense/aerospace industries. The Company seeks to develop
new applications and product enhancements which address additional design
issues, as well as new interfaces for its existing products.
Focus on Customer Service. The Company focuses on providing worldwide
customer service to achieve a high degree of customer satisfaction, and
provides a wide range of support services on both a pre-sale and post-sale
basis to maximize the success of its tools in the customer's design
environment. The Company offers on-site and in-house training programs, on-line
and telephone support for design engineers and annual maintenance contracts.
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Products
Ansoft solutions are offered in both electromechanical ("EM") and signal
integrity ("SI") products. The Company's EM software products enable designers
of electromechanical components and systems to optimize the electrical
performance of their designs while increasing yields. The Company's SI software
products have two markets: High Speed and High Frequency. The Company's SI
(High Speed) software enables designers to design computer interconnects, IC
Packaging structures and electronic systems by accurately capturing the
degradation in signal quality due to higher clock speeds and smaller physical
dimensions. The Company's SI (High Frequency) software enables designers to
design radio frequency integrated circuits ("RF ICs"), antenna and radar
systems and microwave components by accurately solving the effects of
electromagnetic radiation from electronic systems. Ansoft products are
available on Unix workstations from International Business Machines
Corporation, HP, Sun Microsystems, Inc., Silicon Graphics, Inc. and Digital
Electronics Inc. and Intel-based PCs running Microsoft Windows/Windows NT(R).
Ansoft EM Software
Maxwell 2D Field Simulator: This product performs electromagnetic field
simulation at the product design stage from physical design information.
Electromagnetic field simulation provides designers with critical device
parameters such as forces, torques, saturation effects, inductance, capacitance
and power losses. The parametrics capability of this two-dimensional field
simulator allows the user easily to perform "what-if" analysis by automatically
varying physical dimensions, material properties and excitation levels. The
U.S. list price of this product ranges from $2,900 to $12,900.
Maxwell 3D Field Simulator: This product provides similar electromagnetic
field simulation of devices as the Maxwell 2D Field Simulator for devices that
require three-dimensional analysis. The software leads the designer in a top
down fashion from a three-dimensional solid modeler to viewing electromagnetic
field patterns throughout the device. By evaluating field solutions and device
characteristics, the designer is able to determine where material substitutions
and geometry changes can be made to reduce production costs while increasing
device performance. The U.S. list price of this product ranges from $14,900 to
$34,900 (includes Maxwell 2D Field Simulator).
EMSS: This product allows devices designed at the component level in
Ansoft Field Simulators to be simulated on a larger system level by coupling
the electromagnetic behavior of the device with electrical and mechanical drive
and load components, and permits the critical evaluation of both transient and
steady state system level behavior. This integrated solution is used to study
issues such as the effects of non-linear magnetic components on system level
behavior, source and load transients, induced voltages and currents, as well as
position and velocity of moving parts. The U.S. list price of this product
ranges from $19,900 to $44,900.
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Ansoft SI Software (High Speed)
Maxwell Extractor: This product extracts physical interconnects on ICs and
printed circuit boards ("PCBs") and creates device models in HSPICE (Meta
Software), PSpice (MicroSim), or DF/SigNoise (Cadence) formats. The models
accurately capture the degradation in signal quality due to higher clock speeds
and smaller physical dimensions. The U.S. list price of this product is
$19,900.
Maxwell Spicelink: This product creates physical models of IC Packaging
structures in industry standard JEDEC format and creates SPICE models for these
devices. The package includes a schematic capture and circuit simulation tool
which allows system designers to study the effect of connectors, cables and
packages on system performance. The U.S. list price of this product is $34,900.
Maxwell Eminence: This product addresses issues of electromagnetic
radiation from electronic systems and provides solutions to both high speed and
high frequency problems. The U.S. list price of this product is $49,900. There
are two key applications for this product:
- FCC guidelines in the US, European emissions rules and EMC guidelines in
Japan regulate the level of electromagnetic radiation allowable from
computers, personal communications systems and other consumer electronic
products. This product allows system designers to model critical path
PCB emissions, evaluate component level EMI and study shielding
effectiveness, thus enabling them to design proactively for EMC
compliance (High Speed).
- Designers of wireless communication systems use this product to design
RF components and sub-systems and to evaluate the interaction between
the digital and RF portions of telecommunication systems. Engineers in
the military/aerospace industry utilize this product for designing
antenna and radar systems (High Frequency).
ParICs Modeler. This product automatically generates physical designs of
IC Packaging structures in industry standard JEDEC formats. This product is
available stand-alone for IC CAD engineers, or as an option to Extractor or
Spicelink for signal integrity engineers. The U.S. list price for this product
is $4,900.
Ansoft SI Software (High Frequency)
Maxwell Strata. This product will enable the design of highly dense RF
ICs, monolithic microwave integrated circuits ("MMICs") and planar antennas for
customers in the telecommunications and defense electronics market. The U.S.
list prices for this product, which is expected to be available in calendar
1996, are expected to be $29,900 stand-alone and $19,900 if purchased with
another Ansoft product.
Ansoft HFSS. The Company supplies HP with HFSS, which Hewlett-Packard
Corporation ("HP") sells exclusively worldwide for the design of RF and
microwave systems. HFSS is used by microwave component designers to develop
MMICs, which are used in defense and aerospace applications. This product was
first shipped in fiscal 1990. The HP Agreement expires in January 1997 and will
not be renewed. HP has the right to sell the HFSS product through January 1998.
Since January 1994, the Company has directly marketed its
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Maxwell(R) Eminence product, which expands on the functionality of HFSS, to
target the commercial wireless communications market and the military/aerospace
industry through its worldwide direct sales force and its international
distributors.
Sales and Marketing
Ansoft markets its products worldwide through its direct sales force and
its distributors. The Company supports its customers with skilled engineers and
technically proficient sales representatives. The Company hires application
engineers with significant industry experience in order to analyze the needs of
its customers and to gain technical insight into the development of future
products and enhancements to existing products. The Company believes that
customer referrals account for a significant percentage of the Company's new
product sales. The Company generates name recognition and sales through
advertising in trade publications and on the World Wide Web. In addition, the
Company participates in industry trade shows and organizes seminars to promote
and expand the adoption of its products.
Direct. In North America, the Company maintains sales and support offices
in Pittsburgh and San Jose, additional sales personnel in Los Angeles, Boston,
Orlando, Dallas and Detroit, and a telemarketing sales group operating from its
Pittsburgh headquarters. As of April 30, 1996, the Company had a domestic
direct sales force of 14 representatives, supported by 21 employees in
application engineering, marketing and sales administration.
In August 1995, the Company established a sales office in Asia for the
sale of its EM software. As of April 30, 1996, this office consists of four
employees in Japan and one in Singapore . In January 1996, the Company added a
sales representative in England in order to localize its direct sales effort in
Europe and has engaged a local technical consulting firm to assist with
benchmark and technology support.
Distributors and HP. In 1989, Ansoft entered into an exclusive distribution
agreement with HP (the "HP Agreement") for worldwide distribution of its HFSS
product. The HP Agreement will expire in January 1997, and the agreement will
not be renewed. HP has the right to sell the HFSS product through January 1998.
Since January 1994, the Company has directly marketed its Maxwell(R) Eminence
product, which expands on the functionality of HFSS, to target the commercial
wireless communications market and the military/aerospace industry through its
worldwide direct sales force and its international distributors. During fiscal
1996, 1995 and 1994, revenue from HP accounted for approximately 13%, 18%, and
16%, respectively, of the Company's total revenue. The Company expects that HP
will account for a lower percentage of its total revenues in the next twelve
months.
With respect to international licensing, the Company has entered into a
distribution agreement with Innotech Corporation, which is an exclusive
agreement for sales of its SI software in Japan, and agreements with other
distributors in Europe, Korea, Singapore, China and Taiwan. The Company
supports its distributors and their customers with technical, sales and
management personnel.
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Customers
The Company has significant breadth in its installed base with over 500
customers in the communications, semiconductor, automotive, computer,
defense/aerospace and consumer electronics industries. No single customer in
the Company's installed base accounted for more than 10% of total revenue
within any of the past three fiscal years. Representative customers by industry
include:
Communications: Motorola, Inc.; Hughes Electronics Company; Rockwell
International Corporation; Alcatel Network Systems,
Inc.; AT&T Corporation; Northern Telecom Inc.
Semiconductor: Motorola, Inc.; Texas Instruments Incorporated; Samsung
Electronics, Inc.; Lucky-Goldstar Group; Intel
Corporation; LAM Research Corporation; Analog Devices,
Inc.; Harris Corp.; Illinois Superconductor
Corporation; Integrated Device Technology Inc.
Automotive: General Motors Corporation; BMW Ltd.; Hyundai
Corporation; Robert Bosch Corp.
Computer: Sun Microsystems, Inc.; International Business Machines
Corporation; AMP Incorporated; Fujitsu, Ltd.; ITT
Cannon; NEC Corporation; Owl Displays Inc.; Teradyne,
Inc.
Defense/Aerospace: Raytheon Company Inc.; TRW, Inc.; Allied Signal
Corporation; Lockheed Martin Corporation; Sandia
Aerospace National Laboratories; Anaren Microwave Inc.;
United States Corporation; Loral Corporation; United
States Army/Redstone; Aerospatiale Inc.
Consumer
Electronics: Hitachi Ltd.; Mitsubishi Corp.; Sharp Electronics
Corporation; Sony Corporation; Dynamics Research
Corporation; China National Electric
Customer Service and Support
Ansoft provides customer support services on both a pre-sale and post-sale
basis. Pre-sale support involves the Company's application engineers working
with the direct sales force to provide on-site support during critical stages
of the user's benchmark, evaluation and implementation processes. Post-sale
support is provided pursuant to renewable annual maintenance contracts.
Post-sale services include on-line and telephone support for design engineers
and on-site and in-house training on all products. Customers with maintenance
agreements receive all product enhancement releases without additional charge.
Product upgrades that add significant new functionality are provided to
customers for an additional fee.
The Company offers a variety of training programs for customers ranging
from introductory level courses to advanced training.
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Product Development
The Company continually seeks to design and develop new technologies,
products and interfaces. This effort includes releasing improved versions of
its products on a regular basis and developing new products. The Company
assigns an interdisciplinary team of personnel from research and development,
software development, documentation, quality assurance, customer support and
marketing to each product development project. Ansoft develops cooperative
relationships with major customers with respect to beta-testing its new
products or enhancements and implementing suggestions for new product features.
The Company also maintains cooperative relationships with the major hardware
vendors on which the Company's products operate. The Company believes that its
team approach and cooperative relationships allow it to design products that
respond on a timely basis to emerging trends in computing, graphics and
networking technologies.
During fiscal 1996, 1995 and 1994 research and development expenses were
$1.8 million, $1.5 million and $1.3 million, respectively. As of April 30,
1996, the Company's product development group consisted of 28 employees. The
Company anticipates that it will continue to commit substantial resources to
product development for the foreseeable future.
Competition
The EDA software industry is highly competitive and is characterized by
continuing advances in products and technologies. In general, competition in
the traditional EDA industry comes from major EDA vendors, some of which have a
longer operating history, significantly greater financial, technical and
marketing resources, greater name recognition and a larger installed customer
base than the Company. These companies also have established relationships with
current and potential customers of the Company. The Company competes directly
with certain major EDA vendors and privately-held companies which provide
products based on electromagnetic principles derived from Maxwell's Equations.
There can be no assurance that the major EDA vendors and other EDA companies
will not expand and develop new products in the electromagnetics-based EDA
market. The Company also competes, on a limited basis, with the internal
development groups of its existing and potential customers, many of whom design
and develop customized design tools for their particular needs. If the Company
is unable to compete successfully against current and future competitors, the
Company's business, operating results and financial condition will be
materially adversely affected.
Ansoft believes that its current products compete effectively on the basis
of product functionality, solution speed and accuracy, reliability, price, ease
of use and technical support for applications which require accurate modeling
of electromagnetic interaction. However, there is no assurance that the Company
will not face competitive technologies that could hinder its future growth.
Proprietary Rights
The Company is heavily dependent on its proprietary software technology.
The Company relies on a combination of non-competition and confidentiality
agreements with its employees, license agreements, copyrights, trademarks and
trade secret laws to establish and protect proprietary rights to its
technology. The Company does not hold any
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patents. All Ansoft software is shipped with a security lock which limits
software access to authorized users. In addition, the Company does not license
or release its source code. Effective copyright and trade secret protection of
the Company's proprietary technology may be unavailable or limited in certain
foreign countries.
Maxwell(R) and ParICs(R) are registered trademarks in the United States of
Ansoft Corporation.
Employees
As of April 30, 1996, the Company had a total of 69 employees, including
28 in research and development, 35 in sales, marketing, and customer support
services and six in administration. None of the Company's employees is
represented by a collective bargaining agreement, nor has the Company
experienced any work stoppage. The Company considers its relations with its
employees to be good.
ITEM 2. PROPERTIES
The Company occupies approximately 10,000 square feet of space at its
headquarters in Pittsburgh, Pennsylvania under a lease expiring in 1999. The
current annual base rent is approximately $140,400. The Company also maintains
sales and support offices in California and Japan. The Company's current
aggregate annual rental expenses for these additional facilities is
approximately $42,000. Ansoft believes that its existing facilities are
adequate for its current needs and that suitable additional space will be
available when needed.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any litigation and is not aware of any
threatened litigation, unasserted claims or assessments that could have a
material adverse effect on the Company's business, operating results or
financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning each of the
executive officers of the Company:
Name Age Title
Zoltan J. Cendes, Ph.D ........ 50 Chief Research Scientist
Nicholas Csendes .............. 52 President and Chief Executive Officer
Thomas A.N. Miller ............ 48 Chief Financial Officer
Padmanabhan Premkumar ......... 33 Vice President-Marketing
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Dr. Zoltan Cendes is a founder of Ansoft and has served as Chairman of the
Board of Directors of the Company and its chief research scientist, since its
formation in 1984. Since 1982, Dr. Cendes has been a university professor in
electrical and computer engineering at Carnegie Mellon University. Dr. Cendes
has lectured throughout North America, Europe and Asia on the topic of
electromagnetics and finite element analysis and has published over 100
publications on these topics. Dr. Cendes directs the research efforts of
Ansoft.
Nicholas Csendes is a founder of Ansoft and has served as President, Chief
Executive Officer and Secretary since 1992 and a director since 1984. From 1989
to 1994, Mr. Csendes was an officer, director and controlling stockholder of
Southwest Gas Systems, Inc. ("Southwest Gas"), a privately-held natural gas
company which was sold to Ensearch Corporation in 1994. Mr. Csendes was a
founder and major stockholder of IT Network, Inc. ("ITN"), the predecessor
company to Source Media, Inc. ("Source Media"), a publicly-held interactive
information service company. Mr. Csendes was a director of ITN from 1988 to
1994. From 1991 to 1993, Mr. Csendes was a director of Cableshares, Inc., a
publicly-held interactive software development company. Since 1985, Mr. Csendes
has been an officer, director and controlling stockholder of American Banner
Resources, Inc. ("ABR"), a privately-held holding company with various
interests in real estate and public and private securities.
Thomas A.N. Miller is a founder of Ansoft and has served as a director
since 1984 and as Chief Financial Officer since 1994. From 1989 to 1994, Mr.
Miller was an officer, director and controlling stockholder of Southwest Gas.
Mr. Miller was a founder of ITN and served as Chairman of the Board of ITN from
its inception in 1988 to 1994, and served as Chief Executive Officer of ITN
from its inception to December 1992. Since 1981, Mr. Miller has been President,
director and controlling stockholder of ABR and its predecessor companies.
Padmanabhan Premkumar joined Ansoft in 1989. From 1991 to 1994, Mr.
Premkumar was in charge of Ansoft's software development programs as Vice
President of Development. Since 1995, Mr. Premkumar has been Vice
President-Marketing, responsible for product planning, marketing and
commercialization of existing software product enhancements and the commercial
development of new products. Prior to joining Ansoft, Mr. Premkumar was a
research associate in the Robotics Laboratory at the University of Toledo.
Officers are appointed by the Board of Directors and serve at the
discretion of the Board. Dr. Zoltan J. Cendes and Mr. Nicholas Csendes are
brothers. There are no other family relationships between any of the directors
or executive officers of the Company.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock of the Company has been listed on the Nasdaq National
Market under the symbol "ANST" since its initial public offering which was
declared effective on April 3, 1996. Prior to that date, there was no
established public trading market for the Company's Common Stock. The following
table sets forth the range of high and low sale prices of the Common Stock as
reported on the Nasdaq National Market for the fiscal year ended April 30,
1996.
Fiscal 1996: HIGH LOW
---- ---
Fourth Quarter
(April 3, 1996 to April 30, 1996) $9.50 $7.125
The Company has not paid cash dividends on its Common Stock since its
inception. The Company currently intends to retain earnings for development of
its business and, therefore, does not anticipate paying any cash dividends in
the foreseeable future.
The approximate number of shareholders of record at July 18, 1996 was 118.
As of July 18, two record holders were registered clearing agencies holding
common stock on behalf of participants of such clearing agencies.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the Company's Financial Statements and the Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein. The statement of operations data for each of the
years in the three-year period ended April 30, 1996 and the balance sheet data
as of April 30, 1996 and 1995 are derived from financial statements of the
Company which have been audited by KPMG Peat Marwick LLP, independent certified
public accountants, and are included elsewhere in this Report. The statement of
operations data for the year ended April 30, 1993 and the balance sheet data as
of April 30, 1994 are derived from financial statements of the Company which
have been audited by KPMG Peat Marwick LLP, independent certified public
accountants. The statement of operations data for the year ended April 30, 1992
and the balance sheet data at April 30, 1993 and 1992 are derived from unaudited
financial statements.
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Year Ended April 30, (In thousands, except per share data)
-----------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Statement of Operations Data
Revenues:
License ......................... $7,995 $5,921 $ 4,944 $ 3,350 $ 2,567
Service and other ............... 700 233 177 121 --
------ ------ ------- ------- -------
Total revenue ..................... 8,695 6,154 5,121 3,471 2,567
------ ------ ------- ------- -------
Costs and expenses:
Sales and marketing ............. 5,007 3,935 2,734 1,699 1,135
Research and development ........ 1,766 1,462 1,296 1,450 1,488
General and administrative ...... 1,269 1,046 1,137 1,096 860
Write-off of capitalized software -- -- -- -- 1,230
------ ------ ------- ------- -------
Total costs and expenses ...... 8,042 6,443 5,167 4,245 4,713
------ ------ ------- ------- -------
Income (loss) from operations ..... 653 (289) (46) (774) (2,146)
Interest income (expense) ......... 35 (16) (94) (193) (133)
------ ------ ------- ------- -------
Income (loss) before income taxes . 688 (305) (140) (967) (2,279)
Income tax benefit ................ 612 -- -- -- --
------ ------ ------- ------- -------
Net income (loss) ................. $1,300 $ (305) $ (140) $ (967) $(2,279)
====== ====== ======= ======= =======
Net income (loss) per share ....... $ 0.19 $(0.06) $ (0.06) $ (0.40) $ (1.00)
====== ====== ======= ======= =======
Weighted average shares outstanding 6,873 5,528 2,394 2,394 2,286
====== ====== ======= ======= =======
Year Ended April 30, (In thousands, except per share data)
---------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Balance Sheet Data
Cash and cash equivalents .......... $10,728 $ 116 $ 43 $ 10 $ 59
Working capital (deficit) .......... 12,204 593 259 (748) (570)
Total assets ....................... 15,391 1,792 1,417 950 681
Total stockholders' equity (deficit) $14,291 $1,161 $(3,435) $(3,295) $(2,418)
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company develops, markets and supports EDA software, based upon
electromagnetic principles, for the design of electronic, communications and
electromechanical components and systems. The Company was incorporated in 1984
and commenced commercial shipments of its first software product, focused on
the electronic component industry, in 1987. The Company subsequently offered
solutions in both electromechanical ("EM") and signal integrity ("SI")
products. The SI products are targeted at two markets: High Speed and High
Frequency. The importance of any individual product has diminished as the
Company has introduced new products.
Revenue consists primarily of fees for licenses of the Company's software
products and fees for customer service and support. Revenue from the sale of
software licenses is recognized upon shipment of the products and fulfillment
of acceptance terms, if any. No significant obligations, including the
performance of services essential to the functionality of the software, remain
unfulfilled at the time revenue is recognized on software licenses, and with
respect to any remaining insignificant obligations, either the related revenue
is unbundled and deferred, based on the estimated fair value of related
services, or the related estimated costs are accrued. When the Company receives
advance payment for software products, such payments are recorded as deferred
revenue and recognized as revenue when products are shipped and other
obligations, if any, have been satisfied. Other revenue from customer training,
support and other services is recognized as the service is performed.
Costs directly attributable to the cost of license and service revenue are
not material in any reported period. Accordingly, the Company has not
separately disclosed these costs.
In the fourth quarter of fiscal 1996, the Company recorded a net income
tax benefit of $612,000, or $0.09 per share, resulting primarily from the
partial recognition of previously unrecorded deferred tax assets in accordance
with the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes.". The Company's
deferred tax asset of $700,000 as of April 30, 1996, consists primarily of net
operating loss carryforwards for federal income tax purposes, which are
available to offset future taxable income, and expire in increments beginning
in April 2001, through April 2010.
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Results of Operations
The following table sets forth the percentage of total revenue of each
item in the Company's statements of operations:
Year Ended April 30, --------------------------
1996 1995 1994
---- ---- ----
Revenues:
License .................................... 92% 96% 97%
Service and other .......................... 8 4 3
--- ---- ----
Total revenue ............................ 100 100 100
--- ---- ----
Costs and expenses:
Sales and marketing ........................ 58 64 54
Research and development ................... 20 24 25
General and administrative ................. 15 17 22
--- ---- ----
Total costs and expenses ................. 93 105 101
--- ---- ----
Income (loss) from operations ................ 7 (5) (1)
Interest income (expense) .................... -- -- (2)
--- ---- ----
Income (loss) before income taxes ............ 7 (5) (3)
Income taxes ................................. 8 -- --
--- ---- ----
Net income (loss) ............................ 15% (5)% (3)%
=== ==== ====
Year Ended April 30, 1996 compared with Year Ended April 30, 1995
Revenue. The Company's license revenue increased by 35% to $8.0 million
for the year ended April 30, 1996, as compared with $5.9 million in the
previous year. The increase in revenue is primarily attributable to the
increase in the number of licenses sold. Service and other revenue increased by
200% to $700,000 for the year ended April 30, 1996, as compared with $233,000
in the previous year. The increase in service and maintenance revenue was
primarily attributable to purchased annual maintenance agreements and reflects
the continued growth of the installed base of customers and increased focus on
marketing annual maintenance agreements.
International revenue accounted for 33% and 31% of the Company's total
revenue in fiscal 1996 and 1995, respectively. The Company expects that
international revenues will account for an increasing portion of its revenues
in the future.
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Revenue from the HP agreement accounted for 13% and 18% of total revenue in
fiscal 1996 and 1995, respectively. The HP Agreement will expire in January
1997, and will not be renewed. HP has the right to sell the HFSS product through
January 1998. The Company expects that HP will account for a lower percentage of
its total revenues in the next twelve months. Since January 1994, the Company
has directly marketed its Maxwell(R) Eminence product, which expands on the
functionality of HFSS, to target the commercial wireless communications and
defense/aerospace markets through its worldwide direct sales force and its
international distributors.
Sales and Marketing. Sales and marketing expenses consist of salaries,
commissions paid to internal sales and marketing personnel and international
distributors, promotional costs and related operating expenses. Sales and
marketing expenses increased by 27% to $5.0 million in fiscal 1996, as compared
to $3.9 million in fiscal 1995. Sales and marketing expenses increased
primarily due to the expansion of the Company's sales and marketing
organization and, to a lesser extent, participation in domestic and
international conferences and trade shows. Sales and marketing expenses
represented 58% and 64% of total revenue in fiscal 1996 and fiscal 1995,
respectively. The decrease as a percentage of revenue is due to certain of the
expenses being of a fixed nature which have not increased proportionately with
the increase in revenue. The Company expects to increase sales and marketing
expenditures both domestically and internationally as part of its continuing
effort to expand its markets, introduce new products, build marketing staff and
programs and expand its international presence.
Research and Development Expenses. Research and development expenses
include all costs associated with the development of new products and
enhancements to existing products. Research and development expenses increased
21% to $1.8 million in fiscal 1996, as compared to $1.5 million in fiscal 1995.
The increase is due to increased costs associated with continuing product
development and enhancement of existing products. Research and development
expenses represented 20% and 24% of total revenue in fiscal 1996 and 1995,
respectively. The decrease as a percentage of revenue is due to certain of the
expenses being of a fixed nature which have not increased proportionately with
the increase in revenue. The Company anticipates that it will continue to
devote substantial resources to product research and development.
General and Administrative Expenses. General and administrative expenses
increased 21% to $1.3 million in fiscal 1996, as compared to $1.0 million in
fiscal 1995. The increase is due to additional costs required to support the
increase in operations, including the hiring of additional administrative
personnel, along with other general cost increases. General and administrative
expenses represented 15% and 17% of total revenue in fiscal 1996 and 1995,
respectively. The Company expects general and administrative expenses to
continue to increase.
Year Ended April 30, 1995 compared with Year Ended April 30, 1994
Revenue. The Company's license revenue increased by 20% to $5.9 million in
fiscal 1995, as compared to $4.9 million in fiscal 1994. The growth in license
revenue was attributable to an increase in the number of licenses sold. Service
and other revenue increased by 32% to $233,000 in fiscal 1995, as compared to
$177,000 in fiscal
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1994. The increases in service revenue were primarily attributable to purchased
annual maintenance agreements in connection with the continued growth of the
installed base of customers licensing the Company's products.
International revenue accounted for 31% and 28% and of the Company's total
revenue in fiscal 1995 and 1994, respectively. HP revenue accounted for 18% and
16% of total revenue in fiscal 1995 and 1994, respectively.
Sales and Marketing. Sales and marketing expenses increased by 44% to $3.9
million in fiscal 1995, as compared to $2.7 million in fiscal 1994. The
increases were primarily due to the expansion of the Company's sales and
marketing organization and, to a lesser extent, participation in domestic and
international conferences and trade shows. Sales and marketing expenses
represented 64% and 54% of total revenue in fiscal 1995 and 1994, respectively.
Research and Development Expenses. Research and development expenses
increased 13% to $1.5 million in fiscal 1995, as compared to $1.3 million in
fiscal 1994. The increase in fiscal 1995 was due to increased costs associated
with the development of new products and enhancement of existing products.
Research and development expenses represented 24% and 25% of total revenue in
fiscal 1995 and 1994, respectively.
General and Administrative Expenses. General and administrative expenses
were approximately $1.1 million in each of fiscal 1995 and 1994. General and
administrative expenses as a percentage of revenue has decreased in fiscal 1995
as revenue has increased.
Interest Expense. Interest expense decreased by 84% to $15,444 in fiscal
1995, as compared to $94,593 in fiscal 1994. Interest expense in fiscal 1994
includes interest on stockholder advances totaling $67,000. The decrease in
fiscal 1995 is primarily attributable to the issuance of Common Stock of the
Company in consideration for stockholder advances in fiscal 1995.
Quarterly Results of Operations
The following table presents unaudited quarterly results in dollar amounts
for each quarter of fiscal 1996 and fiscal 1995. The information has been
prepared on a basis consistent with the Company's annual financial statements
and, in the opinion of management, contains all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the
information for such periods. The Company's quarterly results have been in the
past, and may be in the future, subject to fluctuations due to increased
competition, the timing of new product announcements, changes in pricing
policies by the Company or its competitors, market acceptance of new and
enhanced versions of the Company's products and the size and timing of
significant licenses. The Company believes that results of operations for the
interim periods are not necessarily indicative of the results to be expected
for any future period.
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Quarter Ended (In thousands, except per share data)
-----------------------------------------------------------------------------------
April Jan. Oct. July April Jan. Oct. July
30, 31, 31, 31, 30, 31, 31, 31,
1996 1996 1995 1995 1995 1995 1994 1994
------ ------ ------ ------ ------ ------ ------ ------
Statement of Operations Data
Revenues:
License ...................... $2,359 $2,066 $1,790 $1,780 $1,816 $1,276 $1,345 $1,484
Service and other ............ 323 157 131 89 58 57 89 28
------ ------ ------ ------ ------ ------ ------ ------
Total revenue .............. 2,682 2,223 1,921 1,869 1,874 1,333 1,434 1,512
------ ------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Sales and marketing .......... 1,582 1,249 1,067 1,110 1,017 898 976 1,046
Research and development ..... 508 415 440 403 407 368 362 323
General and administrative ... 347 370 289 263 261 261 247 277
------ ------ ------ ------ ------ ------ ------ ------
Total costs and expenses ... 2,437 2,034 1,796 1,776 1,685 1,527 1,585 1,646
Income (loss) before taxes ... 245 189 125 93 189 (194) (151) (134)
Interest income (expense) ...... 41 (2) (2) (2) (2) (4) (4) (5)
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before taxes ... 286 187 123 91 187 (198) (155) (139)
Income taxes(1) ................ 612 -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss) ............ $ 898 $ 187 $ 123 $ 91 $ 187 $ (198) $ (155) $ (139)
====== ====== ====== ====== ====== ====== ====== ======
Net income (loss) per share $ 0.12 $ 0.03 $ 0.02 $ 0.01 $ 0.03 $(0.03) $(0.03) $(0.03)
====== ====== ====== ====== ====== ====== ====== ======
Weighted average shares
outstanding .................. 7,302 6,832 6,861 6,893 6,893 6,438 5,638 4,306
====== ====== ====== ====== ====== ====== ====== ======
(1) In the fourth quarter of fiscal 1996, the Company recorded a net income
tax benefit of $612,000 resulting primarily from the partial recognition
of previously unrecorded deferred tax assets.
Liquidity and Capital Resources
Net cash provided by financing activities includes proceeds from the
issuance of Common Stock and stockholder advances totaling $11.4 million,
$714,000, and $594,000, in fiscal 1996, 1995 and 1994, respectively. Other
financing activities have principally been borrowing and repayment of debt.
As of April 30, 1996, the Company had $10.7 million in cash and cash
equivalents. Net cash provided by operating activities was $717,000 in fiscal
1996. Net cash used in operating activities was $340,000, and $126,000 in
fiscal 1995 and 1994, respectively.
Capital expenditures, consisting primarily of purchases of computer
equipment, were $400,000, $277,000 and $246,000 in fiscal 1996, 1995 and 1994,
respectively. The Company expects that purchases of computer equipment will
increase as the Company's employee base grows.
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As of April 30, 1996, the Company has working capital of $12.2 million.
The company believes that the net proceeds from its initial public offering,
together with available funds and cash flows expected to be generated by
operations, will be sufficient to meet its anticipated cash needs for working
capital and capital expenditures for at least the next twelve months.
Thereafter, if cash generated from operations is insufficient to satisfy the
Company's liquidity requirements, the Company may seek additional funds through
equity or debt financing. There can be no assurance that additional financing
will be available or that, if available, such financing will be on terms
favorable to the Company.
Effects of Inflation
To date, inflation has not had a material impact on the Company's
financial results.
Recent Accounting Pronouncements:
In March 1995, the Financial Accounting Standards Board released Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No.
121"). SFAS No. 121 established guidelines for recognition of impairment
losses related to long-lived assets and certain intangibles and related
goodwill for both assets to be held and used as well as assets to be disposed
of. The Company believes that the impact of the adoption of SFAS No. 121 will
not have a material impact on its financial statements.
In addition, the Financial Accounting Standards Board released Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123") in October 1995. SFAS No. 123 outlines
preferable accounting treatment and reporting guidelines for employee stock
compensations plans. The Company intends to adopt SFAS No. 123 through
disclosure only effective May 1, 1996.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Ansoft Corporation:
We have audited the accompanying balance sheets of Ansoft Corporation as
of April 30, 1996 and 1995 and the related statements of operations,
stockholders' equity (deficit) and cash flows for each of the years in the
three-year period ended April 30, 1996. Our audit also included the financial
statement schedule for the year ended April 30, 1996, listed at Item 14(a).
These financial statements and schedule 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ansoft Corporation as of
April 30, 1996 and 1995, and the results of its operations and its cash flows
for each of the years in the three-year period ended April 30, 1996 in
conformity with generally accepted accounting principles. Also in our opinion,
the related financial statement schedule, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects, the information set forth
therein.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
May 29, 1996
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Balance Sheet
------------------------
April 30, (In thousands except per share data) 1996 1995
---------- ----------
Assets
Current assets:
Cash and cash equivalents........................ $10,728 $ 116
Accounts receivable, less allowance for doubtful
accounts of $125 and $90, respectively........ 1,666 1,100
Marketable Securities held to maturity........... 119 --
Deferred Taxes................................... 700 --
Prepaid expenses and other assets................ 91 8
------- -------
Total current assets............................... 13,304 1,224
Plant and equipment, net .......................... 724 521
Marketable Securities held to maturity............. 1,340 --
Other asset........................................ 13 13
Intangible asset, less accumulated amortization of
$110 and $86 respectively ....................... 10 34
------- -------
Total assets....................................... $15,391 $ 1,792
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Note payable to bank ............................ $ -- $ 75
Accounts payable................................. 345 215
Accrued expenses................................. 131 97
Accrued wages.................................... 209 95
Deferred revenue................................. 415 149
------- -------
Total current liabilities.......................... 1,100 631
Total liabilities.................................. 1,100 631
------- -------
Stockholders' equity:
Preferred stock, par value $.01 per share;
1,000 shares authorized, no shares
outstanding................................... -- --
Common stock, par value $.01 per share;
10,000 authorized shares; issued and
outstanding 7,636 and 6,093
shares, respectively.......................... 76 61
Additional paid-in capital....................... 17,204 5,831
Receivable from stockholders..................... -- (442)
Accumulated deficit.............................. (2,989) (4,289)
------- -------
Total stockholders' equity ........................ 14,291 1,161
------- -------
Total liabilities and stockholders'
equity .......................................... $15,391 $ 1,792
======= =======
See accompanying notes to financial statements.
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Statements of Operations
Years Ended April 30, (In thousands, except per share data)
-----------------------------
1996 1995 1994
------- ------- -------
Revenues:
License ....................................... $ 7,995 $ 5,921 $ 4,944
Service and other ............................. 700 233 177
------- ------- -------
Total revenue ................................... 8,695 6,154 5,121
Costs and expenses:
Sales and marketing ........................... 5,007 3,935 2,734
Research and development ...................... 1,766 1,462 1,296
General and administrative .................... 1,269 1,046 1,137
------- ------- -------
Total costs and expenses ........................ 8,042 6,443 5,167
------- ------- -------
Income (loss) from operations ................... 653 (289) (46)
Interest income ................................. 41 -- --
Interest expense ................................ (6) (16) (94)
------- ------- -------
Income (loss) before income taxes ............... 688 (305) (140)
Income taxes .................................... 612 -- --
------- ------- -------
Net income (loss) ............................... $ 1,300 $ (305) $ (140)
======= ======= =======
Net income (loss) per share ..................... $ 0.19 $ (0.06) $ (0.06)
======= ======= =======
Weighted average shares outstanding ............. 6,873 5,528 2,394
======= ======= =======
See accompanying notes to financial statements.
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Statements of Stockholders' Equity (Deficit)
Common Stock Receivable Additional
------------------ From Paid-in Accumulated
(In thousands) Shares Amount Stockholders Capital Deficit Total
-------- ------- ------------ ---------- ----------- --------
Balance, April 30, 1993...... 1,680 $ 17 $ -- $ 532 $ (3,844) $(3,295)
Net loss..................... -- -- -- -- (140) (140)
----- ------ ----- ------- -------- -------
Balance, April 30, 1994...... 1,680 $ 17 $ -- $ 532 $ (3,984) $(3,435)
Net loss..................... -- -- -- 33 (305) (272)
Issuance of common stock..... 4,413 44 (442) 5,266 -- 4,868
----- ------ ----- ------- -------- -------
Balance, April 30, 1995...... 6,093 $ 61 $(442) $ 5,831 $ (4,289) $ 1,161
Net income................... -- -- -- -- 1,300 1,300
Issuance of common stock..... 1,543 15 -- 11,373 -- 11,388
Payments from Stockholders... -- -- 442 -- -- 442
----- ------ ----- ------- -------- -------
Balance, April 30, 1996...... 7,636 $ 76 $ -- $17,204 $ (2,989) $14,291
===== ====== ===== ======= ======== =======
See accompanying notes to financial statements.
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Statements of Cash Flows
-------------------------------
Year Ended April 30, (In thousands) 1996 1995 1994
------- ----- -----
Cash flows from operating activities:
Net income (loss).......................... $ 1,300 $(304) $(140)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation......................... 197 145 126
Amortization......................... 24 24 24
Non-cash compensation................ -- 32 --
Deferred taxes....................... (700) -- --
Changes in assets and liabilities:
Accounts receivable............... (566) (194) (353)
Prepaid expenses and other
assets.......................... (83) -- (2)
Other long-term assets............ -- -- 16
Accounts payable.................. 130 (65) 87
Accrued wages and expenses........ 148 (23) 125
Deferred revenue.................. 266 45 (9)
------- ----- -----
Net cash provided by (used
in) operating activities 716 (340) (126)
------- ----- -----
Cash flows from investing activities:
Purchases of plant and equipment......... (400) (277) (245)
Purchases of marketable securities
held to maturity....................... (1,459) -- --
------- ----- -----
Net cash used in investing activities...... (1,859) (277) (245)
------- ----- -----
Cash flows from financing activities:
Repayment of borrowings.................. (75) (24) (189)
Proceeds from the issuance of common
stock, net............................. 11,388 14 --
Proceeds from related party
stockholders, net...................... 442 700 593
------- ----- -----
Net cash provided by financing activities 11,755 690 404
------- ----- -----
Net increase in cash and cash
equivalents.............................. 10,612 73 33
Cash and cash equivalents at beginning
of period................................ 116 43 10
------- ----- -----
Cash and cash equivalents at end of
period................................... $10,728 $ 116 $ 43
======= ===== =====
Supplemental disclosures of cash flow
information:
Cash paid for interest................... $ 6 $ 15 $ 28
Cash paid for income taxes............... $ 72 $ 2 $ 3
See accompanying notes to financial statements.
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Notes to Financial Statements
(1) Nature of Business and Summary of Significant Accounting Policies
Nature of Business and Basis of Presentation
Ansoft Corporation (Ansoft) develops, markets and supports electronic
design automation software, based upon electromagnetic principles, for the
design of electronic, communications and electromechanical components and
systems.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and disclosure of contingent assets and liabilities. The estimates
and assumptions used in the accompanying financial statements are based on
management's evaluation of the relevant facts and circumstances as of the date
of the financial statements. Actual results may differ from those estimates.
Cash Equivalents
Cash equivalents include only highly liquid debt instruments purchased
with original maturity dates of three months or less.
Marketable Securities
In fiscal 1995, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" on a prospective basis. Marketable Securities portfolio
consists of corporate bonds and agency issues and are classified as of April
30, 1996, as held to maturity. Marketable securities held to maturity are
recorded at amortized cost. A decline in the fair value of any marketable
security below cost, that is deemed other than temporary, is charged to
earnings resulting in a new cost basis for the security. Costs of investments
sold are determined on the basis of specific identification.
Plant and Equipment
Plant and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation for financial reporting purposes is computed using
the straight-line method based upon the estimated useful lives of the assets
which range from three to seven years. Assets acquired under capital leases and
leasehold improvements are amortized over their useful life or the lease term,
as appropriate.
Revenue Recognition
The Company recognizes revenue in accordance with the provisions of
American Institute of Certified Public Accountants Statement of Position No.
91-1, Software Revenue Recognition.
Revenue consists primarily of fees for licenses of the Company's software
products and fees for customer service and support. Revenue from the sale of
software licenses is recognized upon shipment of the products and fulfillment
of acceptance terms, if any. No significant obligations, including the
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performance of services essential to the functionality of the software, remain
unfulfilled at the time revenue is recognized on software licenses, and with
respect to any remaining insignificant obligations, either the related revenue
is unbundled and deferred, based on the estimated fair value of related
services, or the related estimated costs are accrued. When the Company receives
advance payment for software products, such payments are recorded as deferred
revenue and recognized as revenue when products are shipped and other
obligations, if any, have been satisfied. Other revenue from customer training,
support and other services is recognized as the service is performed.
The Company uses distributors for the majority of its international sales.
Revenue generated through distributors is generally recorded at the gross sales
price paid by the customer. Commissions withheld by distributors are recorded
as sales and marketing expense. License revenue also includes royalties earned
on sales of certain products under terms of an agreement with Hewlett-Packard
Corporation (see also note 8). Royalty revenue is recognized upon shipment of
product as reported to the Company by Hewlett-Packard. All obligations of the
Company are satisfied upon shipment of product by Hewlett-Packard.
Costs directly attributable to the cost of license and service revenue are
not material in any reported period. Accordingly, the Company has not
separately disclosed these costs.
Software Development Costs
Under Statement of Financial Accounting Standards (SFAS) No. 86, software
development costs are capitalized beginning when a product's technological
feasibility has been established and ending when a product is available for
general release to customers. Technological feasibility is deemed to have been
established upon completion of a detail program design or, in its absence,
completion of a working model. Generally, the establishment of technological
feasibility of the Company's products and general release have coincided. As a
result, the Company has not capitalized any software development costs because
any costs meeting the requirements of SFAS No. 86 have not been significant.
Intangible Asset
In 1992, the Company acquired the rights to a software product marketed as
the ParICs Modeler. This asset is carried at cost less accumulated amortization
calculated using the straight-line method and a useful life of five years.
Income Taxes
Income taxes are provided for under the provisions of SFAS No. 109,
"Accounting for Income Taxes," for all periods presented. Under the asset and
liability method of SFAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Under SFAS No. 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be realized.
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Net Income (Loss) Per Share
Net income (loss) per share is computed using the weighted average number
of common and common equivalent shares outstanding during the period. Common
equivalent shares are not included in the per share calculations where their
inclusion would be antidilutive, except that in accordance with certain SEC
Staff Accounting Bulletins, common and common equivalent shares issued during
the 12 months preceding the initial filing of the Registration Statement for
the Company's initial public offering have been included in the calculation
using the treasury stock method as if they were outstanding for all periods
presented.
(2) Plant and Equipment
Plant and equipment consist of the following:
-------------------
April 30, (In thousands) 1996 1995
-------- -------
Computer equipment....................................... $ 1,404 $1,036
Furniture and fixtures................................... 262 230
Leasehold improvements................................... 2 2
------- ------
1,668 1,268
Less allowances for depreciation and amortization... 944 747
------- ------
724 521
======= ======
(3) Marketable Securities
Information about marketable investment securities at April 30, 1996, is
as follows:
(In thousands) Amortized Unrealized Unrealized Market
cost gains losses value
--------- ---------- ---------- ------
Marketable Securities $ 1,459 9 -- $ 1,468
======= ===== ===== =======
The carrying values of debt securities as of April 30, 1996, by
contractual maturity is shown below:
(In thousands)
-------
Due in one year or less.................................... $ 119
Due in one to five years................................... 914
Due in five to ten years................................... 426
-------
$ 1,459
=======
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(4) Borrowings
In November 1991, the Company terminated its line of credit agreement with
a bank and converted the outstanding balance, $150,000, to a secured note
payable. The bank had the right to demand payment in full in accordance with
the original line of credit agreement. Principal and interest were payable in
84 monthly installments which began December 1, 1991. The note provided for the
payment of interest at the prime rate of interest plus 1%. The interest rate
was 9.75% and 7.75% as of April 30, 1995 and 1994, respectively. The note was
repaid in full in February 1996.
In 1992, the Company purchased the assets of ParICs, Inc. for $120,000.
Payment was in the form of a $120,000 note, payable in monthly installments
over a five-year period commencing August 1992. The note was paid in full in
1994.
On March 19, 1993, the Company borrowed $150,000 from a former stockholder
evidenced by a note payable at 8% interest. The note was paid in full in 1994.
(5) Leases
The Company leases its facilities under operating lease agreements which
expire in 1999. Rental expense incurred by the Company under operating lease
agreements totaled $187,063, $154,088 and $120,300 for the years ended April
30, 1996, 1995 and 1994, respectively. The future minimum lease payments for
such operating leases as of April 30, 1996, are:
Year ending April 30, (In thousands)
- ----------------------
1997........................................................ $ 148
1998........................................................ 140
1999........................................................ 105
Thereafter.................................................. --
-----
$ 393
=====
(6) Stockholders' Equity (Deficit) and Advances
In May and December 1994, the Company issued 1,397,600 shares and 400,000
shares, respectively, to a corporation whose sole stockholders had been
directors and executive officers of the Company since the formation of the
Company, for settlement of prior advances totaling $2,072,000. In May 1994, the
Company issued 614,524 shares to three directors and executive officers of the
Company at that time for settlement of prior advances totaling $670,129. In
September 1994, the Company issued 1,332,000 shares to nine persons (including
three directors and executive officers of the Company at that time) for
settlement of prior advances totaling $1,412,659. In December 1994, the Company
issued 400,000 shares to two of the directors and executive officers of the
Company at that time for settlement of advances in fiscal 1995 totaling
$500,000. The exchange rates for such advances were fixed at the time of the
initial advances, at the estimated fair market value of the Common Stock on the
date of such advance. Interest expense in 1994 includes interest on stockholder
advances totaling $66,740.
26
29
In April 1996, the Company closed its initial public offering of common
stock at $8.50 per share. The net proceeds of the offering were $11.3 million,
after deducting applicable costs and expenses.
(7) Common Stock Options
The Company's 1988 Stock Option Plan (1988 Plan) authorizes the issuance
of 850,000 shares of common stock for the grant of incentive or nonstatutory
stock options to employees and directors. Under the terms of the 1988 Plan,
options to purchase Common Stock are granted at no less than the stock's
estimated fair market value at the date of the grant and may be exercised
during specified future periods as determined by the Board of Directors. The
1988 Plan provides that the options shall expire no more than ten years after
the date of the grant.
In March 1995, the Board of Directors approved a 1995 Stock Option Plan
(1995 Plan) that authorized the issuance of up to 350,000 shares of Common
Stock for the grant of incentive or nonstatutory stock options to employees and
directors. In January 1996, the Board of Directors approved an additional
300,000 shares of common stock for grant. Under the terms of the 1995 Plan,
options to purchase Common Stock are granted at no less than the stock's
estimated fair market value at the date of the grant and may be exercised
during specified future periods as determined by the Board of Directors. The
1995 Plan provides that the options shall expire no more than ten years after
the date of the grant. Under the 1995 Plan, the Board approved the granting of
incentive stock options to employees who elected to exercise up to 50% of their
currently outstanding incentive stock options under the 1988 Plan. In addition,
employees were given the right to require the Company to buy back any stock
purchased under this offer at the exercise price plus 10% per share from March
15, 1996 until March 15, 1997. American Banner Resources, Inc., a company
wholly owned by two directors of the Company, has agreed to purchase the stock
repurchased by the Company under this program at a price equal to the price
paid by the Company. Employees were also offered the ability to finance the
stock purchased from the exercise of their 1988 Plan options through the
origination of two-year, 8% loans from American Banner Resources, Inc. In
connection with this transaction, the Company recorded a charge to fiscal 1995
operations of $32,558 representing compensation equal to the 10% per share
premium on the 1988 options which were exercised pursuant to the 1995 Plan.
Shares under outstanding options under the 1988 Plan and the 1995 Plan are as
follows:
Shares under Outstanding Options
-------------------------
Shares Price
-------- -----------
Outstanding, April 30, 1993 513,132 $0.32-$1.75
Granted................................ 320,017 $1.75
Canceled............................... (45,000) $1.75
-------- -----------
Outstanding, April 30, 1994 788,149 $0.32-$1.75
Granted................................ 341,508 $1.75-$2.00
Exercised.............................. (217,967) $0.32-$1.75
Canceled............................... (149,473) $1.75
-------- -----------
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30
Outstanding, April 30, 1995 762,217 $1.00-$2.00
Granted................................ 174,000 $1.75-$2.00
Exercised.............................. (42,868) $0.32-$1.75
Canceled............................... (58,132) $1.75
-------- -----------
Outstanding, April 30, 1996 835,217 $1.00-$2.00
======== ===========
Options to purchase 504,411 shares of Common Stock were exercisable at
April 30, 1996 and options to purchase 403,948 shares of Common Stock were
available for future grant at April 30, 1996.
In addition to the options described above, the Chairman of the Board of
Directors received an option to purchase 200,000 shares of Common Stock at an
exercise price of $5.00 per share in April 1995. At that time, such exercise
price was considered to be above the estimated fair market value. As of April
30, 1996, all such options were still outstanding and unexercised. The options
expire ten years after the date of the grant.
(8) Export Sales, Major Customers and Credit Risk
Export sales, principally to Asia, accounted for 33%, 31% and 28% of total
revenues in 1996, 1995 and 1994, respectively. Included in export sales to Asia
were sales to Japan, which accounted for approximately 13%, 14% and 10% of
total revenue in fiscal 1996, 1995 and 1994, respectively. No other foreign
country accounted for more than 10% of total revenue during these periods.
Revenue from one distributor accounted for approximately $684,000,
$489,000 and of total revenue in fiscal 1995 and 1994, respectively. As of
April 30, 1995, accounts receivable from this distributor was $60,467.
In 1989, the Company entered into an exclusive distribution agreement with
Hewlett-Packard (the "HP agreement") for worldwide distribution of its HFSS
product. Revenue from HP accounted for approximately $1,129,000, $1,078,000 and
$821,000 of total revenue in fiscal 1996, 1995 and 1994, respectively. The HP
agreement expires in January 1997, and will not be renewed. HP has the right to
sell the HFSS product until January 1998. In the opinion of management, the
expiration of the distribution agreement will not have a material adverse
effect on the Company's financial position or results of operations.
The Company markets its software products to customers throughout the
world directly and through distributors and generally does not require
collateral. However, letters of credit are obtained from certain international
customers prior to shipment. The Company performs ongoing credit evaluations of
its customers and maintains an allowance for potential credit losses. The
Company believes that it has adequately provided for credit losses.
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(9) Income Taxes
The provision for income taxes consisted of the following:
---------------------------
April 30, (In thousands) 1996 1995 1994
----- ----- -----
Current:
Federal ................................ $ 14 -- --
Foreign ................................ 72 -- --
State .................................. 2 -- --
----- ----- -----
Total ................................ 88 -- --
Deferred:
Federal ................................ (638) -- --
State .................................. (62) -- --
----- ----- -----
Total ................................ (700) -- --
----- ----- -----
Total provision for income taxes ......... $ 612 $ -- $ --
===== ===== =====
The Company's actual income tax expense (benefit) differs from the
expected income tax expense (benefit) computed by applying the statutory
federal income tax rate to income before income taxes as a result of the
following:
--------------------------
April 30, (In thousands) 1996 1995 1994
----- ----- ----
Income tax expense (benefit) at statutory
rate ........................................ $ 234 $(104) $(48)
State income tax, net of federal offset ........ 41 (18) (15)
Expiration of State net operating losses ....... 91 -- --
Change in valuation allowance .................. (992) 114 61
Other, net ..................................... 14 8 2
----- ----- ----
Actual income tax expense (benefit) ............ $(612) $ -- $ --
===== ===== ====
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
--------------------
April 30, (In thousands) 1996 1995
------- -------
Deferred tax assets:
Net operating loss carryforward .................... $ 1,245 $ 1,610
Allowance for doubtful accounts .................... 51 32
Alternative Minimum Tax credit carryforward ........ 14 --
Foreign Tax Credit carryforward .................... 72 --
Other .............................................. -- 14
------- -------
Total gross deferred tax assets ...................... 1,382 1,656
29
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Less valuation allowance ............................. 599 1,591
------- -------
Net deferred tax assets .............................. 783 65
======= =======
Deferred tax liabilities:
Property, plant and equipment ...................... (83) (65)
------- -------
Total gross deferred tax liability ................... (83) (65)
------- -------
Net deferred taxes ................................... $ 700 $ --
======= =======
The Company has established a valuation allowance against its net deferred
tax assets due to the uncertainty surrounding the realization of such assets
pursuant to SFAS No. 109. The decrease in the valuation allowance during the
fourth quarter of the year ended April 30, 1996 was due to management's
determination that some portion of the deferred tax assets would more likely
than not be realized in the future. This determination was due in part to the
successful completion of the Company's IPO, which is expected to generate
future taxable investment income on the IPO proceeds. The ultimate realization
of the remaining deferred tax assets is dependent upon the generation of future
taxable income beyond that which is deemed more likely than not at this time.
Management evaluates on a quarterly basis the recoverability of the deferred
tax assets and the level of the valuation allowance. Due to the uncertainty of
the future financial results of the company, a valuation allowance is
maintained for the remaining deferred tax assets. At such time as it is
determined that it is more likely than not that deferred tax assets are
realizable, the valuation allowance will be reduced.
As of April 30, 1996, the Company had net operating loss carryforwards for
federal income tax purposes of $3,327,161 which are available to offset future
federal taxable income, if any, and expire in relatively equal increments,
beginning April 30, 2001 through April 30, 2010.
(10) Related Party Transactions
Certain of the Company's principal stockholders are also members of the
Board of Directors and executive management.
In 1992, the Company entered into an agreement with a distributor under
which distribution rights in Japan were granted for certain Company products.
In addition, the distributor purchased 120,000 shares of the Company's Common
Stock at a price of $2.50 per share. Sales through the distributor were
approximately $684,000 and $489,000 in 1995 and 1994, respectively. These
transactions were on terms no less favorable to the Company than could be
obtained from unrelated third parties. In fiscal 1995, the Company terminated
the distribution agreement. In the opinion of management, the termination of
the distribution agreement will not have a material adverse effect on the
Company's financial position or results of operations.
(11) Employee Benefit Plan
The Company has a 401(k) savings and retirement plan which covers its
full-time employees who have attained the age of 21 and have completed six
months of service. Eligible employees make voluntary contributions to the plan
up to 15% of their annual compensation. The Company is not required to
contribute, nor has it contributed, to the 401(k) Plan.
30
33
(12) Commitments and Contingencies
The Company is not a party to any litigation and is not aware of any
threatened litigation, unasserted claims or assessments that could have a
material adverse effect on the Company's business, operating results or
financial condition.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
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34
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) DOCUMENTS FILED AS PART OF THIS REPORT:
1. FINANCIAL STATEMENTS. The following consolidated financial statements
of the Company are filed as part of this Annual Report on Form 10-K.
Page(s)
-------
Report of KPMG Peat Marwick LLP 18
Balance Sheet as of April 30, 1996 and 1995 19
Statement of Operations for the years ended April 30, 1996, 1995 and 1994 20
Statement of Stockholders' Equity (Deficit) for the years ended April 30, 1996,
1995 and 1994 21
Statement of Cash Flows for the years ended April 30, 1996, 1995 and 1994 22
Notes to Financial Statements 23
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts and Reserves 34
Financial statement schedules not listed above have been omitted because they
are inapplicable, are not required under applicable provisions of Regulation
S-X, or the information that would otherwise be included in such schedules is
contained in the registrant's financial statements or accompanying notes.
2. EXHIBITS. The Exhibits listed below are filed or incorporated by
reference as part of this Annual Report on Form 10-K.
Exhibit No. Description
- ----------- -----------
3.1 Articles of Incorporation of the Company (incorporated by
reference from Registration Statement No. 333-1398).
3.2 Bylaws of the Company (incorporated by reference from
Registration Statement No. 333-1398).
*10.1 1988 Stock Option Plan (incorporated by reference from
Registration Statement No. 333-1398).
*10.2 1995 Stock Option Plan (incorporated by reference from
Registration Statement No. 333-1398).
*10.3 Zoltan Cendes Stock Option Plan, dated April 30, 1995
(incorporated by reference from Registration Statement
No. 333-1398).
32
35
10.4 Office Lease Agreement between Commerce Court Associates and
the Company dated June 7, 1989.
10.5 Amendment No. 1 to Office Lease Agreement between Commerce Court
Associates and the Company dated March 17, 1994 (incorporated by
reference from Registration Statement No. 333-1398).
10.6 Software Distribution Agreement, by and between the Company and
Hewlett-Packard Company, dated January 1, 1994 (incorporated by
reference from Registration Statement No. 333-1398).
10.7 First Amendment to Software Distribution Agreement, by and
between the Company and Hewlett-Packard Company, dated May 9, 1995
(incorporated by reference from Registration Statement No. 333-1398).
10.8 Second Amendment to Software Distribution Agreement, by and between
the Company and Hewlett-Packard Company, dated September 7, 1995
(incorporated by reference from Registration Statement No. 333-1398).
10.9 Underwriting Agreement dated April 3, 1996 by and between Registrant
and Janney Montgomery Scott Inc. and Pennsylvania Merchant Group Ltd.,
as representatives for the Underwriters identified therein (filed herewith).
11.1 Calculation of Earnings Per Share (filed herewith).
27.1 Financial Data Schedule (filed herewith).
- ----------------
* Denotes management contracts and compensatory plans and arrangements required
to be identified by Item 14(a)(3).
(b) REPORTS ON FORM 8-K:
No Reports on Form 8-K were filed by the Company during the last
quarter of fiscal year 1996.
(c) The Company hereby files as exhibits to this Form 10-K the exhibits set
forth in Item 14(a)(2) hereof which are not incorporated by reference.
(d) The Company hereby files as financial statement schedules to this Form
10-K the financial statement schedules set forth in Item 14(a)(2) hereof.
33
36
ITEM 14 (A).
Schedule II-Valuation and Qualifying Accounts
(In thousands)
Balance as of Additions Balance as of
the Beginning Charged to Costs the End of
of the Period and Expenses Deductions the Period
------------- ------------ ---------- ----------
Year ended April 30, 1996
Allowance for doubtful
accounts ............... 70 55 -- 125
Year ended April 30, 1995
Allowance for doubtful
accounts ............... 60 10 -- 70
Year ended April 30, 1994
Allowance for doubtful
accounts ............... 35 25 -- 60
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37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date July 23, 1996 ANSOFT CORPORATION.
By: /s/ NICHOLAS CSENDES
-------------------------------------
Nicholas Csendes
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on July 23, 1996.
Signature Title
(1) Principal Executive, Financial
Accounting Officers
/s/ NICHOLAS CSENDES, President, Chief Executive Officer and Director
- -----------------------------
Nicholas Csendes
/s/ ZOLTAN J. CENDES, PH.D. Chairman of the Board and Director
- -----------------------------
Zoltan J. Cendes, Ph.D.
/s/ THOMAS A.N. MILLER Chief Financial Officer and Director
- -----------------------------
Thomas A.N. Miller
/s/ JACOB K. WHITE, PH.D. Director
- -----------------------------
Jacob K. White, Ph.D.
/s/ JOHN N. WHELIHAN Director
- -----------------------------
John N. Whelihan
35