UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For The Quarterly Period Ended October 31, 2007
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the transition period from
to
Commission file number 000-27874
ANSOFT CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
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72-1001909
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification no.)
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225 West Station Square, Suite 200
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Pittsburgh, Pennsylvania
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15219-1119
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (412) 261-3200
Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated
filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
þ
Non-accelerated filer
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act). Yes
o
No
þ
The number of shares of the registrant’s Common Stock outstanding as of the close of
business on October 31, 2007 was 23,419,624.
ANSOFT CORPORATION
FORM 10-Q
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
ANSOFT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(unaudited)
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October 31,
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April 30,
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2007
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2007
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Assets
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Current assets
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Cash and cash equivalents
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$
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34,714
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$
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49,356
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Accounts receivable, net of allowance for doubtful
accounts of $1,010 and $973, respectively
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17,715
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24,994
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Deferred income taxes
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4,041
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1,441
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Prepaid expenses and other current assets
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2,278
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2,566
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Total current assets
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58,748
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78,357
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Equipment and furniture, net of accumulated depreciation
of $7,342 and $7,019, respectively
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2,367
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2,514
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Marketable securities
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26,264
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22,383
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Other assets
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159
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155
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Deferred income taxes
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5,409
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5,352
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Goodwill
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1,239
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1,239
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Other intangible assets, net
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590
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1,170
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Total assets
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$
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94,776
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$
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111,170
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Liabilities and stockholders’ equity
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Current liabilities
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Accounts payable
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$
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516
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$
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626
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Accrued payroll
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1,594
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3,380
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Accrued income taxes
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1,746
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603
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Other accrued expenses
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4,324
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4,130
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Current portion of deferred revenue
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23,759
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26,244
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Total current liabilities
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31,939
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34,983
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Accrued income taxes
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3,454
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—
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Long-term portion of deferred revenue
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1,076
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1,404
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Total liabilities
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36,469
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36,387
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Stockholders’ equity
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Preferred stock , par value $0.01 per share; 1,000 shares
authorized, no shares outstanding
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—
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—
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Common stock , par value $0.01 per share; 50,000 shares
authorized; issued 29,829 and 29,258 shares, respectively
and outstanding 23,420 and 23,956, respectively
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298
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293
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Additional paid-in capital
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90,459
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85,754
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Treasury stock, 6,409 and 5,302 shares, respectively
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(80,096
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)
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(49,176
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)
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Accumulated other comprehensive loss
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(332
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(964
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)
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Retained earnings
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47,978
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38,876
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Total stockholders’ equity
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58,307
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74,783
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Total liabilities and stockholders’ equity
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$
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94,776
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$
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111,170
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See accompanying notes to the unaudited consolidated financial statements.
Page 1
ANSOFT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
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Three months ended October
31,
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Six months ended October
31,
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2007
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2006
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2007
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2006
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Revenue
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License
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$
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12,426
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$
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10,938
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$
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22,084
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$
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19,123
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Service and other
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10,960
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9,568
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21,213
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18,706
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Total revenue
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23,386
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20,506
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43,297
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37,829
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Costs of revenue
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License
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156
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141
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292
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261
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Service and other
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432
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360
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843
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693
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Total cost of revenue
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588
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501
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1,135
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954
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Gross profit
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22,798
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20,005
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42,162
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36,875
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Operating Expenses
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Sales and marketing
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9,029
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8,138
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16,646
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15,616
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Research and development
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4,810
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4,730
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9,523
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9,556
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General and administrative
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1,253
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1,240
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2,778
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2,624
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Amortization
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290
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346
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580
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692
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Total operating expenses
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15,382
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14,454
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29,527
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28,488
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Income from operations
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7,416
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5,551
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12,635
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8,387
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Other income, net
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725
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577
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1,556
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1,392
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Income before income taxes
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8,141
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6,128
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14,191
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9,779
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Income tax expense
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2,910
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2,418
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5,089
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3,780
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Net income
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$
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5,231
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$
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3,710
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$
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9,102
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$
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5,999
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Net income per share
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Basic
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$
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0.22
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$
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0.16
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$
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0.39
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$
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0.25
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Diluted
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$
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0.21
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$
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0.14
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$
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0.35
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$
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0.23
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Weighted average shares used in calculation
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Basic
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23,298
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23,609
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23,512
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23,609
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Diluted
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25,301
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26,151
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25,641
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26,165
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See accompanying notes to the unaudited consolidated financial statements.
Page 2
ANSOFT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
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Six months ended October 31,
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2007
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2006
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Cash flows from operating activities:
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Net income
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$
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9,102
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$
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5,999
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Adjustments to reconcile net income to net cash
provided by operating activities
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Depreciation
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488
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529
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Amortization
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809
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917
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Stock-based compensation
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561
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1,212
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Excess tax benefit from stock-based compensation
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(2,557
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)
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(1,011
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)
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Deferred income taxes
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(43
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)
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(210
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)
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Changes in assets and liabilities
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Accounts receivable
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7,881
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7,862
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Prepaid expenses and other assets
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311
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(454
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)
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Other long-term assets
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(4
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)
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(23
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)
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Accounts payable and accrued expenses
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2,531
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|
924
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Deferred revenue
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(3,506
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)
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(1,871
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)
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Net cash provided by operating activities
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15,573
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13,874
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Cash flows from investing activities:
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Purchases of equipment and furniture
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(340
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)
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(353
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)
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Purchases of marketable securities
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(4,248
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)
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(4,771
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)
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Net cash used in investing activities
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(4,588
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)
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(5,124
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)
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Cash flows from financing activities:
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Purchase of treasury stock
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(30,920
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)
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|
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(6,737
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)
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Proceeds from the issuance of common stock, net
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|
1,728
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|
|
|
792
|
|
|
Excess tax benefit from stock-based compensation
|
|
|
2,557
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|
|
|
1,011
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(26,635
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)
|
|
|
(4,934
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents
|
|
|
(15,650
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)
|
|
|
3,816
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|
|
Effect of exchange rate changes
|
|
|
1,008
|
|
|
|
(410
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
|
49,356
|
|
|
|
16,456
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
34,714
|
|
|
$
|
19,862
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
712
|
|
|
$
|
221
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited consolidated financial statements.
Page 3
ANSOFT CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
(unaudited)
(1) Basis of Presentation
The unaudited consolidated financial statements include the accounts of Ansoft Corporation
(“Ansoft” or the “Company”) and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair presentation of financial
position and results of operations have been made. Operating results for interim periods are not
necessarily indicative of results which may be expected for a full year. The information included
in this Quarterly Report on Form 10-Q should be read in conjunction with the April 30, 2007
consolidated financial statements and notes thereto included in Ansoft’s Annual Report on Form 10-K
filed with the Securities and Exchange Commission.
The preparation of consolidated financial statements in conformity with U.S. 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 unaudited consolidated
financial statements are based on management’s evaluation of the relevant facts and circumstances
as of the date of the unaudited consolidated financial statements. Actual results may differ from
those estimates.
(2) Comprehensive income
“Comprehensive income” includes foreign currency translation gains and losses and unrealized gains
and losses on marketable securities, net of tax. A summary of comprehensive income follows:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
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|
Six months ended
|
|
|
|
|
October 31,
|
|
|
October 31,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Net income
|
|
$
|
5,231
|
|
|
$
|
3,710
|
|
|
$
|
9,102
|
|
|
$
|
5,999
|
|
|
Unrealized gain (loss) on marketable securities
|
|
|
180
|
|
|
|
446
|
|
|
|
(138
|
)
|
|
|
736
|
|
|
Foreign currency translation adjustments
|
|
|
563
|
|
|
|
(307
|
)
|
|
|
770
|
|
|
|
(408
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
5,974
|
|
|
$
|
3,849
|
|
|
$
|
9,734
|
|
|
$
|
6,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) Net Income Per Share
Basic net income per share is calculated using the weighted-average number of common shares
outstanding during the period. The weighted-average basic shares were 23,298 and 23,512 for the
three and six month periods ended October 31, 2007, respectively. Diluted net income per share is
computed using the weighted-average number of common shares and potentially dilutive common shares
outstanding during the period. The weighted-average dilutive shares were 25,301 and 25,641 for the
three and six month periods ended October 31, 2007, respectively Potentially dilutive common
shares consist of the incremental common shares issuable upon the exercise of employee stock
options, and are computed using the treasury stock method. Potentially dilutive common shares are
excluded from the calculation if their effect is antidilutive. Unexercised stock options of 68 and
19 shares for the three month periods ended October 31, 2007 and 2006, respectively, are not
included in the computation of diluted earnings per share because the option exercise price was
greater than the average market price, and therefore their inclusion would have been anti-dilutive.
Unexercised stock options of 73 and 21 shares for the six month periods ended October 31, 2007 and
2006, respectively, are not included in the computation of diluted earnings per share because the
option exercise price was greater than the average market price, and therefore their inclusion
would have been anti-dilutive.
The Company repurchased 253 and 39 shares at an average price of $26.26 and $25.73 in the
three-month periods ended October 31, 2007 and 2006, respectively. The Company repurchased 1,107
and 326 shares at an average price of $27.93 and $20.70 in the six-month periods ended October 31,
2007 and 2006, respectively.
(4) Stock-Based Compensation
The Company’s income from operations and income before income taxes includes stock-based
compensation of $0.3 million and $0.6 million for the three month periods ended October 31,
2007 and 2006, respectively, and net income was reduced by $0.3 million, or $0.01 per diluted
share, and $0.5 million, or $0.02 per diluted share for the three month periods ended October
31, 2007 and 2006, respectively, due to the inclusion of stock-based compensation. The Company’s
income from operations and income before income taxes includes stock-based
Page 4
compensation of $0.6 million and $1.2 million for the six month periods ended October 31,
2007 and 2006, respectively, and net income was reduced by $0.5 million, or $0.02 per diluted
share, and $1.0 million, or $0.04 per
diluted share for the six month periods ended October 31, 2007 and 2006, respectively, due to the
inclusion of stock-based compensation. The stock based compensation expense was recorded in sales
and marketing, research and development, and general and administrative.
(5) Line of Credit
On October 22, 2007, the Company renewed for an additional year its secured credit facility, with
an aggregate commitment of up to $30,000, with a domestic financial institution (the “Bank”). At
the Company’s option, borrowings under the credit facility bear interest at the Bank’s prime
lending rate or the LIBOR rate plus a margin of .050 basis points. The facility is secured by the
Company’s marketable securities.
The ability of the Company to borrow under the credit facility is subject to its ongoing compliance
with certain financial and other covenants, including a tangible net worth covenant. As of October
31, 2007, the Company was in compliance with its covenants under the credit facility. As of October
31, 2007, the Company had no borrowings under the credit facility.
(6) Commitments and Contingencies
The Company sells software licenses and services to its customers under proprietary software
license agreements. Each license agreement contains the relevant terms of the contractual
arrangement with the customer, and generally includes certain provisions for indemnifying the
customer against losses, expense and liabilities from damages that may be incurred by or awarded
against the customer in the event the Company’s software or services are found to infringe upon a
patent, copyright, or other proprietary right of a third party.
To date, the Company has not had to reimburse any of its customers for any losses related to these
indemnification provisions and no material claims asserted under these indemnification provisions
are outstanding as of October 31, 2007. For several reasons, including the lack of prior
indemnification claims, the Company cannot determine the maximum amount of potential future
payments, if any, related to such indemnification provisions.
(7) Intangible Assets
The following is a summary of intangible assets as of October 31, 2007:
|
|
|
|
|
|
|
Purchased Technology
|
|
$
|
2,230
|
|
|
Non-Compete
|
|
|
2,500
|
|
|
Trademark
|
|
|
212
|
|
|
Customer List
|
|
|
18,488
|
|
|
|
|
|
|
|
Less Accumulated Amortization
|
|
|
(22,840
|
)
|
|
|
|
|
|
|
Total
|
|
$
|
590
|
|
|
|
|
|
|
These intangible assets are amortized over their estimated useful lives, ranging between
three and seven years. There are no expected residual values related to these intangible
assets. Remaining fiscal year 2008 amortization as of October 31, 2007 is $590.
(8) Income Taxes
The Company adopted the provisions of Financial Standards Accounting Board Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), an interpretation of FASB
Statement No. 109 (“SFAS 109”), on May 1, 2007. As a result of the implementation of FIN 48, the
Company was not required to record a cumulative effect of adoption of FIN 48 to beginning retained
earnings. At the adoption date of May 1, 2007, the Company had $3.2 million of unrecognized
tax benefits that is classified as a non-current liability, of which all would affect our effective
tax rate if recognized. At October 31, 2007, the Company had $3.5 million of unrecognized tax
benefits. The Company does not reasonably expect any possible material changes to the estimated
amount of the liability associated with its uncertain tax positions through April 30, 2008.
Page 5
The Company recognizes interest and penalties related to uncertain tax positions in income tax
expense. As of May 1, 2007, the Company had approximately $0.2 million of accrued
interest related to uncertain tax positions.
The tax years 2004 — 2006 remain open to examination by the major taxing jurisdictions to which we
are subject.
(9) Recent Accounting Pronouncements
In September 2006, the FASB issued FASB Statement No. 157, “Fair Value Measurements”
(SFAS 157), which defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair value
measurements. SFAS 157 is effective for the Company in the beginning of the Company’s 2009
fiscal year. The Company is currently evaluating the impact, if any, that SFAS 157 will
have on its consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and
Financial Liabilities—Including an amendment of FASB Statement No. 115,” (SFAS 159) which provides
entities with an option to report selected financial assets and liabilities at fair value. SFAS 159
also establishes presentation and disclosure requirements designed to facilitate comparisons
between entities that choose different measurement attributes for similar types of assets and
liabilities. SFAS 159 will be effective for the Company beginning in the Company’s 2009 fiscal
year. The Company is currently evaluating the impact that SFAS No. 159 will have on its
consolidated financial statements.
(10) Marketable Securities
Marketable securities, classified as available for sale, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
|
Cost
|
|
|
Gain
|
|
|
Loss
|
|
|
Value
|
|
|
October 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bond Funds
|
|
$
|
2,782
|
|
|
$
|
—
|
|
|
$
|
(89
|
)
|
|
$
|
2,693
|
|
|
Corporate Bonds
|
|
|
23,912
|
|
|
|
39
|
|
|
|
(380
|
)
|
|
|
23,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities
|
|
$
|
26,694
|
|
|
$
|
39
|
|
|
$
|
(469
|
)
|
|
$
|
26,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bond Funds
|
|
$
|
2,696
|
|
|
$
|
10
|
|
|
$
|
(6
|
)
|
|
$
|
2,700
|
|
|
Corporate Bonds
|
|
|
19,979
|
|
|
|
38
|
|
|
|
(334
|
)
|
|
|
19,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities
|
|
$
|
22,675
|
|
|
$
|
48
|
|
|
$
|
(340
|
)
|
|
$
|
22,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At October 31, 2007, the contractual maturities of the debt securities available for sale are:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost
|
|
|
Fair Value
|
|
|
Due in one year or less
|
|
$
|
725
|
|
|
$
|
719
|
|
|
Due after one year through five years
|
|
|
18,066
|
|
|
|
17,841
|
|
|
Due after five years through ten years
|
|
|
4,963
|
|
|
|
4,853
|
|
|
Due after ten years
|
|
|
158
|
|
|
|
158
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
23,912
|
|
|
$
|
23,571
|
|
|
|
|
|
|
|
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements that involve substantial risks and uncertainties. When used in
this Form 10-Q, the words “anticipate,” “plan,” “believe,” “estimate,” “expect” and similar
expressions as they relate to Ansoft or its management are intended to identify such
forward-looking statements. Ansoft’s actual results, performance or achievements could differ
materially from the results expressed in, or implied by, these forward-looking statements. Factors
that could cause or contribute to such differences include (1) the degree and rate of growth of the
markets in which Ansoft competes and the accompanying demand for Ansoft’s products, (2) the level
of product and price competition, (3) the ability of Ansoft to develop and market new products and
to control costs, (4) the ability to expand its direct sales force (5) the ability to attract and
retain key personnel. Ansoft does not undertake to publicly update or revise its forward-looking
statements even if experience or future developments make it clear that any projected results
expressed or implied therein will not be realized, and (6) other risks and uncertainties set forth
in Ansoft’s public reports filed with the SEC, including, but not limited to, its annual report on
Form 10-K for the fiscal year ended April 30, 2007.
Page 6
Overview
Ansoft is a leading developer of high-performance electronic design automation (EDA) software.
Engineers use Ansoft software to achieve first-pass system success when designing mobile
communication and Internet-access devices, broadband networking components and systems, integrated
circuits (ICs), printed circuit boards (PCBs) and electromechanical systems. Ansoft markets its
products worldwide through its own direct sales force and has comprehensive customer-support and
training offices throughout North America, Asia and Europe.
During the second quarter of fiscal year 2008, revenues increased by 14% from the previous fiscal
year’s second quarter. New license revenue increased by 14% and maintenance revenue increased 15%.
Net income for the quarter was $5.2 million compared to $3.7 million during the second fiscal
quarter of 2007.
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
Six months ended October
|
|
|
|
|
|
|
|
October 31,
|
|
|
|
|
|
|
31,
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Percentage
|
|
|
(In thousands)
|
|
|
Percentage
|
|
|
|
|
2007
|
|
|
2006
|
|
|
change
|
|
|
2007
|
|
|
2006
|
|
|
change
|
|
|
Revenue
|
|
|
23,386
|
|
|
|
20,506
|
|
|
|
14
|
%
|
|
|
43,297
|
|
|
|
37,829
|
|
|
|
14
|
%
|
|
Cost of revenue
|
|
|
588
|
|
|
|
501
|
|
|
|
17
|
%
|
|
|
1,135
|
|
|
|
954
|
|
|
|
19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
22,798
|
|
|
|
20,005
|
|
|
|
14
|
%
|
|
|
42,162
|
|
|
|
36,875
|
|
|
|
14
|
%
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
9,029
|
|
|
|
8,138
|
|
|
|
11
|
%
|
|
|
16,646
|
|
|
|
15,616
|
|
|
|
7
|
%
|
|
Research and development
|
|
|
4,810
|
|
|
|
4,730
|
|
|
|
2
|
%
|
|
|
9,523
|
|
|
|
9,556
|
|
|
|
—
|
|
|
General and administrative
|
|
|
1,253
|
|
|
|
1,240
|
|
|
|
1
|
%
|
|
|
2,778
|
|
|
|
2,624
|
|
|
|
6
|
%
|
|
Amortization
|
|
|
290
|
|
|
|
346
|
|
|
|
(16
|
%)
|
|
|
580
|
|
|
|
692
|
|
|
|
(16
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
15,382
|
|
|
|
14,454
|
|
|
|
6
|
%
|
|
|
29,527
|
|
|
|
28,488
|
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
7,416
|
|
|
|
5,551
|
|
|
|
34
|
%
|
|
|
12,635
|
|
|
|
8,387
|
|
|
|
51
|
%
|
|
Other income, net
|
|
|
725
|
|
|
|
577
|
|
|
|
26
|
%
|
|
|
1,556
|
|
|
|
1,392
|
|
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
8,141
|
|
|
|
6,128
|
|
|
|
33
|
%
|
|
|
14,191
|
|
|
|
9,779
|
|
|
|
45
|
%
|
|
Income tax expense
|
|
|
2,910
|
|
|
|
2,418
|
|
|
|
20
|
%
|
|
|
5,089
|
|
|
|
3,780
|
|
|
|
35
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5,231
|
|
|
$
|
3,710
|
|
|
|
41
|
%
|
|
$
|
9,102
|
|
|
$
|
5,999
|
|
|
|
52
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparison of the Three and Six Months Ended October 31, 2007 and 2006
Revenue
. Total revenue in the three and six-month periods ended October 31, 2007 increased 14% to
$23.4 and $43.3 million, respectively. License revenue during the three-month period ended October
31, 2007 increased 14% to $12.4 million from $10.9 million during the comparable period in the
prior fiscal year. License revenue during the six-month period ended October 31, 2007 increased 15%
to $22.1 million from $19.1 million during the comparable period in the prior fiscal year. The
increases are due in part to continued improvement in the technology sectors resulting in an
increased demand for our software products worldwide. Growth occurred in both our high performance
electronics and electromechanical (EM) product lines for the three and six-month periods. Service
and other revenue in the three and six-month periods ended October 31, 2007 increased 15% and 13%,
respectively, due to the continued growth of the installed base of customers under annual
maintenance agreements.
International revenue accounted for 63% and 60% of the Company’s total revenue in the three-month
periods ended October 31, 2007 and 2006, respectively. Revenue in Asia accounted for 46% and 42%
and revenue in Europe accounted for 17% and 18% in the three-month periods ended October 31, 2007
and 2006, respectively. International revenue accounted for 63% and 59% of the Company’s total
revenue in the six-month periods ended October 31, 2007 and 2006, respectively. Revenue in Asia
accounted for 44% and 43% and revenue in Europe accounted for 19% and 16% in the six-month periods
ended October 31, 2007 and 2006, respectively. As of October 31, 2007 and April 30, 2007, there
were net assets of $20.8 million and $22.3 million in Asia. Generally, the Company believes
international sales are subject to additional risks associated with international operations,
including currency exchange fluctuations, tariff regulations and requirements for export.
Page 7
Exchange rates will fluctuate throughout the fiscal year. When comparing the percentage of
international revenues to total revenues for the three and six-month period, using current year
exchange rates for the prior year revenues, the international revenue as a percentage of total
revenue would not change for the three and six-month periods ended October 31, 2006.
Cost of revenue
. Cost of revenue consists primarily of software materials, personnel and other
expenses related to providing maintenance, post-contract customer support, licenses and upgrades to
customers. Cost of revenue for the three and six-month periods ended October 31, 2007 increased 17%
and 19% from the comparable period in the prior fiscal year.
Sales and marketing expenses
. Sales and marketing expenses consist of salaries; commissions paid
to internal sales and marketing personnel, promotional costs and related operating expenses. Sales
and marketing expenses in the three and six-month periods ended October 31, 2007 increased 11% and
7% to $9.0 million and $16.6 million from the comparable periods in the prior fiscal year. Stock
based compensation expense of $0.1 million was included in sales and marketing expenses for the
three month periods ended October 31, 2007 and 2006. Stock based compensation expense of $0.2
million was included in sales and marketing expenses for the six month periods ended October 31,
2007 and 2006. Sales and marketing expenses represented 38% and 41% of total revenue in the
six-month periods ended October 31, 2007 and 2006, respectively. This decrease is a result of the
Company continuing to gain leverage from its sales force.
Research and development expenses
. Research and development expenses include all costs associated
with the development of new products and enhancements to existing products. Total research and
development expenses for the three and six-month periods ended October 31, 2007 increased 2% to
$4.8 million and remained flat at $9.5 million from the comparable periods in the prior fiscal
year. Total research and development costs for the six-month period decreased primarily due to a
reduction of $0.6 million in stock based compensation expense to $0.2 million. Stock based
compensation expense of $0.1 million and $0.4 million was included in research and development
expenses for the three month periods ended October 31, 2007 and 2006, respectively. Research and
development expenses represented 22% and 25% of total revenue in the six-month periods ended
October 31, 2007 and 2006, respectively.
General and administrative expenses
. General and administrative expenses for the three and six
month periods ended October 31, 2007 increased 1% and 6%, respectively. Stock based compensation
expense of $0.1 million was included in general and administrative expenses for the three month
periods ended October 31, 2007 and 2006. Stock based compensation expense of $0.2 million was
included in general and administrative expenses for the six month periods ended October 31, 2007
and 2006, respectively. General and administrative expenses represented 6% and 7% of total revenue
in the six-month periods ended October 31, 2007 and 2006, respectively.
Amortization expense
. Amortization expense for the three and six-month periods ended October 31,
2007 decreased 16%. The decrease is due to various intangible assets being fully amortized in the
prior fiscal year.
Other income, net
. Other income for the three and six-month periods ended October 31, 2007 was $0.7
million and $1.6 million, an increase of $0.1 million and $0.2 million from the same period in the
previous fiscal year.
Income tax expense.
In the three and six month periods ended October 31, 2007, the Company recorded
tax expense of $2.9 million and $5.1 million compared to $2.4 million and $3.8 million for the same
periods in the previous fiscal year. The effective tax rate was higher in the prior fiscal periods
because the US Research and Development Tax Credit (“Tax Credit”) had expired. The Tax Credit was
reinstated in December 2006.
Liquidity and Capital Resources
As of October 31, 2007, Ansoft had $34.7 million in cash and cash equivalents and $26.3 million of
marketable securities. Net cash provided by operating activities in the six-month periods ended
October 31, 2007 and 2006 was $15.6 million and $13.9 million, respectively.
Net cash used in investing activities in the six-month periods ended October 31, 2007 and 2006 was
$4.6 million and $5.1 million, respectively. Capital expenditures were $0.3 million and $0.4
million in the six-month periods ended October 31, 2007 and 2006, respectively. Purchases of
marketable securities were $4.2 million and $4.8 million in the six-month periods ended October 31,
2007 and 2006, respectively.
Page 8
Net cash used in financing activities was $26.6 million and $4.9 million in the six-month periods
ended October 31, 2007 and 2006, respectively. Proceeds from the issuance of common stock were
$1.7 million and $0.8 million in the six-month periods ended October 31, 2007 and 2006. Funds used
for the repurchase of common stock were $30.9 million and $6.7 million in the six-month periods
ended October 31, 2007 and 2006, respectively. Shares were repurchased at an average price of
$27.93 and $20.70 in the six-month periods ended October 31, 2007 and 2006, respectively. The
Company expects to continue to purchase common stock under its share repurchase plan.
A summary of Ansoft’s significant contractual obligations and commitments as of October 31, 2007 is
as follows (in thousands and for fiscal year):
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
2008
|
|
$
|
1,432
|
|
|
2009
|
|
|
1,754
|
|
|
2010
|
|
|
1,107
|
|
|
2011
|
|
|
960
|
|
|
2012
|
|
|
725
|
|
|
Thereafter
|
|
|
121
|
|
For fiscal year 2008, the balance of $1,432 represents the remaining payments due as of October 31,
2007.
Critical Accounting Policies
As discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” section of the Company’s Annual Report on Form 10-K for the fiscal year
ended April 30, 2007, the Company considers its policies on revenue recognition, valuation of
accounts receivable, impairment of long-lived assets, impairment of marketable securities available
for sale, stock-based compensation and deferred tax asset valuation allowance to be the most
critical in understanding the judgments that are involved in preparing its consolidated financial
statements. With the adoption of FIN 48 as of May 1, 2007, the Company has added “Uncertain Tax
Positions” as a critical accounting policy.
Uncertain Tax Positions
The Company accounts for uncertain tax positions in accordance with FIN 48. The application of
income tax law is inherently complex. Laws and regulations in this area are voluminous and are
often ambiguous. As such, the Company is required to make many subjective assumptions and judgments
regarding its income tax exposures. Interpretations of and guidance surrounding income tax laws and
regulations change over time. As such, changes in its subjective assumptions and judgments can
materially affect amounts recognized in the consolidated balance sheets and statements of
operations. See Note 8 to the unaudited consolidated financial statements, “Income Taxes”, for
additional detail on the Company’s uncertain tax positions.
Effect of Recent Accounting Pronouncements
In September 2006, the FASB issued FASB Statement No. 157, “Fair Value Measurements”
(SFAS 157), which defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair value
measurements. SFAS 157 will be effective for the Company beginning in the Company’s 2009
fiscal year. The Company is currently evaluating the impact, if any, that SFAS 157 will
have on its consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and
Financial Liabilities—Including an amendment of FASB Statement No. 115,” (SFAS 159) which provides
entities with an option to report selected financial assets and liabilities at fair value. SFAS 159
also establishes presentation and disclosure requirements designed to facilitate comparisons
between entities that choose different measurement attributes for similar types of assets and
liabilities. SFAS 159 will be effective for the Company beginning in the Company’s 2009 fiscal
year. The Company is currently evaluating the impact that SFAS No. 159 will have on its
consolidated financial statements.
Page 9
Item 3. Quantitative and Qualitative Disclosure about Market Risk
There have been no material changes in reported market risks faced by the Company since April 30,
2007.
Interest Rate Risk.
The Company’s exposure to market risk for changes in interest rates relates
primarily to its investment portfolio. The Company mitigates its risk by diversifying its
investments among securities and limits the amount of credit exposure to any one issuer. The
Company does not hedge any interest rate exposures. The portfolio includes only marketable
securities with active secondary or resale markets to ensure portfolio liquidity.
Foreign Currency Risk.
The majority of our foreign currency transactions are denominated in yen or
euros, which are the functional currencies of Japan and Europe, respectively. As a result of
transactions being denominated and settled in such functional currencies, the risks associated with
currency fluctuations are primarily associated with foreign currency translation adjustments. We
do not currently hedge against foreign currency translation risks and do not currently believe that
foreign currency exchange risk is significant to our operations due to the short term nature of
assets and liabilities denominated in foreign currencies.
The average foreign exchange rates used to translate the statements of operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
Six months ended
|
|
Foreign Currency
|
|
October 31, 2007
|
|
October 31, 2006
|
|
|
|
Yen
|
|
|
117.9
|
|
|
|
115.2
|
|
|
Euro
|
|
|
1.39
|
|
|
|
1.27
|
|
Item 4. Controls and Procedures
Under the supervision and with the participation of the Company’s management, including the
Company’s Chief Executive Officer and Chief Financial Officer, the Company evaluated the
effectiveness of the design and operation of its disclosure controls and procedures as of the end
of the period covered by this Quarterly Report on Form 10-Q, and, based on their evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and
procedures are effective. There were no significant changes in the Company’s internal control over
financial reporting during the period covered by this Quarterly Report on Form 10-Q that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.
PART II OTHER INFORMATION
Item 1A. Risk Factors
Information regarding risk factors is discussed in Item 1A, “Risk Factors” of the Company’s Form
10-K for the fiscal year ended April 30, 2007. There have been no material changes in the Company’s
risk factors previously disclosed in the Company’s Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table sets forth the common stock purchased by month for the quarter ended October
31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total number of
|
|
Maximum
|
|
|
|
|
|
|
|
|
|
|
|
shares
|
|
number of
|
|
|
|
|
|
|
|
|
|
|
|
repurchased as
|
|
shares that may
|
|
|
|
Total
|
|
|
|
|
|
part of publicly
|
|
yet be
|
|
|
|
number of
|
|
Average
|
|
announced
|
|
repurchased
|
|
|
|
shares
|
|
price paid
|
|
plans or
|
|
under the plans
|
|
Period
|
|
repurchased
|
|
per share
|
|
programs
|
|
or programs (1)
|
|
August 1, 2007– August 31, 2007
|
|
|
240,899
|
|
|
$
|
26.08
|
|
|
|
7,286,351
|
|
|
|
1,713,649
|
|
|
October 1, 2007 – October 31, 2007
|
|
|
12,500
|
|
|
$
|
29.76
|
|
|
|
7,298,851
|
|
|
|
1,701,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
253,399
|
|
|
$
|
26.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
All repurchases were made pursuant to a share repurchase program publicly announced in 1998
and amended in 2002, 2004, 2006 and 2007. On September 6, 2007, the Company announced that the
Board of Directors voted to amend its existing common stock repurchase program to permit the
Company to acquire an additional 1,000,000 shares of its common stock. Unless terminated
earlier by resolution of our Board of Directors, the share repurchase program will expire when
we have repurchased all shares authorized for repurchase thereunder. Under the plan the
Company is authorized to repurchase 9,000,000 shares.
|
Page 10
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of stockholders of the Company was held on September 5, 2007. Proxies were
solicited pursuant to Section 14(a) of the Securities and Exchange Act of 1934 and there was no
solicitation in opposition to the Company’s solicitations.
The following five nominees proposed by the Board of Directors were elected for one year terms
expiring at the 2008 Annual Meeting:
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares in
|
|
Shares
|
|
Name
|
|
Favor
|
|
Withheld
|
|
Nicholas Csendes
|
|
|
16,141,110
|
|
|
|
7,228,189
|
|
|
Zoltan J. Cendes
|
|
|
15,511,676
|
|
|
|
7,857,623
|
|
|
Peter Robbins
|
|
|
21,740,641
|
|
|
|
1,628,658
|
|
|
John N. Whelihan
|
|
|
21,187,489
|
|
|
|
2,181,810
|
|
|
Paul J. Quast
|
|
|
21,739,680
|
|
|
|
1,629,619
|
|
Item 6. Exhibits
|
|
10.15
|
|
Letter dated October 22, 2007 amending Loan Agreement by and between Ansoft
Corporation and PNC Bank, National Association dated October 21, 2004—Filed herewith.
|
|
|
|
|
31.1
|
|
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes Oxley Act of
2002—Filed herewith.
|
|
|
|
|
31.2
|
|
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as amended, and Section 302 of the Sarbanes Oxley Act of
2002—Filed herewith.
|
|
|
|
|
32.1
|
|
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002—Filed herewith.
|
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.
|
|
|
|
|
|
|
|
|
Date: November 16, 2007
|
|
ANSOFT CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Nicholas Csendes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nicholas Csendes
|
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Thomas A.N. Miller
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas A.N. Miller
|
|
|
|
|
|
Chief Financial Officer
|
|
|
Page 11
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