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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

EXCHANGE ACT OF 1934

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2004

OR

Commission file number: 0-20853

ANSYS, Inc.

(exact name of registrant as specified in its charter)

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  ¨

Indicate by a check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes  x    No  ¨

The number of shares of the Registrant’s Common Stock, par value $.01 per share, outstanding as of April 30, 2004 was 15,360,650 shares.

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ANSYS, INC. AND SUBSIDIARIES

INDEX

ANSYS, DesignSpace, ANSYS DesignModeler, ANSYS DesignXplorer VT, ANSYS DesignXplorer, ANSYS ProFEA, ANSYS Emax, ANSYS Workbench environment, CFX, AI*Environment, CADOE S.A. and any and all ANSYS, Inc. product names are registered trademarks or trademarks of subsidiaries of ANSYS, Inc. located in the United States or other countries. All other product names mentioned are trademarks or registered trademarks of their respective manufacturers.

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PART I – UNAUDITED FINANCIAL INFORMATION

ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share information)

(Unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements.

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ANSYS, INC. AND SUBIDARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(Unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements.

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ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements.

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ANSYS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2004

(Unaudited)

1. Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements have been prepared by ANSYS, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information for commercial and industrial companies and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the accompanying statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The accompanying condensed consolidated financial statements 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 year ended December 31, 2003. The condensed consolidated December 31, 2003 balance sheet presented is derived from the audited December 31, 2003 balance sheet included in the most recent Form 10-K. 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 ended March 31, 2004 are not necessarily indicative of the results that may be expected for any future period.

Concentrations of Credit Risk: The Company has a concentration of credit risk with respect to trade receivables due to the limited number of distributors through which the Company sells its products. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral.

In addition to the concentration of credit risk with respect to trade receivables, the Company’s cash and cash equivalents are also exposed to concentration of credit risk. The Company maintains its cash accounts primarily in U.S. banks which are insured by the F.D.I.C. up to $100,000 per bank. The Company had cash balances on deposit with a U.S. bank at March 31, 2004 that exceeded the balance insured by the F.D.I.C. in the amount of approximately $43 million. A significant portion of the Company’s remaining cash balance is also uninsured.

Stock-Based Compensation: The Company has elected to account for stock-based compensation arrangements under the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock-Based Compensation.” No compensation expense has been recognized in the condensed consolidated statements of income as option grants generally are made with exercise prices equal to the fair value of the underlying common stock on the award date, which is typically the date of compensation measurement.

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Had compensation cost been determined based on the fair value at the date of grant, in accordance with the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” the Company’s net income and basic and diluted earnings per share would have been reduced to the pro forma amounts indicated below:

Reclassifications: Certain reclassifications have been made to the 2003 financial statements to conform to the 2004 presentation.

2. Accumulated Other Comprehensive Income

As of March 31, 2004 and December 31, 2003, accumulated other comprehensive income, as reflected on the condensed consolidated balance sheets, was comprised of foreign currency translation adjustments.

Comprehensive income for the three-month periods ended March 31, 2004 and 2003 was as follows:

3. Other Current Assets

The Company reports accounts receivable related to the portion of annual lease licenses and software maintenance that has not yet been recognized as revenue as a component of other current assets. These amounts totaled $14.5 million and $13.0 million as of March 31, 2004 and December 31, 2003, respectively.

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4. Earnings Per Common Share

Basic earnings per share (“EPS”) amounts are computed by dividing earnings by the average number of common shares outstanding during the period. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive equivalents outstanding. The details of basic and diluted earnings per share are as follows:

5. Acquisition of CFX

On February 26, 2003 the Company acquired 100% of the shares in certain entities and assets (hereinafter collectively referred to as “CFX”) for a purchase price of approximately $21.7 million. The CFX operating results are included in the Company’s financial statements for only the periods subsequent to the acquisition.

The CFX business was a carve-out entity from the acquiree with significant intercompany transactions and, as a result, proforma information on revenue, income before extraordinary items and the cumulative effect of accounting changes (including those on an interim basis), net income and earnings per share are indeterminable.

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6. Goodwill and Intangible Assets

During the first quarter of 2004, the Company completed the annual impairment test for goodwill and intangibles with indefinite lives and determined that goodwill and the trademark had not been impaired as of January 1, 2004. No events occurred or circumstances changed during the quarter ended March 31, 2004 that required an interim goodwill impairment test.

As of March 31, 2004 and December 31, 2003, the Company’s intangible assets are classified as follows:

Amortization expense for amortized intangible assets was $904,000 and $621,000 for the three months ended March 31, 2004 and March 31, 2003, respectively.

Amortization expense for the amortized intangible assets reflected above is expected to be approximately $3,589,000, $3,362,000, $2,500,000, $2,443,000 and $635,000 for the years ending December 31, 2004, 2005, 2006, 2007 and 2008, respectively.

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The changes in goodwill during the three-month period ended March 31, 2004 are as follows:

7. Geographic Information

Revenue by geographic area for the three months ended March 31, 2004 and 2003 is as follows:

Long-lived assets (excluding deferred tax assets) by geographic area is as follows:

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8. Borrowing Arrangements and Other Obligations

The Company has an uncommitted and unsecured $10 million demand line of credit (the “LOC”) with a bank. The LOC agreement provides that the Company may borrow up to $10 million, subject to the bank’s willingness to make such a loan at the time of the request at its sole discretion. Interest on any borrowings is at the bank’s prime rate or LIBOR, plus an applicable margin. The bank may demand repayment of the entire amount outstanding under the line of credit at any time and for any reason without notice. The Company, in lieu of a fee for the line of credit, has agreed to maintain certain deposits, which range from $5 million to $10 million, depending on the deposit type, with the bank. At March 31, 2004, there were no borrowings outstanding under the LOC.

The Company’s software licensing agreements generally require it to indemnify the customer against claims that its software infringes third party patent, copyright, trademark or other proprietary rights. Such indemnification obligations are generally limited and consistent with industry standards, including the Company’s right to replace an infringing product. As of March 31, 2004, the Company has not experienced any material losses related to these indemnification obligations and no material claims with respect thereto were outstanding. The Company does not expect significant claims related to these indemnification obligations, and consequently has not established any related reserves.

9. Stock Repurchase Program

In October 2001, the Company announced that its Board of Directors had amended its existing stock repurchase program to acquire up to an additional one million shares, or four million shares in total under the program that was initially announced in February 2000. Under this program, there were no shares repurchased in the three-month period ended March 31, 2004. As of March 31, 2004, 1.1 million shares remain authorized for repurchase under the program.

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INDEPENDENT ACCOUNTANTS’ REPORT

To the Board of Directors and Stockholders of

ANSYS, Inc.

Canonsburg, Pennsylvania

We have reviewed the accompanying condensed consolidated balance sheet of ANSYS, Inc. and subsidiaries (the “Company”) as of March 31, 2004, and the related condensed consolidated statements of income and cash flows for the three-month periods ended March 31, 2004 and 2003. These financial statements are the responsibility of the Company’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 of 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 the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of ANSYS, Inc. and subsidiaries as of December 31, 2003, and the related consolidated statements of income, cash flows and stockholders’ equity for the year then ended (not presented herein); and in our report dated February 16, 2004, we expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph, which indicated that the Company changed its method of accounting for goodwill and other intangible assets to conform to Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” In our opinion, the information set forth in the condensed consolidated balance sheet as of December 31, 2003 included in the Company’s Form 10-Q referred to above is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

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Overview:

ANSYS’s quarterly results for the period ended March 31, 2004 reflect revenue and diluted earnings per share growth of 27% and 59%, respectively. These results were impacted by various factors, including a full quarter of CFX operating results in the current year quarter as compared to approximately one month in the prior year quarter, foreign currency fluctuations, reduced headcount-related costs in the Company’s services business and a lower effective tax rate.

ANSYS, Inc. (the “Company”) develops and globally markets engineering simulation software and technologies widely used by engineers and designers across a broad spectrum of industries, including aerospace, automotive, manufacturing, electronics and biomedical. Headquartered at Southpointe in Canonsburg, Pennsylvania, the Company employs approximately 550 people and focuses on the development of open and flexible solutions that enable users to analyze designs directly on the desktop, providing a common platform for fast, efficient and cost-conscious product development, from design concept to final-stage testing and validation. The Company distributes its ANSYS^®, DesignSpace^®, ICEM CFD Engineering, CFX^® and CADOE^® products through a global network of channel partners, in addition to its own direct sales offices in strategic, global locations. It is the Company’s intention to continue to maintain this mixed sales and distribution model. The following discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto for the three-month periods ended March 31, 2004 and 2003, and with the Company’s audited financial statements and notes thereto for the year ended December 31, 2003 filed on Form 10-K with the Securities and Exchange Commission.

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 below concerning the future trends regarding the Company’s total cost of sales increasing as a percentage of revenue, the Company’s intentions related to continued investments in sales and marketing and research and development, plans related to future capital spending, the sufficiency of existing cash and cash equivalent balances to meet future working capital and capital expenditure requirements, estimates of tax rates in future periods, as well as statements which contain such words as “anticipates”, “intends”, “believes”, “plans” and other similar expressions. The Company’s actual results could differ materially from those set forth in forward-looking statements. Certain factors that might cause such a difference include risks and uncertainties detailed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in the 2003 Annual Report to Stockholders and in “Certain Factors Regarding Future Results” included herein as Exhibit 99.1 to this Form 10-Q.

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Results of Operations

Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003

Revenue. The Company’s total revenue increased 27.4% in the 2004 first quarter to $31.3 million from $24.6 million in the 2003 first quarter. On February 26, 2003 the Company acquired 100% of the shares in certain entities and assets (hereinafter collectively referred to as “CFX.”) The financial results of the CFX acquisition are included in the Company’s financial statements only for the period after the acquisition. The 2003 first-quarter post-acquisition CFX revenue was approximately $2.3 million, as compared with 2004 first quarter CFX-related revenues of $7.3 million.

On average, for the first quarter of 2004, the U.S. dollar was approximately 13% weaker, when measured against the Company’s primary foreign currencies, than for the first quarter of 2003. The weakening resulted in increased revenue and operating income during the 2004 period, as compared with the corresponding 2003 period, of approximately $922,000 and $488,000, respectively.

International and domestic revenues, as a percentage of total revenue, were 68.8% and 31.2%, respectively, in the quarter ended March 31, 2004 and 65.1% and 34.9%, respectively, in the quarter ended March 31, 2003.

Software license revenue increased $3.9 million or 31.2% in the 2004 quarter to $16.3 million from $12.4 million in the 2003 quarter. A significant portion of this increase is due to a full quarter of CFX revenue in 2004. The software license revenue related to CFX products was approximately $4.5 million during the quarter ended March 31, 2004 as compared with approximately $1.2 million for the period subsequent to the acquisition to March 31, 2003.

Maintenance and service revenue increased 23.4% in the 2004 quarter to $15.0 million from $12.2 million in the 2003 quarter. This increase was primarily the result of an increase of $1.7 million in CFX-related revenue from $1.1 million of revenue for the quarter ended March 31, 2003 to $2.8 million in revenue for the quarter ended March 31, 2004. Also contributing to the increase were maintenance contracts sold in association with paid-up license sales in recent quarters.

In valuing deferred revenue for inclusion on the CFX opening balance sheet as of February 26, 2003, the Company complied with the fair value provisions of Emerging Issues Task Force (“EITF”) Issue No. 01-3 “Accounting in a Business Combination for Deferred Revenue of an Acquiree.” In accordance with EITF 01-3, acquired deferred software license revenue of approximately $4.8 million was recorded on the opening balance sheet. This amount was approximately $3.4 million lower than the historical carrying value. Although this purchase accounting requirement will have no impact on the Company’s business or cash flow, it adversely impacts the Company’s reported GAAP software license revenue post-acquisition. The adverse impact on reported revenue was approximately $122,000 and $454,000 for the three months ended March 31, 2004 and 2003, respectively. The impact during the quarters ended June 30, 2003,

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September 30, 2003 and December 30, 2003 was approximately $1.1 million, $900,000 and $500,000, respectively. The adverse impact on reported revenue is expected to be approximately $70,000 in each of the three quarters remaining in the year ending December 31, 2004.

Cost of Sales and Gross Profit. The Company’s total cost of sales increased to $5.2 million, or 16.5% of total revenue, in the 2004 first quarter from $4.6 million, or 18.7% of total revenue, in the 2003 first quarter. The increase in the 2004 quarter as compared to the 2003 quarter was primarily related to an additional $1.3 million in costs, including an additional $400,000 in acquired software amortization expense, associated with a full quarter of CFX activity in the current year quarter, as compared to approximately one month of activity in the prior year quarter, and a $200,000 increase in third party royalties. These increases were partially offset by a $700,000 decrease in headcount-related costs and a $200,000 decrease in outside technical support consulting costs.

As a result of the changes in revenue and cost of sales, the Company’s gross profit increased 30.8% to $26.2 million in the 2004 quarter from $20.0 million in the 2003 quarter.

Selling and Marketing. Total selling and marketing expenses increased from $5.5 million, or 22.4% of total revenue in the 2003 quarter, to $6.1 million, or 19.3% of total revenue in the 2004 quarter. The increase resulted primarily from approximately $670,000 in additional costs related to CFX, mainly the result of the inclusion of a full quarter of CFX operational activity in 2004. The Company anticipates that it will continue to make significant investments throughout 2004 in its global sales and marketing organization to strengthen its competitive position, to enhance major account sales activities and to support its worldwide sales distribution and marketing strategies.

Research and Development. Research and development expenses increased in the 2004 first quarter to $6.3 million, or 20.3% of total revenue, from $5.7 million, or 23.0% of total revenue, in the 2003 quarter. The increase resulted primarily from approximately $1 million in additional costs related to CFX, mainly the result of the inclusion of a full quarter of CFX operational activity in 2004. These costs were partially offset by $158,000 of internal software costs capitalized in excess of the prior year quarter.

The Company has traditionally invested significant resources in research and development activities and intends to continue to make significant investments in this area.

Amortization. Amortization expense increased to $287,000 in the 2004 first quarter from $223,000 in the prior year quarter. The increase relates to the full quarter of amortization expense associated with certain intangible assets acquired in the CFX acquisition in 2004 as compared to 2003.

General and Administrative. General and administrative expenses increased from $2.6 million, or 10.7% of total revenue in the 2003 first quarter, to $3.5 million, or 11.2% of

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total revenue in the 2004 first quarter. The 2004 quarter included increased costs of approximately $490,000 related to a full versus partial quarter of CFX expenses and of approximately $200,000 related to increased salary and headcount related costs.

The Company maintains commercial insurance to protect against and manage the risks involved in conducting business. The cost to obtain insurance coverage for such risks has significantly increased due to the environment within the commercial insurance industry. When the Company renewed its U.S. contract for employee health insurance coverage in 2004, the new contract resulted in significantly higher health insurance costs than in prior years. Based on this contract and the general trend in domestic health care costs, these costs are expected to continue to significantly increase in future periods. Because these insurance costs relate to personnel, they are allocated to each functional area of the Company and will increase cost of sales, sales and marketing, research and development, and general and administrative expenses in future periods.

On July 30, 2002 the Sarbanes-Oxley Act (the “Act”) was signed into law. The Act contains far-reaching corporate governance reforms and new disclosure requirements for public companies. Certain of the Act’s provisions became effective immediately, while other provisions will be implemented through December 31, 2004. Costs to comply with the provisions of the Act, including legal, accounting and consulting fees, will result in higher general and administrative expenses in future periods.

Other Income. Other income decreased by $304,000 from $534,000 during the quarter ended March 31, 2003 to $230,000 for the quarter ended March 31, 2004.

During the quarter ended March 31, 2004 the Company had a net foreign exchange loss of $5,000 as compared with a gain of $319,000 for the quarter ended March 31, 2003. The majority of the net foreign exchange gain from the quarter ended March 31, 2003 resulted from the strengthening of the U.S. Dollar versus the British Pound.

Because the CFX acquisition consisted primarily of non-U.S. locations, the Company, for the foreseeable future, will have increased exposure to volatility of foreign exchange rates. The Company does not use any futures or derivative contracts to manage foreign exchange risk. Future foreign exchange fluctuations may not offset as they did during the quarter ended March 31, 2004. The Company is most impacted by movements among and between the Canadian Dollar, British Pound, Euro, Indian Rupee, Japanese Yen and the U.S. Dollar.

Interest and dividend income, on cash and cash equivalents and short-term investments, was approximately $200,000 for each of the quarters ended March 31, 2004 and 2003. The decline in interest rates from 2003 to 2004 was offset by an increased level of funds invested in 2004 as compared with 2003.

Income Tax Provision. The Company’s effective rates of taxation were 30.0% in the 2004 quarter and 34.2% in the 2003 quarter. These rates are lower than the federal and state combined statutory rate as a result of export benefits, as well as the generation of research and experimentation credits. The Company expects that the effective tax rate will be in the range of 30% - 31% for the year ending December 31, 2004.

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In November 2000, the United States enacted the FSC Repeal and Extraterritorial Income Exclusion Act (the “Act”) in response to a challenge from the World Trade Organization (“WTO”) that the existing tax benefits provided by foreign sales corporations were prohibited tax subsidies. The Act generally repealed the foreign sales corporation and implemented an extraterritorial income (“ETI”) tax benefit. Upon introduction of the ETI tax benefit, the European Union stated that it did not believe the ETI provisions bring U.S. tax law into WTO-compliance and asked the WTO to rule on the matter. On August 30, 2002, the WTO ruled that the European Union may impose up to $4 billion per year in retaliatory duties against U.S. exports. In March 2003, the European Union approved a retaliation list of specific products but has not yet imposed sanctions. The WTO decision does not repeal the ETI tax benefit and it does not require the European Union to impose trade sanctions, so it is not possible to currently predict the future impact of the WTO decision. In fiscal year 2003, export benefits reduced the Company’s effective tax rate by approximately 6.3%. Any prospective changes regarding tax benefits associated with the Company’s export sales or other federal and state tax planning vehicles may adversely impact the Company’s effective tax rate and decrease its net income in future periods.

Net Income. The Company’s net income in the 2004 quarter was $7.1 million as compared to $4.3 million in the 2003 quarter. Diluted earnings per share increased to $.43 in the 2004 quarter as compared to $.27 in the 2003 quarter as a result of the increase in net income. The weighted average shares used in computing diluted earnings per share were 16.5 million in the 2004 quarter and 15.6 million in the 2003 quarter.

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Liquidity and Capital Resources

As of March 31, 2004, the Company had cash, cash equivalents and short-term investments totaling $96.3 million and working capital of $81.5 million, as compared to cash, cash equivalents and short-term investments of $83.0 million and working capital of $70.9 million at December 31, 2003. The short-term investments are generally investment grade and liquid, which allows the Company to minimize interest rate risk and to facilitate liquidity in the event of an immediate cash need requirement.

The Company’s operating activities provided cash of $13.2 million and $11.5 million during the three months ended March 31, 2004 and 2003, respectively. The $1.7 million increase in the Company’s cash flow from operations in the 2004 three-month period as compared to the comparable 2003 period was primarily the result of $2.9 million in increased earnings offset against the $1.6 million increase in other current assets mostly from an increased level of accounts receivable related to the portion of annual lease licenses and software maintenance that has not been recognized as revenue.

The Company’s investing activities used net cash of $1.2 million and $22.2 million for the three months ended March 31, 2004 and 2003, respectively. The $21.0 million decrease in the level of investing activities between the 2004 and 2003 periods resulted from the February 2003 cash outlay of $21.5 million for the acquisition of CFX. The Company currently plans additional capital spending of approximately $2.5 to $3.0 million throughout the remainder of 2004; however, the level of spending will be dependent upon various factors, including growth of the business and general economic conditions.

Financing activities provided cash of $1.0 million in the three months ended March 31, 2004 as compared with cash provided of $1.4 million during the three months ended March 31, 2003. The proceeds from the exercise of stock options were $400,000 lower in the quarter ended March 31, 2004 as compared with the corresponding 2003 quarter.

The Company believes that existing cash and cash equivalent balances of $91.3 million, together with cash generated from operations, will be sufficient to meet the Company’s working capital and capital expenditure requirements through the remainder of fiscal 2004. The Company’s future cash requirements may be obtained through additional equity or debt financings. There can be no assurance that such financings can be obtained on favorable terms, if at all.

The Company does not have any special purpose entities or off-balance sheet financing arrangements.

During the quarter ended March 31, 2004 the Company had no borrowings under an uncommitted and unsecured $10.0 million line of credit.

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Critical Accounting Policies

ANSYS believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. ANSYS recognizes revenue in accordance with SOP 97-2, “Software Revenue Recognition,” and related interpretations. Revenue from perpetual licenses is recognized upon delivery of the licensed product and the utility that enables the customer to request authorization keys, provided that acceptance has occurred and a signed contractual obligation has been received, the price is fixed and determinable, and collectibility of the receivable is probable. Revenue for software lease licenses is recognized ratably over the period of the lease contract. Revenue is recorded net of the distributor fee for sales through the ANSYS distribution network. The Company estimates the value of post-contract customer support sold together with perpetual licenses by reference to published price lists which generally represent the prices at which customers could purchase renewal contracts for such services. Revenue from maintenance contracts is recognized ratably over the term of the contract. Costs related to maintenance obligations are expensed as incurred. Revenue from training, support and other services is recognized as the services are performed.

ANSYS makes judgments as to its ability to collect outstanding receivables and provides allowances for a portion of receivables when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding invoices from both a value and delinquency perspective. For those invoices not specifically reviewed, provisions are provided at differing rates, based upon the age of the receivable and the geographical area of origin. In determining these percentages, the Company analyzes its historical collection experience and current economic trends in the customer’s industry and geographic region. If the historical data used to calculate the allowance for doubtful accounts does not reflect the future ability to collect outstanding receivables, additional provisions for doubtful accounts may be needed and future results of operations could be materially affected.

ANSYS capitalizes internal labor costs associated with the development of product enhancements subsequent to the determination of technological feasibility. Amortization of capitalized software costs, both for internally developed as well as for purchased software products, is computed on a product-by-product basis over the estimated economic life of the product, which is generally three years. The Company periodically reviews the carrying value of capitalized software and an impairment will be recognized in the results of operations if the expected future undiscounted operating cash flow derived from the capitalized software is less than its carrying value.

ANSYS makes significant estimates in determining its worldwide income tax provision. These estimates are subject to many transactions and calculations where the ultimate tax outcome is uncertain. Although the Company believes that its estimates are reasonable, the final outcome of tax matters could be different than the estimates reflected in the historical income tax provision and accruals. Such differences could have a material impact on income tax expense and net income in the period in which such determination is made.

The Company tests goodwill and intangibles with indefinite lives for impairment at least annually by comparing the fair value of each asset to its carrying value. Fair value is estimated using the discounted cash flow and other valuation methodologies that are based on projections of the amounts and timing of future revenues and cash flows.

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As the Company continues to expand its direct sales presence in international regions, the portion of its revenue, expenses, cash, accounts receivable and payment obligations denominated in foreign currencies continues to increase. As a result, changes in currency exchange rates from time to time may affect the Company’s financial position, results of operations and cash flows.

No material change has occurred in the Company’s market risk subsequent to December 31, 2003.

As required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, the Company has evaluated, with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, the effectiveness of its disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that such disclosure controls and procedures are effective in ensuring that material information relating to the Company, including its consolidated subsidiaries, is made known to the certifying officers by others within the Company and its consolidated subsidiaries during the period covered by this report.

In 2002, the Company created a Disclosure Review Committee to assist in the quarterly evaluation of the Company’s internal disclosure controls and procedures and in the review of the Company’s periodic filings under the Exchange Act. The membership of the Disclosure Review Committee consists of the Company’s Chief Executive Officer, Chief Financial Officer, Controller, General Counsel, Treasurer, Vice President of Sales and Services, Vice President of Human Resources and Business Unit General Managers. This committee is advised by external counsel, particularly on SEC-related matters.

From time to time, the Company reviews the disclosure controls and procedures, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that the Company’s systems evolve with its business. There was no change in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2004 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

The Company is subject to various legal proceedings from time to time that arise in the ordinary course of business. Each of these matters is subject to various uncertainties, and it is possible that these matters may be resolved unfavorably to the Company.

The Internal Revenue Service has examined the Company’s federal income tax returns for all years through 2000. The IRS is currently examining the Company’s federal income tax returns for the year 2001.

None.

None.

None.

None.

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(a) Exhibits.

(b) Reports on Form 8-K.

The Company furnished a Current Report on Form 8-K to the Securities and Exchange Commission on February 12, 2004 containing the earnings release announcement of its financial results for the year ended December 31, 2003.

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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.

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EXHIBIT INDEX

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