Realize Your Product Promise™
Fluid Dynamics Structural Mechanics Electromagnetics Systems & Multiphysics
Letter to StockhoLderS
A Commitment to Growth
commitment to the enhancement of long-term value for both
In 2012, ANSYS once again delivered on its relentless
customers and stockholders. By focusing on customer relation-
ships, technological advances and strategic acquisitions, ANSYS
has continued to strengthen its position as the global leader in
engineering simulation.
ANSYS delivered double-digit growth that underscored our long-
standing history and focus on solid financial performance, across
the spectrum of macro-economic realities. Another four consecu-
tive record-breaking quarters of both non-GAAP revenues and EPS,
coupled with a strong balance sheet and operating cash flows, gave
ANSYS the financial strength to surge forward. That is exactly what we did, and our 2012 progress
propelled us into 2013 even more strongly equipped to deliver the promise of our vision of compre-
hensive, full-fidelity virtual prototypes enabling Simulation-Driven Product Development™. Beyond
“the numbers,” we made significant strides in technology, people and customer engagements.
The Market Leader in Simulation Technology Raises the Bar
Our long-standing product leadership is the driving force
behind our market leadership. The comprehensive
ANSYS portfolio of engineering simulation solutions is the
great enabler of virtual prototypes of complete systems.
This allows innovative concepts to be examined to help
customers deliver superior performance and reliability at
reasonable costs… all at the speed of thought. In 2012,
we increased our investment and focus in research and
development as a commitment to the long-term opportu-
nity. Three major milestones sprang from this investment.
ANSYS® 14.5
We launched the latest generation of our ANSYS
Workbench™ engineering technology suite, ANSYS
14.5. Historically, ANSYS has had leading capabilities
across the spectrum of engineering disciplines, both
in terms of technology and market presence. Each
of these major product lines saw dramatic increases
in capability, speed and precision in 2012. The
real uniqueness is in the ANSYS Workbench™ platform,
which allows the complete set of products to synergis-
tically perform multi-physics simulations of complete
systems, from the nano- to the macro-level, across all
industries. This also enabled innovations in further
integration with our Ansoft technologies (acquired in
2008) to continue to drive the convergence of mechani-
cal and electrical simulations. We also made significant
progress in integrating Apache offerings (acquired in
2011) into the platform. The result of all of these
capabilities is the fulcrum upon which our customers
can leverage accelerated design efficiency, enabling
them to greatly reduce the concept-to-market time of
their products.
1 / Letter to StockhoLderS
Letter to StockhoLderS
Esterel Technologies
Complete systems are getting increasingly complex in
today’s world. The mechanical and electronic worlds
have often combined to provide a new generation of
“smart products” that react to users and the environ-
ment. A key component of this new breed of product
is the software which provides the “smarts.” With the
acquisition of Esterel Technologies, ANSYS became a
pioneer in including these complex software compo-
nents in system simulations. Integrated with ANSYS,
Esterel capabilities will enable software and systems
engineers to design, simulate and produce embed-
ded software – i.e., the control code – built into the
electronics in aircraft, automotive, energy systems,
medical devices and virtually any other products that
have central processing units. This is one of the most
dramatically growing fields in engineering, but also one
where the tolerance for risk is near zero.
Apache Design Systems
2012 was also the first full year of teaming with Apache
Design. On all fronts, the acquisition has delivered
above expectations. The financial performance is obvi-
ous, but the rapid convergence of infrastructure and
processes was particularly impressive. The demonstra-
tion of technology advancement also became apparent
in the merging of the product streams that opened new
doors for comprehensive simulation, from chip through
package through board and system levels.
As 2013 unfolds, the ongoing integration of Apache and
Esterel into the ANSYS business will be a key focus for
us. We will continue to search for other possible key
technology acquisitions that will further our vision of
Simulation Driven Product Development and the simu-
lation of complete, multi-physics systems.
Extending and Evolving Customer Relationships
ANSYS is anchored by over 45,000 customers throughout
the globe. This broad base of customers represents the
long-range opportunity as even our leading technology is
in its relative adolescence, continually being empowered
by the ever-expanding growth of computing capacity. It
is not mere numbers that define the ANSYS community.
It is leadership across virtually every industry: 96 of the
Fortune 100 Industrial companies are ANSYS customers.
It is innovation: 96 of the companies from the Thomson
Reuters Top 100 Global Innovators list are also ANSYS
customers – demonstrating the nexus between innovative
companies and the power of ANSYS software to amplify
their engineering capabilities. These are the leading com-
panies, with many of whom we have forged multi-decades-
long relationships. Their jobs have not gotten any easier as
increasing product complexity, customer expectations, the
regulatory environment and the value of their own product
leadership determines the long-term winners. All of this
happens when the internet, social media and 24x7 news
heralds their successes… and failures.
Robust Financial Performance
Our excitement about the long-term opportunity does not
imply that we are not focused on the continual validation
of that premise. In 2012, ANSYS delivered four consecu-
tive quarters of growth in non-GAAP revenue and earnings,
coupled with strong margins and operating cash flows,
while also increasing our investment in R&D. We increased
non-GAAP revenue by 15% to $807.7 million. Non-GAAP
diluted earnings per share also grew by 15% to $2.91. Our
fundamentals are strong and we foresee continued invest-
ment in R&D, sales and marketing initiatives, business
infrastructure and strategic acquisitions (which remains
our first choice for the use of excess cash). In February of
2012, the Board of Directors approved an increase in the
ANSYS authorized share repurchase program to a total of
up to three million shares. Throughout the course of 2012,
we took advantage of market volatility and repurchased
1.5 million shares of stock.
2 / Letter to StockhoLderS
Great Technology + Great People + Great Customers =
Great Opportunity… 2013 and Beyond
For over four decades, ANSYS has been providing
customers with breakthrough, innovative solutions and
dedicated service. Vitally important to this are the numer-
ous ANSYS stakeholders who have been part of driving the
current reality and the future opportunity. A shared sense
of purpose and commitment permeates our long-standing
partners and the over 2,400 ANSYS employees worldwide.
The ANSYS level of execution and performance in 2012
gives us a great deal of confidence as we enter the new
year. Our mantra of continuous improvement drives us to
ever-greater achievement in 2013 and beyond.
It is a matter of committed passion — it’s what we have
been doing for over 40 years.
James E. Cashman III
President and Chief Executive Officer
3 / Letter to StockhoLderS
CORPORATE INFORMATION
Stockholder Information
Requests for information
about the Company
should be directed to:
Investor Relations
ANSYS, Inc.
Southpointe
275 Technology Drive
Canonsburg, PA 15317
U.S.A.
Telephone: 724.514.1782
Stock Listing
Transfer Agent and Registrar
American Stock Transfer & Trust Company
6201 15th Ave
Brooklyn, NY 11219
Shareholder Services: 800.937.5449
718.921.8124
TTY: 718.921.8386
866.703.9077
info@amstock.com
www.amstock.com
Headquarters
ANSYS, Inc.
Southpointe
275 Technology Drive
Canonsburg, PA 15317
U.S.A.
Telephone: 1.866.267.9724 or
724.746.3304
www.ansys.com
4 / Letter to StockhoLderS
About ANSYS, Inc.
ANSYS, Inc., headquartered in Canonsburg, Pennsylvania, U.S.A., is committed
to innovation by improving the way our customers design and develop products
through Simulation-Driven Product Development.™ Whether developing
innovative performance modeling and simulation technologies, working with
customers to understand their needs, or delivering a successful solution
implementation at a customer site, ANSYS brings over four decades of experi-
ence, talent and drive to every situation.
Founded in 1970, ANSYS has evolved from a small group of engineers to an
international corporation that employs over 2,400 development, sales, fi nance,
marketing, administrative and management professionals. Dedicated employees
and visionary, responsible leadership — together with a large and loyal customer
base and a worldwide network of valued partners — have helped ANSYS to create
a global and infl uential engineering simulation community.
Clear vision, sound and consistent strategy, fi nancial stability, and an
unwavering focus on engineering simulation have led the Company’s growth and
success. The Company off ers an integrated, full-spectrum portfolio, re-investing
a signifi cant percentage of revenue back into research and development. In
addition, strategic alliances and acquisitions have helped ANSYS to build
capabilities to meet customer needs. Many customers are re-evaluating their
development processes and using engineering simulation to drive innovative
product designs, rather than traditional hardware prototyping and testing.
ANSYS looks forward to many more decades of innovations and to developing
technologies that will solve tomorrow’s complex problems in both mature and
emerging industries.
Forward-Looking Information
The Company cautions investors that its performance is subject to risks
and uncertainties. Some matters discussed in this document may constitute
forward-looking statements that involve risks and uncertainties that could
cause actual results to diff er materially from those projected. These risks and
uncertainties are discussed at length, and may be amended from time to time,
in the Company’s Annual Report to Stockholders and fi lings with the SEC,
including our most recent fi lings on Forms 10-K and 10-Q. We undertake no
obligation to publicly revise any forward-looking statements, whether changes
occur as a result of a new information update or for future events, after the date
they were made.
ANSYS, Inc. is an Equal Opportunity/Affi rmative Action Employer. It is the
Company’s policy to provide equal employment opportunity to employees and
applicants for employment and to prohibit discrimination on the basis of, among
other protected categories, race, color, religion, sex, age, national origin, veteran
status or being a qualifi ed individual with a disability in all aspects of employ-
ment including recruiting, hiring, training or promoting personnel.
ANSYS and any and all ANSYS, Inc., brand, product, service and feature names,
logos and slogans are registered trademarks or trademarks of ANSYS, Inc., or its
subsidiaries in the United States or other countries. All other brand, product,
service and feature names or trademarks are the property of their respective
owners.
At ANSYS, we bring clarity and insight
to your most complex phenomena through
fast, accurate and reliable simulation.
Every Product is a Promise
Every product you make is a promise to your customer. A promise to be functional
and efficient. To be safe and reliable. To perform better than any other design
on the market. At the end of the day, your products are all that matter.
ANSYS provides the engineering and design process insight to help you be
first to market with products that realize their promise and revolutionize
your business. We develop, market and support engineering simulation
software used to predict how products will behave and how manufacturing
processes will operate in real-world environments. We offer the most
comprehensive suite of simulation solvers in the world so that you can
confidently predict your product’s success. ANSYS simulation software,
coupled with our team of applications experts and global support network,
is the key to:
g
g
g
g
Lower Development Costs
We’ll help you get to an accurate answer faster, so you
can do more in less time while using fewer resources
than ever before
Reduce Time to Market
Our software drastically shortens development time and
prototype iterations so you can be first to market with
tomorrow’s products, today
Optimize Product Performance
As the world leader in engineering simulation software,
we enable our customers to consistently perfect product
reliability, performance and safety
Outperform the Competition
Using simulation early and often, our customers gain an
unrivaled advantage in today’s competitive market
40 Years of Innovation
We are the largest engineering simulation
company in the world, serving more than
40,000 customers. Our steady growth and
financial strength reflect our commitment to
innovation and R&D. We reinvest 15 percent
of our revenues each year into research to
continually refine our software. That’s
why more leading organizations trust
ANSYS with their most difficult product
design challenges.
“Without simulation results on components, there’s a chance that
these components can have shortcomings. This can be very damaging
to a company’s reputation. It’s very costly. An entire market for that
component goes away. The airlines aren’t going to install a turbine
blade that is known to crack. Having ANSYS and the ability to evaluate
whether our components will perform is extremely valuable.”
Page Strohl
Senior Structures Engineer
Chromalloy Gas Turbine
Performance Improvements Achieved through Simulation
ANSYS technology helps drive dramatic improvements across our customers’ product
development processes, from reduced costs and shorter development times to improved
quality and reliability. Nearly half of all best-in-class companies use simulation
deliberately throughout the design process. These leading manufacturers realize
significantly lower product costs and up to three times higher profitability than
companies that use simulation only occasionally.
Performance Improvements Achieved Percent Change over Past 24 Months
-10% -5%
0% 5% 10% 15%
Product cost
-6%
3%
5%
15%
Source: Aberdeen Group, April 2010
Best-in-class
All others
Profit margins on products
less than two years old
Award-Winning Design
One of the most respected names in American design, Herman Miller,
used ANSYS structural mechanics software to meet the complex
requirements of designing the Mirra® chair for a wide range of body
types and postures.
The Mirra’s TriFlex backrest,
which automatically adjusts to
each user, was developed as a single
composite plastic structure using
ANSYS software to determine the
coupled response of the back and
supporting spine.
•
1970
Swanson Analysis Systems Inc. is founded.
Westinghouse becomes our first client.
•
1971
ANSYS 2.0 is released, revolutionizing
simulation in materials, contact
dynamics and thermal effects.
•
1975
ANSYS introduces geometric and
thermoelectric elements—once
again leading the field in advanced
technologies.
Our technology enables you to predict
with confidence that your products will
thrive in the real world.
Fluid Dynamics
Our CFD portfolio, which includes ANSYS Fluent® and ANSYS CFX®, is the most
trusted and widely used simulation suite the world over. With the industry’s
most advanced solvers, ANSYS fluid dynamics technology delivers the fast,
reliable simulations our customers require to design with confidence.
Applications
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g
Improve aerodynamics and ventilation in aircraft, cars and
buildings; cut energy costs and improve comfort and safety
Design more-efficient and longer-lasting turbines, from huge
hydroturbines to turbochargers and heart pumps
Create better-functioning solutions in alternative energy
such as wave power, wind turbines and fuel cells
Improve drug delivery for faster-to-market pharmaceuticals
Structural Mechanics
ANSYS structural mechanics software brings together the largest
elements library with the most advanced structural simulation
capabilities available. This unified engineering environment helps
you streamline processes to optimize product reliability, safety and
functionality. Leveraging user-friendly tools in industry-standard
products, including ANSYS Mechanical,TM ANSYS Autodyn® and
others, your team will increase productivity, minimize physical
prototyping, and deliver better products in less time.
Lufthansa Saves Time, Reduces Costs
Lufthansa Technik AG leverages ANSYS simulation software
to gauge wear and tear of aircraft components. This prolongs
service intervals, saving time and maintenance costs. The
results are safer, less expensive flights for consumers and
a more profitable business for Lufthansa.
Dyson Drastically Improves Fan Design
Dyson needed to boost the performance of their
Air MultiplierTM fan. ANSYS enabled 10 times
the design variation analysis, resulting in a 250
percent improvement over the original design.
The end result: Dyson met its product deadline
schedule and won international recognition.
Applications
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g
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Improve durability and decrease failure in automobile
and airplane components
Improve longevity and reliability of civil engineering
projects such as dams, bridges and high-rises
Reduce weight while maintaining integrity of air and
spacecraft; test reliability before failure, in fields in
which failure is not an option
Improve the accuracy and durability of scientific
instruments such as observatories and hadron colliders
Create better and more reliable marine and offshore
equipment; ensure functionality throughout the
lifespan of household appliances
•
1981
We become the first provider to introduce
workstations as an alternative to mainframes,
resulting in outstanding usability for our
customers.
•
1983
With the introduction of electro-
magnetic capabilities, we add
to our growing reputation as the
world leader in simulation.
•
1985
As the first provider to offer online help, as
well as the first to support parametric analysis
and structured optimization, we dramatically
improve the potential of simulation.
Electromagnetics
Our software enables you to predict the behavior of complex electrical and
electromechanical systems — from mobile communication and internet devices
to automotive components and electronics equipment. The industry-leading
ANSYS HFSS™ and ANSYS Maxwell® solvers eliminate prototype iterations and
deliver your products to market faster.
Applications
g
g
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Improve equipment performance of smartphones, satellites,
batteries and hybrid vehicles
Design more-effective MRI machines, implantable defibrillators
and other medical devices
Create better electromechanical components for automobiles,
generators, transformers, power electronics and magnet design
Ensure the highest speed of computer chip and board design, and
optimize functionality of anything that uses a chip or circuit
Improve signal integrity for high-frequency technology such
as antennas, RF and microwave devices
Systems & Multiphysics
In today’s competitive marketplace, it is crucial to consider all physical
phenomena when designing a new product. Leading manufacturers are increasing
the fidelity of their simulation models by coupling two or more physics in their
investigations. ANSYS expertise in multiphysics gives you the power to solve
complex, system-level challenges. Our unified engineering environment
seamlessly integrates systems, product teams and third-party technology.
Panasonic Eyes Faster
Development Cycles
Using ANSYS electromagnetics
simulation software, Panasonic
improved signal integrity for
its remote surveillance camera.
By adopting a circuit and 3-D
electromagnetic cosimulation
approach, the design team
saved almost three months
in development time.
A Systems-Level Approach
Our collaborative simulation environment provides modeling scalability specifically for
evaluating entire systems that include 3-D high-fidelity models, circuit reduced-order
models or any combination of these:
g
g
g
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g
Accurate tracking of the interactive effects of components and
detailing how they will perform as a whole
The ability to address different dimensions of a system — from
physics, fidelity and state to scale and users
Modeling scalability for evaluating entire systems that include
any combination of high-fidelity 3-D and reduced-order models
Best-in-class core server technology coupled with an integrated
development environment
A collaborative environment for defining, executing and storing
results of system-level simulation projects for multiple users
At ANSYS, we’re seeing dramatic improvements
across our customers’ development processes,
from reduced costs and development time
to improved quality. We’re listening to our
customers and responding to their needs
for efficiency, robustness and accuracy.
•
1987
We introduce the first layered composite
solid element and become the first to
simulate electromagnetic phenomena.
•
1991
ANSYS introduces the first CFD solver for unstructured
grids and becomes the first simulation provider
to release tetrahedral meshing.
ANSYS expert training, services and
support help to ensure your success.
Whether you are new to engineering simulation or are a highly-skilled specialist,
ANSYS provides the training, services and support you need to create the next must-
have product. Live phone support and the customer web portal make it easy for you
to submit requests and concerns. So you have available services when and where
you need them most, and in the form that is most useful to your team.
Comprehensive Consulting Services
Our full suite of consulting services is designed to help customers realize the return
on every investment in ANSYS technology. We’ll help you maximize the value of our
tools by working with your team to develop and document methodologies and best
practices. And we’ll customize our simulation software to better fit into your specific
design processes. This enables you to be more efficient by reducing the time spent
performing simulations, and it gives you the ability to extend the software to
non-expert users.
Training Delivers Better Insight
ANSYS training solutions are designed to give you the best
insight for quickly solving your most difficult engineering
problems – from classroom training on basic physical
concepts to online courses and customized training at
your own site.
This wide range of training opportunities helps you to design
the ideal methodologies for addressing specific process or
application challenges, while also driving simulation use
throughout your organization.
“ANSYS enables us to understand not only what can be
done in a product in terms of features and performance,
but what should be done in the product to design for
reliability and manufacturability.”
Scott Parent
Vice President of Technology
Baker Hughes
•
•
1994
SASI becomes ANSYS, Inc.
ANSYS creates the world’s first iterative
solver for large structural problems.
•
•
1996
ANSYS launches DesignSpace with ANSYS
Workbench as its environment.
We create the first commercial CFD with
parallel processing as a standard feature.
•
1999
By adding multiphysics modeling to our
list of capabilities, ANSYS yet again raises
the bar — resulting in vastly more accurate,
effective simulation.
At ANSYS, we focus on digitally simulating performance across all physics
of complete systems and in their real-world environments. We’re helping
manufacturers worldwide streamline processes to accelerate innovation.
When simulation drives product development, anything is possible.
Cummins Puts Green Initiative into Overdrive
Cummins uses ANSYS software to design and test radical
improvements in its engines — reducing weight, improving
fuel economy and cutting emissions.
“The ANSYS Workbench environment provides access to the best multiphysics tools we need
to conduct many types of simulation and analysis. Whether our need is thermal, structural,
dynamic or static engineering analysis, ANSYS Workbench provides the flexibility and
versatility to accommodate our needs — as well as the multiphysics capabilities to link the
results of our various simulations.”
Bob Tickel
Director of Structural & Dynamic Analysis
Cummins Inc.
ST Ericsson Answers the Call to Lead
As a leading global provider for the wireless market, ST Ericsson relies on
ANSYS for comprehensive electromagnetics simulation to stay competitive
in the ever-changing field of smartphones. With our tools, they reduce
risk in their designs, shorten lead times in development, and get successful
products to market faster.
“Today we’re working with ANSYS. We have a much more efficient design flow,
we know what part our components play in the design, and we know before
producing our boards that they will be functional. It’s a much better
starting point for our platform validation.”
Jonas Persson
Technical Manager
ST Ericsson
•
2001
We added design exploration to expand
the suite’s capabilities.
•
2003
ANSYS acquires CFX, cementing our place
as the industry leader in CFD tools.
•
2004
ANSYS becomes the first simulation
company to solve 100 million structural
degrees of freedom.
Our global reach, expert people
and proven strengths help you
realize your product promise.
Every product is a promise to live up to and surpass customer expectations. A promise
to be better than the competition. By simulating early and often with ANSYS software,
you can become faster, more cost-effective and more innovative. We are dedicated to
providing simulation solutions that enable our customers to excel in today’s competitive
market. We are the world’s most trusted and successful engineering simulation partner.
We’ll help you realize your product promise.
Red Bull Passes Competition
Using ANSYS CFD simulation, Red Bull Racing Team achieved reliable,
accurate analyses in record time — as well as a competitive edge in
performance before hitting the track.
“ANSYS simulation software is incredibly reliable and accurate. Simulation enables us to
drastically reduce lead times and get solutions to the circuit much, much quicker so that
we are more competitive race-to-race.”
Steve Nevey
Business Development Manager
Red Bull Technology
•
2005
ANSYS adds cutting-edge electronics, hydrodynamic
and offshore structural assessment capabilities.
•
2006
ANSYS reaches another milestone, becoming
the No. 1 CAE company in R&D investment.
By acquiring Fluent, ANSYS gains unmatched
capabilities in fluid dynamics simulation.
•
2008
ANSYS acquires Ansoft, adding high-performance
electronics and electromagnetics software to our
repertoire of simulation solutions.
Simulation Optimizes Engine Performance
Mercury Marine, a leader in marine propulsion and pleasure boating,
uses ANSYS simulation software to develop new engines. Working
hand-in-hand with our application experts, Mercury Marine engineers
optimize their engine designs and deliver the best products to their
customers faster.
Our Reach
We have a presence in more than 40 countries and a powerful network of partners that
provide local, value-added service and support. So whether you’re a customer in Germany,
Brazil or South Korea, we have the global expertise and reach to meet your challenges
and speak your language. And we’ll deliver the resources to help you rapidly deploy and
efficiently manage your simulation processes and data.
Our People
We employ more than 2,000 professionals, including more master’s-
and PhD-level engineers in our service organization than any other
simulation provider. Our team of simulation experts will guide you
on how to more effectively use our software tools and maximize ROI.
We’re a recognized leader in all physics areas in addition to simulation.
And our team has extensive training in fields such as finite element
analysis, computational fluid dynamics, electronics and electromagnetics,
and design optimization.
At ANSYS, we’re relentlessly committed to your product
development success. We’re passionate about developing
and delivering world-class engineering simulation
software to address your current and future product
development needs.
Our Strengths
•
•
•
Focused
Simulation is all we do
Leading product technologies
in all physics areas
Largest development team
focused on simulation
Capable
2,000 employees
60 locations, 40 countries
•
•
Trusted
96 of top 100 ForTune 500
industrials use our software
ISO 9001 and NQA-1 certified
•
•
•
Proven
Recognized as one of the
world’s most innovative and
fastest-growing companies*
•
•
Independent
Long-term financial stability
CAD agnostic
*BusinessWeek, ForTune
•
2009
ANSYS launches its next generation of Workbench and
completes the world’s first commercial simulation of more
than 1 billion computational cells. ForTune magazine
names ANSYS on its list of “Fastest Growing Companies.”
•
2010
ANSYS celebrates its 40th anniversary as
the world leader in engineering simulation.
•
2011
ANSYS acquires Apache, adding power
analysis and optimization platforms
for electronics applications.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2012
Commission File Number 0-20853
ANSYS, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
275 Technology Drive, Canonsburg, PA
(Address of principal executive offices)
04-3219960
(I.R.S. Employer Identification No.)
15317
(Zip Code)
724-746-3304
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.01 par value per share
(Title of each class)
The NASDAQ Stock Market, LLC
(Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by a check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
No
Indicate by a check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes
No
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
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
No
Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in PART III of this Form 10-K, or any amendment to this Form 10-K.
Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company (as defined in Exchange Act Rule 12b-2). (Check one):
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Indicate by a check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes
No
The aggregate market value of the voting stock held by non-affiliates of the Registrant, based upon the closing sale price of the
Common Stock on June 29, 2012 as reported on the NASDAQ Global Select Market, was $4,977,000,000. Shares of Common Stock held by
each officer, director and by each shareholder who owns 5% or more of the outstanding Common Stock have been excluded in that such
shareholders may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other
purposes.
The number of shares of the Registrant’s Common Stock, par value $.01 per share, outstanding as of February 20, 2013 was
92,939,969 shares.
Documents Incorporated By Reference:
Portions of the Proxy Statement for the Registrant’s 2013 Annual Meeting of Stockholders are incorporated by reference into Part III.
ANSYS, Inc.
ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR 2012
Table of Contents
PART I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Item 5.
Item 6.
Item 7.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accounting Fees and Services
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Exhibits and Financial Statement Schedules
SIGNATURES
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18
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Important Factors Regarding Future Results
Information provided by ANSYS, Inc. (hereafter the "Company" or "ANSYS"), in this Annual Report on Form 10-K, may
contain forward-looking statements concerning such matters as projected financial performance, market and industry segment
growth, product development and commercialization, acquisitions or other aspects of future operations. Such statements, made
pursuant to the safe harbor established by the securities laws, are based on the assumptions and expectations of the Company’s
management at the time such statements are made. The Company cautions investors that its performance (and, therefore, any
forward-looking statement) is subject to risks and uncertainties. Various important factors including, but not limited to, those
discussed in Item 1A. Risk Factors, may cause the Company’s future results to differ materially from those projected in any
forward-looking statement. All information presented is as of December 31, 2012, unless otherwise indicated.
ITEM 1.
BUSINESS
PART I
ANSYS, a Delaware corporation formed in 1994, develops and globally markets engineering simulation software and services
widely used by engineers, designers, researchers and students across a broad spectrum of industries and academia, including
aerospace, automotive, manufacturing, electronics, biomedical, energy and defense. Headquartered south of Pittsburgh,
Pennsylvania, the Company and its subsidiaries employed approximately 2,400 people as of December 31, 2012 and focus 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 suite of simulation technologies through a global network of independent
resellers and distributors (collectively, channel partners) and direct sales offices in strategic, global locations. It is the
Company's intention to continue to maintain this hybrid sales and distribution model.
On August 1, 2012, the Company completed its acquisition of Esterel Technologies, S.A. ("Esterel"), a leading provider of
embedded software simulation and automatic generation of certified code solutions for mission critical applications. Under the
terms of the acquisition agreement, ANSYS acquired 100% of Esterel for a purchase price of $58.2 million, which included
$13.1 million in acquired cash. The acquisition agreement also includes retention provisions for key members of Esterel's
management and employees. The Company funded the transaction entirely with existing cash balances. The complementary
combination is expected to accelerate development of new and innovative products to the marketplace while lowering design
and engineering costs for customers.
The Company's product portfolio consists of the following:
ANSYS® Workbench™
ANSYS Workbench is the framework upon which the Company's suite of advanced engineering simulation technologies is
built. The innovative project schematic view ties together the entire simulation process, guiding the user through complex
multiphysics analyses with drag-and-drop simplicity. With bi-directional computer-aided design (“CAD”) connectivity,
powerful highly-automated meshing, a project-level update mechanism, pervasive parameter management and integrated
optimization tools, the ANSYS Workbench platform delivers unprecedented productivity, enabling Simulation Driven Product
Development™.
Multiphysics
The Company's multiphysics product suite allows engineers and designers to create virtual prototypes of their designs operating
under real-world multiphysics conditions. As the range of need for simulation expands, companies must be able to accurately
predict how complex products will behave in real-world environments, where multiple types of coupled physics interact.
ANSYS multiphysics software enables engineers and scientists to simulate the interactions between structural mechanics, heat
transfer, fluid flow and electromagnetics all within a single, unified engineering simulation environment.
Structural Mechanics
The Company's structural mechanics product suite offers simulation tools for product design and optimization that increase
productivity, minimize physical prototyping and help to deliver better and more innovative products in less time. These tools
tackle real-world analysis problems by making product development less costly and more reliable. In addition, these tools have
capabilities that cover a broad range of analysis types, elements, contacts, materials, equation solvers and coupled physics
capabilities all targeted toward understanding and solving complex design problems.
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Fluid Dynamics
The Company's fluid dynamics product suite offers modeling of fluid flow and other related physical phenomena. Fluid flow
analysis capabilities provide all the tools needed to design and optimize new fluids equipment and to troubleshoot already
existing installations. The fluid dynamics product suite contains general-purpose computational fluid dynamics software and
specialized products to address specific industry applications.
Electromagnetics
The Company's electromagnetics product suite provides field simulation software for designing high-performance electronic
and electromechanical products. The software streamlines the design process and predicts performance, all prior to building a
prototype, of mobile communication and internet-access devices, broadband networking components and systems, integrated
circuits (“IC”) and printed circuit boards (“PCB”), as well as electromechanical systems such as automotive components and
power electronics equipment.
System Simulation
The Company delivers a unique and comprehensive system simulation capability that is ideal for the design of today's
increasingly automated products. This collaborative environment leverages the Company's multiphysics, multibody dynamics,
circuit and embedded software simulation capabilities, enabling users to simulate the complex interactions between
components, circuits and control software within a single environment. These technologies provide a complete view into
predicted product performance, which creates greater design confidence for engineers.
Apache Design Low-Power Electronic Solutions
The Company's suite of Apache software delivers power analysis and optimization platforms along with comprehensive and
integrated methodologies that provide capabilities for managing the power budget, power delivery integrity, and power-induced
noise in an electronic design, from initial prototyping to system sign-off. These solutions deliver accuracy with correlation to
silicon measurement; the capacity to handle an entire electronic system including IC, package, and PCB; efficiency for ease-of-
debug and fast turnaround time; and comprehensiveness to facilitate cross-domain communications and electronic ecosystem
enablement.
Esterel Technologies SCADE® Solutions
The Company's SCADE product suite is a formal, comprehensive solution for developing critical systems and automatic
generation of embedded software, supporting the entire development workflow, from requirements analysis and design through
verification, implementation and deployment. SCADE solutions easily integrate, allowing for development optimization and
increased communication among team members.
Explicit Dynamics
The Company's explicit dynamics product suite simulates events involving short-duration, large-strain, large-deformation,
fracture, complete material failure or structural problems with complex interactions. This product suite is ideal for simulating
physical events that occur in a short period of time and may result in material damage or failure. Such events are often difficult
or expensive to study experimentally.
Simulation Process and Data Management
ANSYS Engineering Knowledge Manager™ (“ANSYS EKM”) is a comprehensive solution for simulation-based process and
data management challenges. ANSYS EKM provides solutions and benefits to all levels of a company, enabling an
organization to address the critical issues associated with simulation data, including backup and archival, traceability and audit
trail, process automation, collaboration and capture of engineering expertise, and intellectual property protection.
High-Performance Computing
The Company's high-performance computing (“HPC”) product suite enables enhanced insight into product performance and
improves the productivity of the design process. The HPC product suite delivers cross-physics parallel processing capabilities
for the full spectrum of the Company's simulation software by supporting structural, fluids, thermal and electromagnetic
simulations in a single HPC solution. This product suite decreases the turnaround time for individual simulations, allowing
users to consider multiple design ideas and make the right design decisions early in the design cycle.
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Geometry Interfaces
The Company offers comprehensive geometry handling solutions for engineering simulation in an integrated environment with
direct interfaces to all major CAD systems, support of additional readers and translators, and an integrated geometry modeler
exclusively focused on analysis.
Meshing
Creating a mesh that transforms a physical model into a mathematical model is a critical and foundational step in almost every
engineering simulation study. Accurate meshing is especially challenging today with increasing product design complexity and
heightened expectations of product performance. The Company's meshing technology provides a means to balance these
requirements, obtaining the right mesh for each simulation in the most automated way possible. The technology is built on the
strengths of world-class leading algorithms, that are integrated in a single environment to produce the most robust and reliable
meshing available.
Academic
The Company's academic product suite provides a highly scalable portfolio of academic products based on several usage tiers:
associate, research and teaching. Each tier includes various noncommercial products that bundle a broad range of physics and
advanced coupled field solver capabilities. The academic product suite provides entry-level tools intended for class
demonstrations and hands-on instruction. It provides flexible terms of use and more complex analysis suitable for doctoral and
post-doctoral research projects. The Company also provides a low-cost, problem-size-limited product suitable for student use
at home.
PRODUCT DEVELOPMENT
The Company makes significant investments in research and development and emphasizes accelerated new integrated product
releases. The Company's product development strategy centers on ongoing development and innovation of new technologies to
increase productivity and to provide engineering simulation solutions that customers can integrate into enterprise-wide product
lifecycle management systems. The Company's product development efforts focus on extensions of the full product line with
new functional modules, further integration with CAD, electronic CAD (“ECAD”), product lifecycle management (“PLM”)
products and the development of new products. The Company's products run on the most widely used engineering computing
platforms and operating systems, including Windows, Linux and most UNIX workstations.
During 2012, the Company completed the following major product development activities and releases:
• The release of version 14.5 of ANSYS software, which delivers many new and critical multiphysics solutions,
enhancements to pre-processing and meshing capabilities, a groundbreaking Chip-Package-System solution, as well as
a new parametric HPC licensing model to make design exploration more scalable. The new HPC Parametric Pack
amplifies the available licenses for individual applications (pre-processing, meshing, solve, HPC, post-processing),
enabling simultaneous execution of multiple design points while consuming just one set of application licenses. With
the integration of ANSYS TGrid™ functionalities in the ANSYS Fluent® environment, users of the new release can
create higher-fidelity simulation results faster. The release introduces extended fluid-thermal capabilities, such as two-
way coupling between fluid simulation and electromagnetic field simulation. The ANSYS Workbench platform
supports the efficient coupling of multiple physics models and, when paired with this new feature, users can quickly
and accurately predict losses and understand the effects of temperature on material performance in electromechanical
devices such as motors and transformers. With the integration of Esterel's SCADE Suite with ANSYS Simplorer® in
version 14.5, companies can virtually validate power electronic and mechatronic systems earlier in the design process
by simulating the embedded software with the hardware, including electrical, mechanical and fluidic subsystems. This
capability increases the design fidelity and boosts confidence that products will perform as expected. The release also
further streamlines the design workflow and introduces ANSYS HFSS™ for ECAD.
• The release of ANSYS Academic Student, a new simulation solution derived from ANSYS's successful teaching
software. The simulation functionality built into Academic Student provides access to the same solvers and user
environment in ANSYS's industry products. The inclusion of structural mechanics, rigid-body dynamics, fluid
dynamics and multiphysics solvers addresses the fundamental educational needs of students across many disciplines,
such as mechanical, aerospace, civil, chemical, biomedical engineering and physics. Students with multi-core
processors on their personal computers (up to a quad-core processor) can also benefit from the software's ability to run
the solvers in parallel, allowing for more advanced simulations.
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• The release of Apache's RedHawk™-3DX, which is designed to meet the power, performance and price demands of
low-power mobile, high-performance computing, consumer and automotive electronics. The release improves the
accuracy and coverage of dynamic power analysis by providing enhanced logic-handling capabilities. Its new event-
and state-propagation technologies with vector-based and VectorLess™ modes utilize both the functional stimulus and
statistical probability to determine the switching scenario of the design. The software provides a hierarchical
extraction methodology and a re-architected transient simulation engine, delivering up to 40 percent speed
improvement without sacrificing sign-off accuracy. The software enables the creation of an accurate, low-drop-out
behavioral model for full-chip static and dynamic simulations to help detect and predict excessive load and line
regulations.
The Company's total research and development expenses were $132.6 million, $108.5 million and $89.0 million in 2012, 2011
and 2010, respectively, or 16.6%, 15.7% and 15.3% of total revenue, respectively. As of December 31, 2012, the Company's
product development staff consisted of approximately 900 employees, most of whom hold advanced degrees and have industry
experience in engineering, mathematics, computer science or related disciplines. The Company has traditionally invested
significant resources in research and development activities and intends to continue to make investments in this area,
particularly as it relates to expanding the capabilities of its flagship products and other products within its broad portfolio of
simulation software, evolution of its ANSYS Workbench platform, HPC capabilities, robust design and ongoing integration.
PRODUCT QUALITY
The Company's employees generally perform product development tasks according to predefined quality plans, procedures and
work instructions. Certain technical support tasks are also subject to a quality process. These plans define for each project the
methods to be used, the responsibilities of project participants and the quality objectives to be met. The majority of software
products are developed under a quality system that is certified to the ISO 9001:2008 standard. The Company establishes
quality plans for its products and services, and subjects product designs to multiple levels of testing and verification in
accordance with processes established under the Company's quality system.
SALES AND MARKETING
The Company distributes and supports its products through a global network of independent channel partners, as well as
through its own direct sales offices. This network provides the Company with a cost-effective, highly specialized channel of
distribution and technical support. It also enables the Company to draw on business and technical expertise from a global
network, provides relative stability to the Company's operations to offset geography-specific economic trends and provides the
Company with an opportunity to take advantage of new geographic markets. Approximately 26% in 2012, 26% in 2011 and
27% in 2010 of the Company's total revenue was derived through the indirect sales channel.
The channel partners sell ANSYS products to new customers, expand installations within the existing customer base, offer
training and consulting services, and provide the first line of ANSYS technical support. The Company's channel partner
certification process helps to ensure that each channel partner has the ongoing capability to adequately represent the Company's
expanding product lines and to provide an acceptable level of training, consultation and customer support.
The Company also has a direct sales management organization in place to develop an enterprise-wide, focused sales approach
and to implement a worldwide major account strategy. The sales management organization also functions as a focal point for
requests to ANSYS from the channel partners and provides additional support in strategic locations through the presence of
direct sales offices. A Vice President of Worldwide Sales and Support heads the Company's sales management organization.
During 2012, the Company continued to invest in its existing domestic and international strategic sales offices. In total, the
Company's direct sales offices employ 1,100 employees who are responsible for the sales, technical support, engineering
consulting services, marketing initiatives and administrative activities designed to support the Company's overall revenue
growth and expansion strategies.
The Company's products are utilized by organizations ranging in size from small consulting firms to the world's largest
industrial companies. No single customer accounted for more than 5% of the Company's revenue in 2012, 2011 or 2010.
Information with respect to foreign and domestic revenue may be found in Note 18 to the consolidated financial statements in
Part IV, Item 15 of this Annual Report on Form 10-K and in the section entitled “Management's Discussion and Analysis of
Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report on Form 10-K.
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STRATEGIC ALLIANCES AND MARKETING RELATIONSHIPS
The Company has established and continues to pursue strategic alliances with advanced technology suppliers, and marketing
relationships with hardware vendors, specialized application developers, and CAD, ECAD and PLM providers. The Company
believes that these relationships facilitate accelerated incorporation of advanced technology into the Company's products,
provide access to new customers, expand the Company's sales channels, develop specialized product applications and provide
direct integration with leading CAD, electronic design automation (“EDA”), product data management and PLM systems.
The Company has technical and marketing relationships with leading CAD vendors, such as Autodesk, Dassault Systèmes,
Parametric Technology Corporation and Siemens Product Lifecycle Management Software Inc., to provide direct links between
products. These links facilitate the transfer of electronic data models between the CAD systems and ANSYS products.
Similarly, the Company maintains marketing and software development relationships with leading EDA software companies,
including Cadence, Synopsys, Mentor Graphics, Zuken and Agilent. These relationships support transfer of data between
electronics design and layout packages and the ANSYS electronics simulation portfolio.
The Company has established relationships with leading suppliers of computer hardware, including Intel, AMD, Microsoft,
NVIDIA, Hewlett-Packard, IBM, Dell, Cray, Mellanox and other leading regional resellers and system integrators. These
relationships provide the Company with joint marketing opportunities, such as advertising, public relations, editorial coverage
and customer events. In addition, these alliances provide the Company with early access and technical collaboration on new
and emerging computing technologies, ensuring that the Company's software products are certified to run effectively on the
most current hardware platforms. Important 2012 milestones included expanded support for NVIDIA General-Purpose
Graphical Processing Units, work with Intel on the Xeon Phi many-core processor and demonstration of extreme parallel
scaling in conjunction with Cray.
The Company's Enhanced Solution Partner Program actively encourages specialized developers of software solutions to use the
Company's technology as a development platform for their applications and provides customers with enhanced functionality
related to their use of the Company's software. With over 100 active enhanced solution partnerships, spanning a wide range of
technologies, including electronics, mechanical simulation, fluid simulation, acoustics, turbomachinery and CAD, this partner
ecosystem extends the depth and breadth of the Company's technology offerings.
The Company has a software license agreement with Livermore Software Technology Corporation (“LSTC”) whereby LSTC
has provided LS-DYNA software for explicit dynamics solutions used in applications such as crash test simulations in
automotive and other industries. Under this arrangement, LSTC assists in the integration of the LS-DYNA software with the
Company's pre- and post-processing capabilities and provides updates and problem resolution in return for royalties from sales
of the ANSYS/LS-DYNA combined product.
An improved framework and streamlined workflow for composites modeling was introduced in 2012, leveraging a software
license agreement between the Company and Evolutionary Engineering AG, introducing the ability to efficiently create 3-D
layered composites from complex geometry and combine them with non-composite parts in global assemblies.
The Company has a software license agreement with SpaceClaim Corporation ("SpaceClaim") that provides direct modeling
geometry creation and editing capability through the ANSYS SpaceClaim Direct Modeler application, leveraging the open
architecture of the ANSYS platform. SpaceClaim is bundled with a variety of ANSYS products in order to encourage adoption
of engineering simulation by engineers involved with early concept phase design work, where simulation can deliver low-cost,
high-impact system optimization, upstream of building the first physical prototype.
The Company also has a software license agreement with HBM that provides the advanced fatigue capabilities of nCode
DesignLife™, a leading durability software from HBM. ANSYS® nCode DesignLife™ technology leverages the open
architecture of the ANSYS platform and enables mechanical engineers to more easily address complex product life and
durability issues, all before a prototype is ever built.
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COMPETITION
The Company believes that the principal factors affecting sales of its software include ease of use, breadth and depth of
functionality, flexibility, quality, ease of integration with other software systems, file compatibility across computer platforms,
range of supported computer platforms, performance, price and total cost of ownership, customer service and support, company
reputation and financial viability, and effectiveness of sales and marketing efforts.
The Company continues to experience competition across all markets for its products and services. Some of the Company's
current and possible future competitors have greater financial, technical, marketing and other resources than the Company, and
some have well established relationships with current and potential customers of the Company. The Company's current and
possible future competitors also include firms that have or may in the future elect to compete by means of open source
licensing. These competitive pressures may result in decreased sales volumes, price reductions and/or increased operating
costs, and could result in lower revenues, margins and net income.
PROPRIETARY RIGHTS AND LICENSES
The Company regards its software as proprietary and relies on a combination of trade secret, copyright, patent and trademark
laws, license agreements, nondisclosure and other contractual provisions, and technical measures to protect its proprietary
rights in its products. The Company distributes its software products under software license agreements that grant customers
nonexclusive licenses, which are typically nontransferable, for the use of the Company's products. License agreements for the
Company's products are directly between the Company and end-users. Use of the licensed software product is restricted to
specified sites unless the customer obtains a multi-site license for its use of the software product. Software security measures
are also employed to prevent unauthorized use of the Company's software products and the licensed software is subject to terms
and conditions prohibiting unauthorized reproduction. Customers may purchase a perpetual license of the technology with the
right to annually purchase ongoing maintenance, technical support and upgrades, or may lease the product on a fixed-term basis
for a fee that includes the license, maintenance, technical support and upgrades.
The Company licenses its software products utilizing a combination of web-based and hard copy license terms and forms. For
certain software products, the Company primarily relies on "click-wrapped" licenses. The enforceability of these types of
agreements under the laws of some jurisdictions is uncertain.
The Company also seeks to protect the source code of its software as a trade secret and as unpublished copyrighted work. The
Company has obtained federal trademark registration protection for ANSYS and other marks in the U.S. and in foreign
countries. Additionally, the Company was awarded numerous patents by the U.S. Patent and Trademark Office, and has a
number of patent applications pending. The Company does not always choose to seek patent protection for its intellectual
property, as the process of obtaining patent protection is expensive and time consuming. As a result, the Company primarily
relies on the protection of its source code as a trade secret.
Employees of the Company have signed agreements under which they have agreed not to disclose trade secrets or confidential
information and, where legally permitted, that restrict engagement in or connection with any business that is competitive with
the Company anywhere in the world while employed by the Company (and, in some cases, for specified periods thereafter),
and that any products or technology created by them during their term of employment are the property of the Company. In
addition, the Company requires all channel partners to enter into agreements not to disclose the Company's trade secrets and
other proprietary information.
Despite these precautions, there can be no assurance that misappropriation of the Company's technology and proprietary
information (including source code) will not occur. Further, there can be no assurance that copyright, trademark, patent and
trade secret protection will be available for the Company's products in certain jurisdictions, or that restrictions on the ability of
employees and channel partners to engage in activities competitive with the Company will be enforceable. Costly and time-
consuming litigation could be necessary in the future to enforce the Company's rights to its trade secrets and proprietary
information or to enforce its patent rights and copyrights, and it is possible that in the future the Company's competitors may be
able to obtain the Company's trade secrets or to independently develop unpatented technology similar to the Company's.
The software development industry is characterized by rapid technological change. Therefore, the Company believes that
factors such as the technological and creative skills of its personnel, new product developments, frequent product
enhancements, name recognition and reliable product maintenance are also important to establishing and maintaining
technology leadership in addition to the various legal protections of its technology that may be available.
The Company does not believe that any of its products infringe upon the proprietary rights of third parties. There can be no
assurance, however, that third parties will not claim such infringement by the Company or its licensors or licensees with respect
to current or future products. The Company expects that software suppliers will increasingly be subject to the risk of such
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claims as the number of products and suppliers continues to expand and the functionality of products continues to increase.
Any such claims, with or without merit, could be time consuming, result in costly litigation, cause product shipment delays or
require the Company to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not
be available on terms acceptable to the Company.
SEASONAL VARIATIONS
The Company's business has experienced seasonality, including quarterly reductions in software sales resulting from the
slowdown during the summer months, particularly in Europe, as well as from the seasonal purchasing and budgeting patterns of
the Company's global customers. The Company's revenue is typically highest in the fourth quarter.
BACKLOG
The Company had a backlog of $55.2 million and $56.3 million of orders received but not invoiced as of December 31, 2012
and 2011, respectively.
EMPLOYEES
As of December 31, 2012, the Company and its subsidiaries had approximately 2,400 employees. At that date, there were also
contract personnel and co-op students providing ongoing development services and technical support. Certain employees of the
Company are subject to collective bargaining agreements and have local work councils. The Company believes that its
relationship with its employees is good.
AVAILABLE INFORMATION
The Company's website is www.ansys.com. The Company makes available on its website, free of charge, Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, interactive data files, Current Reports on Form 8-K, reports filed pursuant to
Section 16 and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended, as soon as reasonably practicable after such materials are electronically filed or furnished to the
Securities and Exchange Commission ("SEC"). The Company's reports may also be obtained by accessing the EDGAR
database of the SEC's website at www.sec.gov. In addition, the Company has posted the charters for its Audit Committee,
Compensation Committee, Nominating and Corporate Governance Committee, and Strategy Committee, as well as the
Company's Code of Business Conduct and Ethics, Standard Business Practices and Corporate Governance Guidelines on its
website. Information posted on the Company's website is not incorporated by reference in this Annual Report on Form 10-K.
ITEM 1A. RISK FACTORS
Information provided by the Company or its spokespersons, including information contained in this Annual Report on Form
10-K, may from time to time contain forward-looking statements concerning projected financial performance, market and
industry sector growth, product development and commercialization or other aspects of future operations. Such statements will
be based on the assumptions and expectations of the Company's management at the time such statements are made. The
Company cautions investors that its performance (and, therefore, any forward-looking statement) is subject to risks and
uncertainties. Various important factors including, but not limited to, the following may cause the Company's future results to
differ materially from those projected in any forward-looking statement.
Global Economic Conditions. The financial markets in certain geographies continue to experience disruption, including,
among other things, volatility in securities prices, diminished liquidity and credit availability, ratings downgrades of certain
investments, declining valuations of others and uncertainty regarding governmental fiscal policies. These economic conditions
may negatively impact the Company as some of its customers defer purchasing decisions, thereby lengthening the Company's
sales cycles. In addition, certain of the Company's customers' budgets may be constrained and they may be unable to purchase
the Company's products at the same level. The Company's customers' ability to pay for the Company's products and services
may also be impaired, which may lead to an increase in the Company's allowance for doubtful accounts and write-offs of
accounts receivable. The Company is unable to predict the likely duration and severity of the current economic conditions.
Should these economic conditions result in the Company not meeting its revenue growth objectives, the Company's operating
results, cash flows and financial condition could be adversely affected.
Decline in Customers' Business. The Company's sales are based significantly on end-user demand for products in key
industrial sectors. Many of these sectors periodically experience economic declines, which may be exacerbated by other
economic factors, including the recent global economic conditions. These factors may adversely affect the Company's business
by extending sales cycles and reducing revenue. These economic factors may cause the Company's customers to reduce the
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size of their workforce or cut back on operations and may lead to a reduction in license renewals or ongoing maintenance
contracts with the Company. The Company's customers may also request discounts or extended payment terms on new
products or seek to extend payment terms on existing contracts, all of which may cause fluctuations in the Company's future
operating results. The Company may not be able to adjust its operating expenses to offset such fluctuations because a
substantial portion of the Company's operating expenses is related to personnel, facilities and marketing programs. The level of
personnel and related expenses may not be able to be adjusted quickly and is based, in significant part, on the Company's
expectation for future revenue.
Risks Associated with International Activities. A majority of the Company's business comes from outside the United States and
the Company has customers that supply a wide spectrum of goods and services in virtually all of the world's major economic
regions. As the Company continues to expand its sales presence in international regions, the portion of its revenue, expenses,
cash, accounts receivable and payment obligations denominated in foreign currencies continues to increase. The Company's
revenues and operating results are adversely affected when the U.S. Dollar strengthens relative to other currencies and are
positively affected when the U.S. Dollar weakens. As a result, changes in currency exchange rates will affect the Company's
financial position, results of operations and cash flows. In the event that there are economic declines in countries in which the
Company conducts transactions, the resulting changes in currency exchange rates may affect the Company's financial position,
results of operations and cash flows. The Company is most impacted by movements in and among the Euro, British Pound,
Japanese Yen, Indian Rupee, Korean Won and the U.S. Dollar. The Company seeks to reduce these risks primarily through its
normal operating and treasury activities, but there can be no assurance that it will be successful in reducing these risks.
Additional risks inherent in the Company's international business activities include imposition of government controls; export
license requirements; restrictions on the export of critical technology, products and services; political and economic instability;
trade restrictions; changes in tariffs and taxes; difficulties in staffing and managing international operations; longer accounts
receivable payment cycles; and the burdens of complying with a wide variety of foreign laws and regulations. Effective patent,
copyright, trademark and trade secret protection may not be available in every foreign country in which the Company sells its
products and services. The Company's business, financial position, results of operations and cash flows could be materially,
adversely affected by any of these risks.
Stock Market and Stock Price Volatility. Market prices for securities of software companies have generally been volatile. In
particular, the market price of the Company's common stock has been, and may continue to be, subject to significant
fluctuations as a result of factors affecting the Company, the software industry or the securities markets in general. Such factors
include, but are not limited to, declines in trading price that may be triggered by the Company's failure to meet the expectations
of securities analysts and investors. Moreover, the trading price could be subject to additional fluctuations in response to
quarter-to-quarter variations in the Company's operating results, material announcements made by the Company or its
competitors, conditions in the financial markets or the software industry generally or other events and factors, many of which
are beyond the Company's control.
Rapidly Changing Technology; New Products; Risk of Product Defects. The Company operates in an industry generally
characterized by rapidly changing technology and frequent new product introductions, which can render existing products
obsolete or unmarketable. A major factor in the Company's future success will be its ability to anticipate technological changes
and to develop and introduce, in a timely manner, enhancements to its existing products, products acquired in acquisitions and
new products to meet those changes. If the Company is unable to introduce new products and to respond quickly to industry
changes, its business, financial position, results of operations and cash flows could be materially, adversely affected.
The introduction and marketing of new or enhanced products require the Company to manage the transition from existing
products in order to minimize disruption in customer purchasing patterns. There can be no assurance that the Company will be
successful in developing and marketing, on a timely basis, new products or product enhancements, that its new products will
adequately address the changing needs of the marketplace or that it will successfully manage the transition from existing
products. Software products as complex as those offered by the Company may contain undetected errors or failures when first
introduced, or as new versions are released, and the likelihood of errors is increased as a result of the Company's commitment
to the frequency of its product releases. There can be no assurance that errors will not be found in any new or enhanced
products after commencement of commercial shipments. Certain products require a higher level of sales and support expertise.
The ability of the Company's sales channel, particularly the indirect channel, to obtain this expertise and to sell the new product
offerings effectively could have an adverse impact on the Company's sales in future periods. Any of these problems may result
in the loss of or delay in customer acceptance, diversion of development resources, damage to the Company's reputation, or
increased service and warranty costs, any of which could have a material, adverse effect on the Company's business, financial
position, results of operations and cash flows.
Product Quality. The Company has separate quality systems and registrations under the ISO 9001:2008 standard, in addition to
other governmental and industrial regulations. The Company’s continued compliance with quality standards and favorable
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outcomes in periodic examinations is important to retain current customers and vital to procure new sales. If the Company was
determined not to be compliant with various regulatory or ISO 9001/9000 standards, its certificates of registration could be
suspended, requiring remedial action and a time-consuming re-registration process. The Company’s reputation may become
diminished, resulting in a material, adverse impact on revenue, operating margins, net income, financial position and cash
flows.
Competition. The Company continues to experience competition across all markets for its products and services. Some of the
Company's current and possible future competitors have greater financial, technical, marketing and other resources than the
Company, and some have well established relationships with current and potential customers of the Company. The Company's
current and possible future competitors also include firms that have or may in the future elect to compete by means of open
source licensing. These competitive pressures may result in decreased sales volumes, price reductions and/or increased
operating costs, and could result in lower revenues, margins and net income.
Changes in the Company's Pricing Models. The intense competition the Company faces in the sales of its products and
services, and general economic and business conditions, can put pressure on the Company to adjust its prices. If the Company's
competitors offer deep discounts on certain products or services, or develop products that the marketplace considers more
valuable, the Company may need to lower prices or offer other favorable terms in order to compete successfully. Any such
changes may reduce operating margins and could adversely affect operating results. The Company's software license updates
and product support fees are generally priced as a percentage of its new software license fees. The Company's competitors may
offer lower percentage pricing on product updates and support that could put pressure on the Company to further discount its
new license prices.
Any broad-based change to the Company's prices and pricing policies could cause new software license and service revenues to
decline or be delayed as its sales force implements and its customers adjust to the new pricing policies. Some of the Company's
competitors may bundle software products for promotional purposes or as a long-term pricing strategy or provide guarantees of
prices and product implementations. These practices could, over time, significantly constrain the prices that the Company can
charge for certain of its products. If the Company does not adapt its pricing models to reflect changes in customer use of its
products or changes in customer demand, the Company's new software license revenues could decrease. Additionally, increased
distribution of applications through application service providers, including software-as-a-service providers, may reduce the
average price for the Company's products or adversely affect other sales of the Company's products, reducing new software
license revenues unless the Company can offset price reductions with volume increases. The increase in open source software
distribution may also cause the Company to adjust its pricing models.
Dependence on Senior Management and Key Technical Personnel. The Company's success depends upon the continued
services of the Company's senior executives, key technical employees and other employees. Each of the Company's executive
officers, key technical personnel and other employees could terminate his or her relationship with the Company at any time.
The loss of any of the Company's senior executives might significantly delay or prevent the achievement of the Company's
business objectives and could materially harm the Company's business and customer relationships.
In addition, because of the highly technical nature of the Company's products, the Company must attract and retain highly
skilled engineering and development personnel, many of whom are recruited from outside of the United States. The market for
this talent is highly competitive. The Company is limited in its ability to recruit internationally by restrictive domestic
immigration laws. If the Company has less success in recruiting and retaining key personnel, the Company's business,
reputation and operating results could be materially and adversely affected.
Dependence on Proprietary Technology. The Company's success is highly dependent upon its proprietary technology. The
Company generally relies on contracts and the laws of copyright, patents, trademarks and trade secrets to protect its technology.
The Company maintains a trade secrets program, enters into confidentiality agreements with its employees and channel
partners, and limits access to and distribution of its software, documentation and other proprietary information. There can be no
assurance that the steps taken by the Company to protect its proprietary technology will be adequate to prevent
misappropriation of its technology by third parties, or that third parties will not be able to develop similar technology
independently. Costly and time-consuming litigation could be necessary to enforce and determine the scope of trade secret
rights and related confidentiality and nondisclosure provisions. Although the Company is not aware that any of its technology
infringes upon the rights of third parties, there can be no assurance that other parties will not assert technology infringement
claims against the Company or that, if asserted, such claims will not prevail.
Risks associated with security of our products, source code and IT systems. We make significant efforts to maintain the
security and integrity of our products, source code and computer systems and data. Despite significant efforts to create security
barriers to such programs, it is virtually impossible for us to entirely mitigate this risk. There appears to be an increasing
number of computer “hackers” developing and deploying a variety of destructive software programs (such as viruses, worms,
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and the like) that could attack our products and computer systems. Like all software products, our software is vulnerable to
such attacks. The impact of such an attack could disrupt the proper functioning of our software products, cause errors in the
output of our customers' work, allow unauthorized access to sensitive, proprietary or confidential information of ours or our
customers and other destructive outcomes. If this were to occur, our reputation may suffer, customers may stop buying our
products, we could face lawsuits and potential liability and our financial performance could be negatively impacted.
There is also a danger of industrial espionage, cyber-attacks, misuse, or theft of information or assets (including source code),
or damage to assets by people who have gained unauthorized access to our facilities, systems, or information. Such
cybersecurity breaches, misuse, or other disruptions could lead to the disclosure of portions of our product source code or other
confidential information, improper usage and distribution of our products without compensation, illegal usage of our products
jeopardize the security of information stored in and transmitted through our computer systems, theft, manipulation and
destruction of private and proprietary data, defective products and production downtimes. Although we actively employ
measures to combat unlicensed copying, access and use of software and intellectual property through a variety of techniques,
preventing unauthorized use or infringement of our rights is inherently difficult. These events could adversely affect our
financial results or could result in significant claims for damages against us, and participating in lawsuits to protect against any
such unauthorized access to, usage of or disclosure of any of our products or any portion of our product source code, or in
prosecutions in connection with any such cybersecurity breach, could be costly and time-consuming and may divert
management's attention and adversely affect the market's perception of us and our products.
Policing the unauthorized distribution and use of our products is difficult, and software piracy (including online piracy) is a
persistent problem. Although we actively employ measures to combat unlicensed copying, access and use of software and
intellectual property through a variety of techniques, preventing unauthorized use or infringement of our rights is inherently
difficult. The proliferation of technology designed to circumvent typical software protection measures used in our products,
and the possibility that methods of circumventing the techniques we employ in our products, may lead to an expansion in
piracy or misuse of our products and intellectual property. As a result, and despite our efforts to prevent such activities and to
prosecute instances of such activities, we may nonetheless lose significant revenue due to illegal use of our software, and
management's attention may be diverted to address specific instances of piracy or misuse or address piracy and misuse in
general.
A number of our core processes, such as software development, sales and marketing, customer service and financial
transactions, rely on our IT infrastructure and applications. Malicious software, sabotage and other cybersecurity breaches of
the types discussed above could cause an outage of our infrastructure, which could lead to a substantial denial of service and
ultimately to production downtime, recovery costs, and customer claims. This could have a significant negative impact on our
business, financial position, profit, or cash flows.
We have implemented a number of measures designed to ensure the security of our information, IT resources, and other assets.
Nonetheless, unauthorized users could gain access to our systems through cyber-attacks and steal, use without authorization,
and sabotage our intellectual property and confidential data. Any breach of our IT security, misuse, or theft could lead to loss of
production, to recovery costs, or to litigation brought by employees, customers or business partners, which could have a
significant negative impact on our business, financial position, profit, cash flows and reputation.
Dependence on Channel Partners. The Company continues to distribute a meaningful portion of its products through its global
network of independent, regional channel partners. The channel partners sell the Company's software products to new and
existing customers, expand installations within the existing customer base, offer consulting services and provide the first line of
technical support. Consequently, in certain geographies, the Company is highly dependent upon the efforts of the channel
partners. Difficulties in ongoing relationships with channel partners, such as failure to meet performance criteria or to promote
the Company's products as aggressively as the Company expects, and differences in the handling of customer relationships,
could adversely affect the Company's performance. Additionally, the loss of any major channel partner for any reason,
including a channel partner's decision to sell competing products rather than the Company's products, could have a material,
adverse effect on the Company. Moreover, the Company's future success will depend substantially on the ability and
willingness of its channel partners to continue to dedicate the resources necessary to promote the Company's portfolio of
products and to support a larger installed base of the Company's products. If the channel partners are unable or unwilling to do
so, the Company may be unable to sustain revenue growth.
During times of significant fluctuations in world currencies, certain channel partners may have solvency issues to the extent
that effective hedge transactions are not employed or there is not sufficient working capital. In particular, if the U.S. Dollar
strengthens relative to other currencies, certain channel partners who pay the Company in U.S. Dollars may have trouble
paying the Company on time or may have trouble distributing the Company's products due to the impact of the currency
exchange fluctuation on such channel partner's cash flows. This may impact the Company's ability to distribute its products
into certain regions and markets, and may have an adverse effect on the Company's results of operations and cash flows.
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Reliance on Perpetual Licenses. Although the Company has historically maintained stable recurring revenue from the sale of
software lease licenses and software maintenance subscriptions, it also has relied on sales of perpetual licenses that involve
payment of a single, up-front fee and that are more typical in the computer software industry. While revenue generated from
software lease licenses and software maintenance subscriptions currently represents a portion of the Company's revenue, to the
extent that perpetual license revenue continues to represent a significant percentage of total revenue, the Company's revenue in
any period will depend increasingly on sales completed during that period.
Renewal Rates for Annual Lease and Maintenance Contracts. A substantial portion of the Company's license and
maintenance revenue is derived from annual lease and maintenance contracts. These contracts are generally renewed on an
annual basis and typically have a high rate of customer renewal. In addition to the recurring revenue base associated with these
contracts, a majority of customers purchasing new perpetual licenses also purchase related annual maintenance contracts. If the
rate of renewal for these contracts is adversely affected by economic or other factors, the Company's license and maintenance
growth will be adversely affected over the term that the revenue for those contracts would have otherwise been recognized. As
a result, the Company's business, financial position, results of operations and cash flows may also be adversely impacted during
those periods.
Risks Associated with Acquisitions. Historically, the Company has consummated acquisitions in order to support the
Company's long-term strategic direction, accelerate innovation, provide increased capabilities to its existing products, supply
new products and services, expand its customer base and enhance its distribution channels. In the future, the Company may not
be able to identify suitable acquisition candidates or, if suitable candidates are identified, the Company may not be able to
complete the business combination on commercially acceptable terms. The process of exploring and pursuing acquisition
opportunities may result in devotion of significant management and financial resources.
Even if the Company is able to consummate acquisitions that it believes will be successful, such transactions present many
risks. Significant risks to such acquisitions include, among others: failing to achieve anticipated synergies and revenue
increases; difficulty incorporating and integrating the acquired technologies or products with the Company's existing product
lines; difficulty in coordinating, establishing or expanding sales, distribution and marketing functions, as necessary; disruption
of the Company's ongoing business and diversion of management's attention to transition or integration issues; unanticipated
and unknown liabilities; the loss of key employees, customers, partners and channel partners of the Company or of the acquired
company; and difficulties implementing and maintaining sufficient controls, policies and procedures over the systems, products
and processes of the acquired company. If the Company does not achieve the anticipated benefits of its acquisitions as rapidly
or to the extent anticipated by the Company's management and financial or industry analysts, or if others do not perceive the
same benefits of the acquisition as the Company, there could be a material, adverse effect on the Company's stock price,
business, financial position, results of operations or cash flows.
In addition, for companies acquired, limited experience will exist for several quarters following the acquisition relating to how
the acquired company's sales pipelines will convert into sales or revenues and the conversion rate post-acquisition may be quite
different than the historical conversion rate. Because a substantial portion of the Company's sales are completed in the latter
part of a quarter, and its cost structure is largely fixed in the short-term, revenue shortfalls may have a negative impact on the
Company's profitability. A delay in a small number of large, new software license transactions could cause the Company's
quarterly software license revenues to fall significantly short of its predictions.
Risks Associated with the Esterel Acquisition. On August 1, 2012, the Company completed its acquisition of Esterel, a leading
provider of embedded software simulation and automatic generation of certified code solutions for mission critical applications.
Under the terms of the acquisition agreement, ANSYS acquired 100% of Esterel for a purchase price of $58.2 million, which
included $13.1 million in acquired cash. The acquisition agreement also includes retention provisions for key members of
Esterel's management and employees. The Company funded the transaction entirely with existing cash balances. While the
acquisition of Esterel is expected to accelerate development and delivery of new and innovative products to the marketplace
while lowering design and engineering costs for customers, the Company will need to meet significant challenges to realize the
expected benefits and synergies of the acquisition. These challenges include:
•
Integrating the management teams, strategies, cultures and operations of the two companies.
• Retaining and assimilating the key personnel of each company.
•
Integrating sales and business development operations.
• Retaining existing customers of each company.
• Developing new products and services that utilize the technologies and resources of both companies.
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• Creating uniform standards, controls, procedures, policies and information systems.
• Realizing the anticipated cost savings in the combined company.
• Combining the businesses of the Company and Esterel in a manner that neither materially disrupts Esterel's
existing customer relationships nor otherwise results in decreased revenues and that allows the Company to
capitalize on Esterel's growth opportunities.
The accomplishment of these post-acquisition objectives will involve considerable risks, including:
• The loss of key employees that are critical to the successful integration and future operations of the companies.
• The potential disruption of each company's ongoing business and distraction of their respective management
teams.
• The difficulty of incorporating acquired technology and rights into the Company's products and services.
• Unanticipated expenses related to technology integration.
•
•
Potential disruptions in each company's operations; loss of existing customers; loss of key information, expertise
or know-how; and unanticipated additional recruitment and training costs.
Possible inconsistencies in standards, controls, procedures and policies that could adversely affect the Company's
ability to maintain relationships with customers and employees or to achieve the anticipated benefits of the
acquisition.
•
Potential unknown liabilities associated with the acquisition.
The market price of the Company's common stock may decline as a result of the acquisition for a number of reasons, including:
• The integration of Esterel by the Company may be unsuccessful.
• The Company may not achieve the perceived benefits of the acquisition as rapidly as, or to the extent anticipated
by, financial or industry analysts.
• The effect of the acquisition on the Company's financial results may not be consistent with the expectations of
financial or industry analysts.
If the Company does not succeed in addressing these challenges or any other problems encountered in connection with the
acquisition, its operating results and financial condition could be adversely affected.
Disruption of Operations or Infrastructure Failures. A significant portion of the Company's software development personnel,
source code and computer equipment is located at operating facilities in the United States, Canada, India, Japan and throughout
Europe. The occurrence of a natural disaster or other unforeseen catastrophe at any of these facilities could cause interruptions
in the Company's operations, services and product development activities. Additionally, if the Company experiences problems
that impair its business infrastructure, such as a computer virus, telephone system failure or an intentional disruption of its
information technology systems by a third party, these interruptions could have a material, adverse effect on the Company's
business, financial position, results of operations, cash flows and the ability to meet financial reporting deadlines. Further,
because the Company's sales are not generally linear during any quarterly period, the potential adverse effects resulting from
any of the events described above or any other disruption of the Company's business could be accentuated if it occurs close to
the end of a fiscal quarter.
Sales Forecasts. The Company makes many operational and strategic decisions based upon short- and long-term sales
forecasts. The Company's sales personnel continually monitor the status of all proposals, including the estimated closing date
and the value of the sale, in order to forecast quarterly sales. These forecasts are subject to significant estimation and are
impacted by many external factors, including global economic conditions and the performance of the Company's customers. A
variation in actual sales activity from that forecasted could cause the Company to plan or to budget incorrectly and, therefore,
could adversely affect the Company's business, financial position, results of operations and cash flows. The Company's
management team forecasts macroeconomic trends and developments, and integrates them through long-range planning into
budgets, research and development strategies and a wide variety of general management duties. Global economic conditions,
and the effect those conditions and other disruptions in global markets have on the Company's customers, may have a
significant impact on the accuracy of the Company's sales forecasts. These conditions may increase the likelihood or the
magnitude of variations between actual sales activity and the Company's sales forecasts and, as a result, the Company's
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performance may be hindered because of a failure to properly match corporate strategy with economic conditions. This, in
turn, may adversely affect the Company's business, financial position, results of operations and cash flows.
Risks Associated with Significant Sales to Existing Customers. A significant portion of the Company's sales includes follow-
on sales to existing customers that invest in the Company's broad suite of engineering simulation software and services. If a
significant number of current customers were to become dissatisfied with the Company's products and services, or choose to
license or utilize competitive offerings, the Company's follow-on sales, and recurring lease and maintenance revenues, could be
materially, adversely impacted, resulting in reduced revenue, operating margins, net income and cash flows.
Income Tax Estimates. The Company makes significant estimates in determining its worldwide income tax provision. These
estimates involve complex tax regulations in a number of jurisdictions across the Company's global operations and are subject
to many transactions and calculations in which the ultimate tax outcome is uncertain. The final outcome of tax matters could
be different than the estimates reflected in the historical income tax provision and related accruals. Such differences could have
a material impact on income tax expense and net income in the periods in which such determinations are made.
The amount of income tax paid by the Company is subject to ongoing audits by federal, state and foreign tax authorities. These
audits can often result in additional assessments, including interest and penalties. The Company's estimate for liabilities
associated with uncertain tax positions is highly judgmental and actual future outcomes may result in favorable or unfavorable
adjustments to the Company's estimated tax liabilities, including estimates for uncertain tax positions, in the period the
assessments are made or resolved, audits are closed or when statutes of limitation on potential assessments expire. As a result,
the Company's effective tax rate may fluctuate significantly on a quarterly or annual basis.
The Company allocates a portion of its purchase price to goodwill and intangible assets. Impairment charges associated with
goodwill are generally not tax deductible and will result in an increased effective income tax rate in the period the impairment
is recorded. The Company has recorded significant deferred tax liabilities related to acquired intangible assets that are not
deductible for tax purposes. These deferred tax liabilities are based on future statutory tax rates in the locations in which the
intangible assets are recorded. Any future changes in statutory tax rates would be recorded as an adjustment to the deferred tax
liabilities in the period the change is announced, and could have a material impact on the Company's effective tax rate during
that period.
Periodic Reorganization of Sales Force. The Company relies heavily on its direct sales force. From time to time, the
Company reorganizes and makes adjustments to its sales force in response to such factors as management changes,
performance issues, market opportunities and other considerations. These changes may result in a temporary lack of sales
production and may adversely impact revenue in future quarters. There can be no assurance that the Company will not
restructure its sales force in future periods or that the transition issues associated with such a restructuring will not occur.
Regulatory Compliance. Like all other public companies, the Company is subject to the rules and regulations of the SEC,
including those that require the Company to report on and receive an attestation from its independent registered public
accounting firm regarding the Company's internal control over financial reporting. Compliance with these requirements causes
the Company to incur additional expenses and causes management to divert time from the day-to-day operations of the
Company. While the Company anticipates being able to fully comply with these requirements, if it is not able to comply with
the Sarbanes-Oxley reporting or attestation requirements relating to internal control over financial reporting, the Company may
be subject to sanctions by the SEC or NASDAQ. Such sanctions could divert the attention of the Company's management from
implementing its business plan and could have an adverse effect on the Company's business and results of operations.
As the Company's stock is listed on the NASDAQ Global Select Market, the Company is subject to the ongoing financial and
corporate governance requirements of NASDAQ. While the Company anticipates being able to fully comply with these
requirements, if it is not able to comply, the Company's name may be published on NASDAQ's daily Non-Compliant
Companies list until NASDAQ determines that it has regained compliance or the Company no longer trades on NASDAQ. If
the Company were unable to return to compliance with the governance requirements of NASDAQ, the Company may be
delisted from the NASDAQ Global Select Market, which could have an adverse effect on the market value of the Company's
equity securities and the ability to raise additional capital.
Governmental Revenue Sources. The Company's sales to the United States government must comply with Federal Acquisition
Regulations. Failure to comply with these regulations could result in penalties being assessed against the Company or an order
preventing the Company from making future sales to the United States government. Further, the Company's international
activities must comply with the export control laws of the United States, the Foreign Corrupt Practices Act and a variety of
other laws and regulations of the United States and other countries in which the Company operates. Failure to comply with any
of these laws and regulations could adversely affect the Company's business, financial position, results of operations and cash
flows.
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In certain circumstances, the United States government, state and local governments and their respective agencies, and certain
foreign governments may have the right to terminate contractual arrangements at any time, without cause. The United States,
European Union and certain other government contracts, as well as the Company's state and local level contracts, are subject to
the approval of appropriations or funding authorizations. Certain of these contracts permit the imposition of various civil and
criminal penalties and administrative sanctions, including, but not limited to, termination of contracts, refund of a portion of
fees received, forfeiture of profits, suspension of payments, fines and suspensions or debarment from future government
business, any of which could have an adverse effect on the Company's results of operations and cash flows.
Contingencies. The Company is subject to various investigations, claims and legal proceedings that arise in the ordinary
course of business, including alleged infringement of intellectual property rights, commercial disputes, labor and employment
matters, tax audits and other matters. Each of these matters is subject to various uncertainties, and it is possible that an
unfavorable resolution of one or more of these matters could materially affect the Company's results of operations, cash flows
or financial position.
Changes in Existing Financial Accounting Standards. Changes in existing accounting rules or practices, new accounting
pronouncements, or varying interpretations of current accounting pronouncements could have a significant, adverse effect on the
Company's results of operations or the manner in which the Company conducts its business.
Changes in Tax Law. The Company's operations are subject to income and transaction taxes in the United States and in
multiple foreign jurisdictions. A change in the tax law in the jurisdictions in which the Company does business, including an
increase in tax rates or an adverse change in the treatment of an item of income or expense, could result in a material increase
in tax expense. Currently, a substantial portion of the Company's revenue is generated from customers located outside the
United States, and a substantial portion of assets are located outside the United States. United States income taxes and foreign
withholding taxes have not been provided on undistributed earnings for non-United States subsidiaries to the extent such
earnings are considered to be indefinitely reinvested in the operations of those subsidiaries. Changes in existing taxation rules
or practices, new taxation rules, or varying interpretations of current taxation practices could have a material, adverse effect on
the Company's results of operations or the manner in which the Company conducts its business.
The Company has significant operations in India. There have been court rulings concerning certain Indian tax laws that have
been inconsistent with tax positions taken by the Company and inconsistent with the advice provided to the Company by its tax
advisors.
An Indian subsidiary of the Company received a formal inquiry after a service tax audit. The service tax issues raised in the
Company’s notice are very similar to the case, M/s Microsoft Corporation (I) (P) Ltd. Vs Commissions of Service Tax, currently
being appealed to the Delhi Customs, Excise and Service Tax Appellate Tribunal (CESTAT). If the ruling is in favor of
Microsoft, the Company expects a similar outcome for its audit case. If the ruling is unfavorable in the case of Microsoft, the
Company could incur tax charges and related liabilities, including those related to the service tax audit case, of $6 million. Of
the two judicial members assigned to the Microsoft appeal, one member has ruled in favor of Microsoft and one has ruled in
favor of the Commission. A third deciding judge will be appointed for a final decision. The Company can provide no
assurances as to the outcome of the Microsoft appeal or to the impact of the Microsoft appeal on the Company’s audit case. The
Company is uncertain as to when the service tax audit will be completed.
Other court cases are pending in India that could have a material impact on the Company's financial position, results of
operations or cash flows if the ultimate outcome of those cases is similarly inconsistent with tax positions taken by the
Company.
ITEM 1B. UNRESOLVED STAFF COMMENTS
The Company has received no written comments regarding our periodic or current reports from the staff of the SEC that were
issued 180 days or more preceding the end of our fiscal year 2012 and that remain unresolved.
ITEM 2.
PROPERTIES
The Company's executive offices and those related to certain domestic product development, marketing, production and
administration are located in a 107,000 square foot office facility in Canonsburg, Pennsylvania. Total required minimum
payments under the operating lease will be $1.4 million per annum from January 1, 2013 through December 31, 2014.
On September 14, 2012, the Company entered into a lease agreement for 186,000 square feet of rentable space to be located in
a to-be-built office facility in Canonsburg, Pennsylvania, which will serve as the Company's new headquarters. The lease was
effective as of September 14, 2012, but because the leased premises are to-be-built, the Company will not be obligated to pay
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rent until January 1, 2015 (the “Commencement Date”). The term of the lease is 183 months, beginning on the Commencement
Date. Absent the exercise of options in the lease for additional rentable space or early lease termination, the Company's base
rent will be $4.3 million per annum for the first five years of the lease term, $4.5 million per annum for years six through ten
and $4.7 million for years eleven through fifteen.
As part of the acquisition of Apache on August 1, 2011, the Company acquired certain leased office property, including
executive offices, which comprise a 52,000 square foot office facility in San Jose, California. In June 2012, the Company
entered into a new lease for this property, with the lease term commencing July 1, 2012 and ending June 30, 2022. Total
remaining minimum payments under the operating lease as of December 31, 2012 are $9.2 million, of which $0.9 million will
be paid in 2013.
The Company also leases certain office property, including executive offices, which comprise a 28,000 square foot office
facility in Pittsburgh, Pennsylvania. In August 2009, the Company extended the executive office space lease agreement for this
property for a period of three years and ten months, commencing February 15, 2011 and expiring December 31, 2014. Total
required minimum payments under the operating lease will be $570,000 per annum from January 1, 2013 through December
31, 2014.
The Company owns certain office property, including executive offices, which comprise a 94,000 square foot office facility in
Lebanon, New Hampshire. In May 2012, the Company acquired a 60,000 square foot office building adjacent to its Canonsburg
headquarters, which will serve primarily as a data center and customer training space. In addition, the Company owns a 60,000
square foot facility in Pune, India, which supports worldwide product development, marketing and sales activities.
The Company and its subsidiaries also lease office space in various locations throughout the world. The Company owns
substantially all equipment used in its facilities. Management believes that, in most geographic locations, its facilities allow for
sufficient space to support present and future foreseeable needs, including such expansion and growth as the business may
require. In other geographic locations, the Company expects that it will be required to expand capacity beyond that which it
currently owns or leases.
In the opinion of management, the Company's properties and its equipment are in good operating condition and are adequate
for the Company's current needs. The Company does not anticipate difficulty in renewing existing leases as they expire or in
finding alternative facilities.
ITEM 3.
LEGAL PROCEEDINGS
The Company is subject to various investigations, claims and legal proceedings that arise in the ordinary course of business,
including alleged infringement of intellectual property rights, commercial disputes, labor and employment matters, tax audits
and other matters. In the opinion of the Company, the resolution of pending matters is not expected to have a material, adverse
effect on the Company's consolidated results of operations, cash flows or financial position. However, each of these matters is
subject to various uncertainties and it is possible that an unfavorable resolution of one or more of these proceedings could in the
future materially affect the Company's results of operations, cash flows or financial position.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
The Company's common stock trades on the NASDAQ Global Select Market tier of the NASDAQ Stock Market under the
symbol: “ANSS.” The following table sets forth the low and high sale price of the Company's common stock in each of the
Company's last eight fiscal quarters.
December 31
September 30
June 30
March 31
Fiscal Quarter Ended 2012
Fiscal Quarter Ended 2011
Low Sale
Price
High Sale
Price
Low Sale
Price
High Sale
Price
$
$
$
$
63.22
55.45
59.28
55.21
$
$
$
$
73.51
74.37
69.34
66.56
$
$
$
$
45.96
45.72
51.22
49.71
$
$
$
$
62.30
57.15
57.50
56.86
On February 8, 2013, there were 214 stockholders of record and 75,265 beneficial holders of the Company’s common stock.
The Company has not paid cash dividends on its common stock as it has retained earnings for use in its business. The Company
reviews its policy with respect to the payment of dividends from time to time; however, there can be no assurance that any
dividends will be paid in the future.
18
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Performance Graph
Set forth below is a line graph comparing the yearly percentage change in the cumulative total stockholder return on the
Company's common stock, based on the market price of the Company's common stock, with the total return of companies
included within the Russell 1000 Index, the NASDAQ Composite Stock Market Index and an industry peer group of four
companies (Autodesk, Inc., Parametric Technology Corporation, Cadence Design Systems, Inc. and Synopsys, Inc.) selected by
the Company pursuant to Item 201(e) of Regulation S-K, for the period commencing January 1, 2008 and ending December 31,
2012. The calculation of total cumulative returns assumes a $100 investment in the Company's common stock, the Russell
1000 Index, the NASDAQ Composite Stock Market Index and the Peer Group on January 1, 2008, and the reinvestment of all
dividends, and accounts for all stock splits. The historical information set forth below is not necessarily indicative of future
performance.
ASSUMES $100 INVESTED ON JANUARY 1, 2008
ASSUMES DIVIDENDS REINVESTED
FIVE FISCAL YEARS ENDING DECEMBER 31, 2012
19
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Equity Compensation Plan Information as of December 31, 2012
Plan Category
Equity Compensation Plans Approved by Security
Holders
1996 Stock Option and Grant Plan
Ansoft Corporation 2006 Stock Incentive Plan
Apache Design Solutions, Inc. 2001 Stock/Option
Issuance Plan
1996 Employee Stock Purchase Plan
Equity Compensation Plans Not Approved by Security
Holders
None
Total
(a)
(b)
(c)
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(excluding securities
reflected in column
(a))
6,790,421
612,684
306,217
$
$
$
40.80
36.43
19.16
(1)
(2)
4,924,794
—
—
366,615
7,709,322
5,291,409
(1) The number of shares issuable with respect to the current offering period is not determinable until the end of the period.
(2) The per share purchase price of shares issuable with respect to the current offering period is not determinable until the
end of the offering period.
Unregistered Sale of Equity Securities and Use of Proceeds
None.
Issuer Purchases of Equity Securities
Period
October 1 - October 31, 2012
November 1 - November 30, 2012
December 1 - December 31, 2012
Total
Total Number of
Shares Purchased
—
500,000
—
500,000
$
$
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Average Price
Paid per Share
—
67.77
—
67.77
—
500,000
—
500,000
Maximum
Number of Shares
that May Yet Be
Purchased Under
Plans or Programs
2,000,000
1,500,000
1,500,000
1,500,000
20
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ITEM 6.
SELECTED FINANCIAL DATA
The following table sets forth selected financial data as of and for the last five years. This selected financial data should be read
in conjunction with the consolidated financial statements and related notes included in Part IV, Item 15 of this Annual Report
on Form 10-K. The results of acquired companies have been included in the consolidated financial statements since their
respective dates of acquisition.
(in thousands, except per share data)
Total revenue
Operating income
Net income
Earnings per share – basic
Weighted average shares – basic
Earnings per share – diluted
Weighted average shares – diluted
Total assets
Working capital
Long-term liabilities
Stockholders’ equity
Cash provided by operating activities
$
$
$
$
$
$
$
$
2012
798,018
294,253
203,483
2.20
92,622
2.14
94,954
2,607,417
435,972
189,739
1,940,291
298,415
Year Ended December 31,
$
$
$
$
2011
691,449
265,559
180,675
1.96
92,120
1.91
94,381
2,448,470
301,282
255,246
1,754,473
307,661
$
$
$
$
2010
580,236
219,268
153,132
1.69
90,684
1.64
93,209
2,126,876
403,264
285,578
1,529,929
166,884
$
$
$
$
2009
516,885
183,477
116,391
1.32
88,486
1.27
91,785
1,920,182
248,724
340,785
1,312,631
173,689
2008
478,339
169,731
111,671
1.35
82,975
1.29
86,768
1,864,514
129,489
413,951
1,182,899
196,708
In the table above, the comparability of information among the years presented is impacted by the August 1, 2012 acquisition
of Esterel, the August 1, 2011 acquisition of Apache and the July 31, 2008 acquisition of Ansoft Corporation. For further
information on Esterel and Apache, see the “Acquisitions” section of Management’s Discussion and Analysis in Item 7 and in
Note 3 to the consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
ANSYS, Inc.’s results for the year ended December 31, 2012 reflect growth in revenues of 15.4%, operating income of 10.8%
and diluted earnings per share of 12.0% as compared to the year ended December 31, 2011. The Company experienced higher
revenues in 2012 from growth in both license and maintenance revenue, and from the acquisition of Apache in 2011 and Esterel
in 2012. The 2012 results of operations include the results of Esterel for the period from the date of acquisition (August 1,
2012) through December 31, 2012. The 2012 results of operations include a full year of Apache results, as compared to five
months of activity in 2011. The growth in revenue was adversely impacted by the overall strengthening of the U.S. Dollar
against the Company’s primary foreign currencies. The net overall strengthening of the U.S. Dollar resulted in decreased
revenue and operating income by $15.4 million and $7.4 million, respectively, for the year ended December 31, 2012 as
compared to the year ended December 31, 2011. The growth in revenue was partially offset by increased operating expenses
and additional amortization from intangible assets related to the Apache and Esterel acquisitions.
The Company’s non-GAAP results for the year ended December 31, 2012 reflect increases in revenue of 15.2%, operating
income of 14.9% and diluted earnings per share of 15.0% as compared to the year ended December 31, 2011. The non-GAAP
results exclude the income statement effects of the acquisition accounting adjustment to deferred revenue, stock-based
compensation, acquisition-related amortization of intangible assets and transaction costs related to business combinations. For
further disclosure regarding non-GAAP results, see the section titled “Non-GAAP Results” immediately preceding the section
titled “Liquidity and Capital Resources”.
During the year ended December 31, 2012, the Company repurchased 1.5 million shares of treasury stock for $95.5 million at
an average price of $63.65 per share and had net acquisition-related cash outlays of $45.1 million. The Company's financial
position includes $577.2 million in cash and short-term investments, and working capital of $436.0 million as of December 31,
2012. As of December 31, 2012, remaining outstanding borrowings on the Company's term loan totaled $53.1 million.
ANSYS develops and globally markets engineering simulation software and services widely used by engineers, designers,
researchers and students across a broad spectrum of industries and academia, including aerospace, automotive, manufacturing,
electronics, biomedical, energy and defense. Headquartered south of Pittsburgh, Pennsylvania, the Company and its
subsidiaries employed approximately 2,400 people as of December 31, 2012 and focus 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
suite of simulation technologies through a global network of independent channel partners and direct sales offices in strategic,
global locations. It is the Company’s intention to continue to maintain this hybrid sales and distribution model.
The Company licenses its technology to businesses, educational institutions and governmental agencies. Growth in the
Company’s revenue is affected by the strength of global economies, general business conditions, currency exchange rate
fluctuations, customer budgetary constraints and the competitive position of the Company’s products. Please see the sub-
sections entitled “Global Economic Conditions,” “Decline in Customers’ Business,” “Risks Associated with International
Activities,” “Rapidly Changing Technology; New Products; Risk of Product Defects” and “Competition” under Item 1A. Risk
Factors above for a complete discussion of how these factors might impact the Company’s financial condition and operating
results. The Company believes that the features, functionality and integrated multiphysics capabilities of its software products
are as strong as they have ever been. However, the software business is generally characterized by long sales cycles. These long
sales cycles increase the difficulty of predicting sales for any particular quarter. The Company makes many operational and
strategic decisions based upon short- and long-term sales forecasts that are impacted not only by these long sales cycles but by
current global economic conditions. As a result, the Company believes that its overall performance is best measured by fiscal
year results rather than by quarterly results. Please see the sub-section entitled “Sales Forecasts” under Item 1A. Risk Factors
above for a complete discussion of the potential impact of the Company’s sales forecasts on the Company’s financial condition,
cash flows and operating results.
The Company’s management considers the competition and price pressure that it faces in the short- and long-term by focusing
on expanding the breadth, depth, ease of use and quality of the technologies, features, functionality and integrated multiphysics
capabilities of its software products as compared to its competitors; investing in research and development to develop new and
innovative products and increase the capabilities of its existing products; supplying new products and services; focusing on
customer needs, training, consulting and support; and enhancing its distribution channels. From time to time, the Company also
considers acquisitions to supplement its global engineering talent, product offerings and distribution channels.
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Geographic Trends:
During the year ended December 31, 2012 North America contributed consistent and strong revenue growth. In addition,
despite the ongoing macroeconomic concerns in Europe, the overall sales pipeline, renewal rates and customer engagements
remained intact. Revenue growth for the year was particularly strong in Germany and the United Kingdom when compared to
the prior year. While overall, the Company’s General International Area, which includes all geographies other than North
America and Europe, has continued to show improvement, the Company’s growth in the Japan market has slowed due to the
strength of the Japanese Yen and a general weakness in consumer electronics. Japan is the Company’s second largest market
and, as such, the Company is focused on and has made progress on its Japan organizational recovery plan. China, Korea and
Taiwan were also notable areas of sales strength during the year.
Industry Highlights:
During the year ended December 31, 2012, the Company had growth from a combination of large accounts, multi-nationals,
emerging markets and industry verticals with time-sensitive, complex, multiphysics challenges. The Company’s revenue is
derived from customers in many different industries, with no industry accounting for more than 20% of the Company’s sales.
Although customers from all industries contributed to the 2012 results, there were a few sectors where the activity was more
notable than the others, as explained below.
Automotive
The Company experienced growth in the automotive industry, particularly in North America and its General International Area.
A variety of factors positively affected the automotive sector from a simulation perspective, including rising gas prices and
government regulations. These factors caused, and continue to cause, increased technology development with respect to higher
mileage cars, including suppliers accelerating electric vehicle and hybrid electric vehicle component development. In addition,
customers are making investments in high growth product areas such as wireless connectivity, smart products, systems design,
engine and transmission efficiency improvements, emissions reductions and hydraulics, all of which are areas requiring the
breadth and depth of the Company’s product portfolio.
Aerospace and Defense
Despite uncertainty around the future size of the U.S. Department of Defense budget, aerospace and defense remained strong
across most regions, including North America. Shrinking defense spending, volatile security environments, fuel cost spikes and
increased regulations are driving systems engineering, green product development and operational cost reduction initiatives.
Geopolitical drivers and non-state actors in the Middle East, Eastern Europe and Asia have changed the nature of warfare. This
has led to a significant investment in the development of remote and lower-human-risk intelligence, surveillance and
reconnaissance technologies such as unmanned military satellites and advanced sensors, along with supporting infrastructures.
Commercial space exploration provided opportunities for the Company’s portfolio of solutions. Key areas of investment in both
commercial and military aerospace, including engine and aerodynamic efficiency, the development of bio-fuels, the validation
of design processes for new lightweight materials, the development of electronic systems, noise control technologies and
quality control all require the need for more robust simulation requiring the use of the Company's software.
Electronics and Semiconductors
The Company has seen some recovery in the electronics and semiconductor sectors, with a variety of market trends and
initiatives driving the need for simulation. The exploding global demand for increased functionality, higher reliability and
performance within ever-smaller, more portable devices is placing new demands on designers and is providing ANSYS with
outstanding opportunities for growth well into the future. Engineers designing portable electronic devices like smart phones and
tablets are driving an industry trend to integrate rich digital content with wireless connectivity and extended battery life.
Modern systems integrate Radio Frequency ("RF")/Analog/Digital System on Chip solutions with memory, graphics, storage,
Global System for Mobile Communications radio, Bluetooth, antenna, LCD, camera, MP3 and broadcast FM. Extreme
integration creates new challenges for RF performance, system signal integrity, system-level electromagnetic interference, low
power, and communications reliability. ANSYS's ability to combine multiphysics, circuit and embedded software simulation in
a cohesive software offering is especially tailored to meet the exacting demands of electronic design.
Note About Forward-Looking Statements
The following discussion should be read in conjunction with the audited consolidated financial statements and notes thereto
included elsewhere in this Annual Report on Form 10-K. The Company's discussion and analysis of its financial condition and
results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of these financial
statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates
its estimates, including those related to fair value of stock, bad debts, contract revenue, valuation of goodwill, valuation of
23
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intangible assets, income taxes, and contingencies and litigation. The Company bases its estimates on historical experience,
market experience, estimated future cash flows and on various other assumptions that management believes are reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
This Annual Report on Form 10-K 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, but not limited to, the following statements, as
well as statements that contain such words as “anticipates,” “intends,” “believes,” “plans” and other similar expressions:
• The Company’s expectation that it will continue to make targeted investments in its global sales and marketing
organization and its global business infrastructure to enhance major account sales activities and to support its
worldwide sales distribution and marketing strategies, and the business in general.
• The Company’s intentions related to investments in research and development, particularly as it relates to expanding
the capabilities of its flagship products and other products within its broad portfolio of simulation software, evolution
of its ANSYS® Workbench™ platform, HPC capabilities, robust design and ongoing integration.
• The Company’s plans related to future capital spending.
• The Company’s intentions regarding its hybrid sales and distribution model.
• The sufficiency of existing cash and cash equivalent balances to meet future working capital, capital expenditure and
debt service requirements.
• The Company’s assessment of the ultimate liabilities arising from various investigations, claims and legal proceedings.
• The Company’s statement regarding the competitive position and strength of its software products.
• The Company's assessment of its ability to realize deferred tax assets.
• The Company's expectation that it can renew existing leases as they expire, or find alternative facilities without
difficulty as needed.
• The Company's expectations regarding future claims related to indemnification obligations.
• The Company's estimates regarding expected interest expense on its term loan.
• The Company's statements regarding the impact of global economic conditions.
• The Company’s statement regarding increased exposure to volatility of foreign exchange rates.
• The Company’s intentions related to investments in complementary companies, products, services and technologies.
• The Company’s expectations regarding the impact of the merger of its Japan subsidiaries on future income tax expense
and cash flows from operations.
• The Company’s estimates regarding the expected impact on reported revenue related to the acquisition accounting
treatment of deferred revenue.
• The Company’s estimation that it is probable the key member of Apache’s management will remain an employee of
ANSYS on each of the first three anniversaries of the acquisition closing date.
• The Company’s anticipation that Apache will achieve certain revenue and operating income targets whereby it is
probable that at least a portion of the performance-based restricted stock units will vest and that the recipients will
continue employment through the measurement period.
• The Company’s expectations regarding the accelerated development and delivery of new and innovative products to
the marketplace while lowering design and engineering costs for customers as a result of the Esterel acquisition.
Forward-looking statements should not be unduly relied upon because they involve known and unknown risks, uncertainties
and other factors, some of which are beyond the Company's control. The Company's actual results could differ materially from
those set forth in the forward-looking statements. Certain factors that might cause such a difference include risks and
uncertainties detailed in Item 1A. Risk Factors.
24
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Acquisitions
Esterel Technologies, S.A.
On August 1, 2012, the Company completed its acquisition of Esterel. Under the terms of the acquisition agreement, ANSYS
acquired 100% of Esterel for a purchase price of $58.2 million, which included $13.1 million in acquired cash. The acquisition
agreement also includes retention provisions for key members of Esterel's management and employees, which are accounted
for outside of the business combination. The Company funded the transaction entirely with existing cash balances.
Esterel's software enables software and systems engineers to design, simulate and automatically produce certified embedded
software, which is the control code built into the electronics in aircraft, rail transportation, automotive, energy systems, medical
devices and other industrial products that have central processing units. The complementary combination is expected to
accelerate development of new and innovative products to the marketplace while lowering design and engineering costs for
customers.
The operating results of Esterel have been included in the Company's consolidated financial statements since the date of
acquisition, August 1, 2012. The assets and liabilities of Esterel have been recorded based upon management's estimates of
their fair market values as of the acquisition date. The following tables summarize the fair value of consideration transferred
and the fair values of identified assets acquired and liabilities assumed at the acquisition date:
Fair Value of Consideration Transferred:
(in thousands)
Cash
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
(in thousands)
Cash
Accounts receivable and other tangible assets
Customer relationships (12-year life)
Developed software (10-year life)
Platform trade name (indefinite life)
Accounts payable and other liabilities
Deferred revenue
Net deferred tax liabilities
Total identifiable net assets
Goodwill
Apache Design, Inc.
$
$
$
$
58,150
13,075
4,737
21,421
10,717
2,695
(4,936)
(1,139)
(9,286)
37,284
20,866
On August 1, 2011, the Company completed its acquisition of Apache, a leading simulation software provider for advanced,
low-power solutions in the electronics industry. Under the terms of the merger agreement, ANSYS acquired 100% of the
outstanding shares of Apache for a purchase price of $314.0 million, which included $31.9 million in acquired cash and short-
term investments on Apache’s balance sheet, $3.2 million in ANSYS replacement stock options issued to holders of partially-
vested Apache stock options and $9.5 million in contingent consideration that is based on the retention of a key member of
Apache’s management. The Company funded the transaction entirely with existing cash balances. The operating results of
Apache have been included in the Company’s consolidated financial statements since the date of acquisition, August 1, 2011.
25
Table of Contents
The assets and liabilities of Apache have been recorded based on management’s estimates of their fair market values as of the
acquisition date. The following tables summarize the fair value of consideration transferred and the fair values of identifiable
assets acquired and liabilities assumed at the acquisition date:
Fair Value of Consideration Transferred:
(in thousands)
Cash
Contingent consideration
ANSYS replacement stock options
Total consideration transferred at fair value
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
(in thousands)
Cash and short-term investments
Accounts receivable and other tangible assets
Developed software (7-year life)
Customer relationships (15-year life)
Contract backlog (3-year life)
Platform trade names (indefinite lives)
Apache trade name (6-year life)
Accounts payable and other liabilities
Deferred revenue
Net deferred tax liabilities
Total identifiable net assets
Goodwill
$
$
$
$
$
301,306
9,501
3,170
313,977
31,948
6,011
82,500
36,100
13,500
21,900
2,100
(16,867)
(10,100)
(47,229)
119,863
194,114
In valuing deferred revenue on the Apache and Esterel balance sheets as of their respective acquisition dates, the Company
applied the fair value provisions applicable to the accounting for business combinations. Although this acquisition accounting
requirement had no impact on the Company’s business or cash flow, the Company’s reported revenue under GAAP, primarily
for the first 12 months post-acquisition, will be less than the sum of what would otherwise have been reported by Apache,
Esterel and ANSYS absent the acquisitions. Acquired deferred revenue of $10.1 million and $1.1 million were recorded on the
opening balance sheets of Apache and Esterel, respectively. Collectively, these amounts were $24.6 million lower than their
historical carrying values. The impact on reported revenue for the year ended December 31, 2012 was $9.6 million. The
expected impact on reported revenue is $1.8 million and $4.6 million for the quarter ending March 31, 2013 and the year
ending December 31, 2013, respectively.
26
Table of Contents
Results of Operations
For purposes of the following discussion and analysis, the table below sets forth certain consolidated financial data for the
years 2012, 2011 and 2010. The operating results of Esterel and Apache have been included in the results of operations since
their respective acquisition dates of August 1, 2012 and 2011.
(in thousands)
Revenue:
Software licenses
Maintenance and service
Total revenue
Cost of sales:
Software licenses
Amortization
Maintenance and service
Total cost of sales
Gross profit
Operating expenses:
Selling, general and administrative
Research and development
Amortization
Total operating expenses
Operating income
Interest expense
Interest income
Other expense, net
Income before income tax provision
Income tax provision
Net income
Year Ended December 31,
2012
2011
2010
$
$
501,870
296,148
798,018
$
425,881
265,568
691,449
24,512
40,889
74,115
139,516
658,502
205,178
132,628
26,443
364,249
294,253
(2,661)
3,360
(1,405)
293,547
90,064
203,483
$
15,884
33,728
69,402
119,014
572,435
180,357
108,530
17,989
306,876
265,559
(3,332)
3,000
(369)
264,858
84,183
180,675
$
$
351,033
229,203
580,236
10,770
32,757
57,352
100,879
479,357
155,096
88,990
16,003
260,089
219,268
(4,488)
1,911
(297)
216,394
63,262
153,132
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Table of Contents
Year Ended December 31, 2012 Compared to Year Ended December 31, 2011
Revenue:
(in thousands, except percentages)
Revenue:
Lease licenses
Perpetual licenses
Software licenses
Maintenance
Service
Maintenance and service
Total revenue
Year Ended December 31,
Change
2012
2011
Amount
%
$
279,283
$
218,005
$
222,587
501,870
275,498
20,650
296,148
207,876
425,881
246,546
19,022
265,568
61,278
14,711
75,989
28,952
1,628
30,580
$
798,018
$
691,449
$
106,569
28.1
7.1
17.8
11.7
8.6
11.5
15.4
The Company’s revenue increased 15.4% in 2012 as compared to 2011, including increases in all major revenue categories.
The Company's revenue included Apache operations for the full year in 2012 of $62.0 million as compared to five months in
2011 of $14.5 million. The growth was partially influenced by benefits from the Company’s continued investment in its global
sales and marketing organization. Revenue from lease licenses increased 28.1% as compared to the prior year due to an
increase in Apache-related lease license revenue and growth in sales of other lease licenses. Annual maintenance contracts that
were sold with new perpetual licenses, along with maintenance contracts sold with new perpetual licenses in previous years,
contributed to maintenance revenue growth of 11.7%. Perpetual license revenue, which is derived entirely from new sales
during the period, increased 7.1% as compared to the prior year. Esterel-related revenue for the period from the acquisition
date (August 1, 2012) through December 31, 2012 was $3.3 million. Service revenue increased 8.6% as compared to the prior
year, primarily from increased revenue associated with engineering consulting services.
With respect to revenue, on average for the year ended December 31, 2012, the U.S. Dollar was 3.7% stronger, when measured
against the Company’s primary foreign currencies, than for the year ended December 31, 2011. The net overall strengthening of
the U.S. Dollar resulted in decreased revenue and operating income during 2012, as compared to 2011, of $15.4 million and
$7.4 million, respectively.
A substantial portion of the Company’s license and maintenance revenue is derived from annual lease and maintenance
contracts. These contracts are generally renewed on an annual basis and typically have a high rate of customer renewal. In
addition to the recurring revenue base associated with these contracts, a majority of customers purchasing new perpetual
licenses also purchase related annual maintenance contracts. As a result of the significant recurring revenue base, the
Company’s license and maintenance revenue growth rate in any period does not necessarily correlate to the growth rate of new
license and maintenance contracts sold during that period. To the extent the rate of customer renewal for lease and maintenance
contracts is high, incremental lease contracts, and maintenance contracts sold with new perpetual licenses, will result in license
and maintenance revenue growth. Conversely, if the rate of renewal for these contracts is adversely affected by economic or
other factors, the Company’s license and maintenance growth will be adversely affected over the term that the revenue for those
contracts would have otherwise been recognized.
The Company had a backlog of $55.2 million and $56.3 million of orders received but not invoiced as of December 31, 2012
and 2011, respectively.
International and domestic revenues, as a percentage of total revenue, were 66.7% and 33.3%, respectively, during the year
ended December 31, 2012, and 68.8% and 31.2%, respectively, during the year ended December 31, 2011. The Company
derived 26.0% and 26.4% of its total revenue through the indirect sales channel for the years ended December 31, 2012 and
2011, respectively.
In valuing deferred revenue on the Esterel and Apache balance sheets as of their respective acquisition dates, the Company
applied the fair value provisions applicable to the accounting for business combinations resulting in lower amounts of revenue
than Esterel and Apache would have recognized absent the acquisitions. The impact on reported revenue for the year ended
December 31, 2012 was $9.6 million.
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Table of Contents
Cost of Sales and Gross Profit:
(in thousands, except percentages)
Cost of sales:
Software licenses
Amortization
Maintenance and service
Total cost of sales
Gross profit
Year Ended December 31,
2012
2011
Change
Amount
% of
Revenue
Amount
% of
Revenue
Amount
%
$
24,512
40,889
74,115
139,516
$
658,502
3.1
5.1
9.3
17.5
82.5
$
15,884
33,728
69,402
119,014
$
572,435
2.3
4.9
10.0
17.2
82.8
$
$
8,628
7,161
4,713
20,502
86,067
54.3
21.2
6.8
17.2
15.0
Software Licenses: The increase in software license costs was primarily due to the following:
•
Increased Apache-related costs of $7.3 million, primarily as a result of a full year of Apache activity in 2012 as
compared to five months of activity in 2011.
• A $900,000 increase in stock-based compensation.
• Esterel-related cost of sales of $600,000 for the period from the acquisition (August 1, 2012) through December 31,
2012.
Amortization: The increase in amortization expense was primarily due to the following:
• An additional $9.5 million of amortization of acquired Apache software as a result of a full year of Apache activity in
2012 as compared to five months of activity in 2011.
• A net $2.8 million decrease in amortization of other acquired software, including Esterel.
Maintenance and Service: The increase in maintenance and service costs was primarily due to the following:
•
•
Increased salaries and headcount-related costs of $2.3 million.
Increased depreciation expense of $700,000.
• Esterel-related maintenance and service expenses of $600,000 for the period from the acquisition (August 1, 2012)
through December 31, 2012.
The improvement in gross profit was a result of the increase in revenue offset by a smaller increase in related cost of sales.
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Table of Contents
Operating Expenses:
(in thousands, except percentages)
Operating expenses:
Selling, general and
administrative
Research and development
Amortization
Total operating expenses
Year Ended December 31,
2012
2011
Change
Amount
% of
Revenue
Amount
% of
Revenue
Amount
%
$
205,178
132,628
26,443
25.7
16.6
3.3
$
180,357
108,530
17,989
$
26.1
15.7
2.6
24,821
24,098
8,454
$
364,249
45.6
$
306,876
44.4
$
57,373
13.8
22.2
47.0
18.7
Selling, General and Administrative: The increase in selling, general and administrative costs was primarily due to the
following:
•
•
Increased salaries and headcount-related costs of $9.6 million.
Increased Apache-related expenses of $6.2 million, primarily as a result of a full year of Apache activity in 2012 as
compared to five months of activity in 2011.
• Esterel-related selling, general and administrative expenses of $5.5 million for the period from the acquisition (August
1, 2012) through December 31, 2012.
•
Increased stock-based compensation of $2.8 million.
The Company anticipates that it will continue to make targeted investments in its global sales and marketing organization and
its global business infrastructure to enhance major account sales activities and to support its worldwide sales distribution and
marketing strategies, and the business in general.
Research and Development: The increase in research and development costs was primarily due to the following:
•
•
•
•
Increased Apache-related expenses of $9.2 million, primarily as a result of a full year of Apache activity in 2012 as
compared to five months of activity in 2011.
Increased salaries and headcount-related costs of $6.6 million.
Increased stock-based compensation expense of $5.3 million.
Increased depreciation expense of $1.5 million.
• Esterel-related research and development expenses of $1.4 million for the period from the acquisition (August 1,
2012) through December 31, 2012.
• Decreased incentive compensation of $1.7 million.
The Company has traditionally invested significant resources in research and development activities and intends to continue to
make investments in this area, particularly as it relates to expanding the capabilities of its flagship products and other products
within its broad portfolio of simulation software, evolution of its ANSYS® Workbench™ platform, HPC capabilities, robust
design and ongoing integration.
Amortization: The increase in amortization expense was primarily due to the following:
• An additional $9.1 million of amortization of acquired Apache intangible assets, including customer lists, contract
backlog and a trade name, as a result of a full year of Apache activity in 2012 as compared to five months of activity
in 2011.
• A net $500,000 decrease in amortization of other acquired customer lists, including Esterel.
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Table of Contents
Interest Expense: The Company’s interest expense consists of the following:
(in thousands)
Term loan
Amortization of debt financing costs
Discounted obligations
Other
Total interest expense
Year Ended December 31,
2012
2011
1,342
$
1,605
698
546
75
953
462
312
2,661
$
3,332
$
$
Interest Income: Interest income for the year ended December 31, 2012 was $3.4 million as compared to $3.0 million during
the year ended December 31, 2011. Interest income increased as a result of both an increase in the average cash balances and
the rate of return on those balances.
Other Expense, net: The Company recorded other expense of $1.4 million during the year ended December 31, 2012 as
compared to $369,000 during the year ended December 31, 2011. The activity for both years was primarily composed of net
foreign currency transaction losses on transactions denominated in a currency other than the Company or its subsidiaries'
functional currency.
Income Tax Provision: The Company recorded income tax expense of $90.1 million and had income before income taxes of
$293.5 million for the year ended December 31, 2012, representing an effective tax rate of 30.7%. During the year ended
December 31, 2011, the Company recorded income tax expense of $84.2 million and had income before income taxes of
$264.9 million, representing an effective tax rate of 31.8%.
When compared to the federal and state combined statutory rate, these rates were favorably impacted by lower statutory tax
rates in many of the Company’s foreign jurisdictions, the domestic manufacturing deduction, research and experimentation
credits and tax benefits associated with the merger of the Company’s Japan subsidiaries in 2010. In the U.S., which is the
largest jurisdiction where the Company receives such a tax credit, the availability of the research and development credit
expired at the end of 2011. In January 2013, the U.S. Congress passed legislation that reinstated the research and development
credit retroactive to 2012. These rates were also impacted by charges or benefits associated with the Company’s uncertain tax
positions.
As a result of the 2010 subsidiary merger in Japan, the Company realized a reduction in its 2012 income tax expense of $9.0
million related to tax credits in the U.S. associated with foreign taxes paid in Japan. The Company also expects the 2010 Japan
subsidiary merger to reduce future income tax expense by the following amounts:
Fiscal year 2013
Fiscal year 2014
Fiscal year 2015
Estimated Reduction in
Income Tax Expense
$8.9 - $9.1 million
$8.9 - $9.1 million
$6.7 - $6.9 million
Refer to the section titled, “Liquidity and Capital Resources” for the estimated impact of the Japan subsidiary merger on future
cash flows.
Net Income: The Company’s net income for the year ended December 31, 2012 was $203.5 million as compared to net income
of $180.7 million for the year ended December 31, 2011. Diluted earnings per share was $2.14 for the year ended
December 31, 2012 and $1.91 for the year ended December 31, 2011. The weighted average shares used in computing diluted
earnings per share were 95.0 million and 94.4 million during the years ended December 31, 2012 and 2011, respectively.
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Table of Contents
Year Ended December 31, 2011 Compared to Year Ended December 31, 2010
Revenue:
(in thousands, except percentages)
Revenue:
Lease licenses
Perpetual licenses
Software licenses
Maintenance
Service
Maintenance and service
Total revenue
Year Ended
December 31,
Change
2011
2010
Amount
%
$
$
218,005
207,876
425,881
246,546
19,022
265,568
691,449
$
$
184,539
166,494
351,033
211,465
17,738
229,203
580,236
$
$
33,466
41,382
74,848
35,081
1,284
36,365
111,213
18.1
24.9
21.3
16.6
7.2
15.9
19.2
The Company’s revenue increased 19.2% in 2011 as compared to 2010, including increases in license and maintenance
revenue. This strong growth was partially influenced by a modest improvement in the global economy as compared to the prior
year, including the effects of these economic improvements on year-end spending patterns in certain geographies, benefits from
the Company’s continued investment in its global sales and marketing organization and $14.5 million in revenue related to the
acquisition of Apache for the period from the acquisition date (August 1, 2011) through December 31, 2011. Perpetual license
revenue, which is derived entirely from new sales during the period, increased 24.9% as compared to the prior year. The annual
maintenance contracts that were sold with the new perpetual licenses, along with the renewal of maintenance contracts sold
with perpetual licenses in previous years, contributed to maintenance revenue growth of 16.6%. Revenue from lease licenses
increased 18.1% as compared to the prior year, due to growth in sales of lease licenses and the addition of Apache-related lease
license revenue of $14.0 million. Service revenue increased 7.2% as compared to the prior year.
With respect to revenue, on average for the year ended December 31, 2011, the U.S. Dollar was 5.3% weaker, when measured
against the Company’s primary foreign currencies, than for the year ended December 31, 2010. The net overall weakening
resulted in increased revenue and operating income during 2011, as compared with 2010, of $19.8 million and $12.6 million,
respectively.
International and domestic revenues, as a percentage of total revenue, were 68.8% and 31.2%, respectively, during the year
ended December 31, 2011, and 67.5% and 32.5%, respectively, during the year ended December 31, 2010. The Company
derived 26.4% and 26.7% of its total revenue through the indirect sales channel during the years ended December 31, 2011 and
2010, respectively.
In accordance with the accounting requirements applicable to deferred revenue acquired in a business combination, acquired
deferred revenue was recorded on the Apache opening balance sheet at an amount lower than the historical carrying value. The
impact on reported revenue for the year ended December 31, 2011 was $9.6 million, primarily in lease license revenue.
As of December 31, 2011, the Company had a backlog of $56.3 million of orders received but not invoiced.
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Table of Contents
Cost of Sales and Gross Profit:
(in thousands, except percentages)
Cost of sales:
Software licenses
Amortization
Maintenance and service
Total cost of sales
Gross profit
Year Ended December 31,
2011
2010
Change
Amount
% of
Revenue
Amount
% of
Revenue
Amount
%
$
$
15,884
33,728
69,402
119,014
572,435
2.3
4.9
10.0
17.2
82.8
$
$
10,770
32,757
57,352
100,879
479,357
1.9
5.6
9.9
17.4
82.6
$
$
5,114
971
12,050
18,135
93,078
47.5
3.0
21.0
18.0
19.4
Software Licenses: The increase in software license costs was primarily due to the following:
• Apache-related cost of sales of $3.1 million for the period from the acquisition (August 1, 2011) through
December 31, 2011.
•
•
•
Increased third-party royalties of $1.2 million.
Increased stock-based compensation of $400,000.
Increased salaries of $300,000.
Amortization: The increase in amortization expense was primarily a result of the following:
• Amortization of acquired Apache software of $3.8 million.
• A $300,000 increase in amortization of a previously acquired trademark.
• A $3.1 million decrease in amortization of other acquired software.
Maintenance and Service: The increase in maintenance and service costs was primarily due to the following:
•
•
Increased salaries and headcount-related costs, including incentive compensation, of $9.5 million.
Increased business travel expenses of $1.1 million.
• Decreased third-party technical support costs of $800,000.
•
•
Increased office and equipment lease expenses of $600,000.
Increased depreciation of $500,000.
The improvement in the gross profit was a result of the increase in revenue offset by a smaller increase in related cost of sales.
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Table of Contents
Operating Expenses:
(in thousands, except percentages)
Operating expenses:
Selling, general and
administrative
Research and development
Amortization
Total operating expenses
Year Ended December 31,
2011
2010
Change
Amount
% of
Revenue
Amount
% of
Revenue
Amount
%
$
$
180,357
108,530
17,989
306,876
26.1
15.7
2.6
44.4
$
$
155,096
88,990
16,003
260,089
26.7
15.3
2.8
44.8
$
$
25,261
19,540
1,986
46,787
16.3
22.0
12.4
18.0
Selling, General and Administrative: The increase in selling, general and administrative costs was primarily due to the
following:
•
Increased salaries and headcount-related costs, including incentive compensation, of $9.0 million.
• Apache-related selling, general and administrative expenses of $8.4 million.
• Transaction costs totaling $2.1 million related to the Apache acquisition.
•
•
•
•
•
Increased third-party commissions of $1.8 million.
Increased discretionary marketing costs of $1.5 million.
Increased depreciation of $900,000.
Increased business travel expenses and maintenance-related costs, each of $800,000.
Increased stock-based compensation expense of $700,000.
• Decreased franchise tax expenses of $1.8 million.
• Decreased bad debt expense of $1.4 million.
Research and Development: The increase in research and development expenses was primarily due to the following:
•
Increased salaries and headcount-related costs, including incentive compensation, of $8.0 million.
• Apache-related research and development expenses of $6.0 million.
•
•
•
•
Increased stock-based compensation expense of $2.5 million.
Increased depreciation of $700,000.
Increased facilities and information technology maintenance costs of $600,000.
Increased consulting expenses of $500,000.
Amortization: The increase in amortization expense was primarily the result of $1.8 million of acquired Apache intangible
assets, including a trademark, customer lists and contract backlog.
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Table of Contents
Interest Expense: The Company’s interest expense consisted of the following:
(in thousands)
Bank interest on term loans
Amortization of debt financing costs
Discounted obligations
Realized loss on interest rate swap agreement
Other
Total interest expense
Year Ended December 31,
2011
2010
$
$
1,605
953
462
—
312
3,332
$
$
2,096
1,107
334
864
87
4,488
The decreased interest expense shown above for 2011 is primarily a result of the June 30, 2010 expiration of the interest rate
swap and a lower average outstanding debt balance.
Interest Income: Interest income for the year ended December 31, 2011 was $3.0 million as compared to $1.9 million for the
year ended December 31, 2010. Interest income increased as a result of both an increase in the average cash balances and the
rate of return on those balances.
Other Expense, net: The Company recorded other expense of $369,000 during the year ended December 31, 2011 as compared
to other expense of $297,000 during the year ended December 31, 2010. The activity for both years was primarily composed of
net foreign currency transaction losses.
Income Tax Provision: The Company recorded income tax expense of $84.2 million and had income before income taxes of
$264.9 million for the year ended December 31, 2011. This represents an effective tax rate of 31.8%. During the year ended
December 31, 2010, the Company recorded income tax expense of $63.3 million and had income before income taxes of
$216.4 million, representing an effective tax rate of 29.2%.
As a result of a 2010 subsidiary merger in Japan, the Company realized a reduction in its 2011 income tax expense of $9.0
million related to tax credits in the U.S. associated with foreign taxes paid in Japan.
In addition, the Company’s tax expense in the year ended December 31, 2011 was unfavorably impacted by reductions to the
Japanese corporate tax rate, beginning with the 2013 tax year. This legislation, enacted on November 30, 2011, resulted in an
additional $4.8 million in deferred tax expense due to the reduction in the value of certain net deferred tax assets of the
Company’s Japanese subsidiaries. The effect of this adjustment increased the 2011 effective tax rate from 30.0% to 31.8%.
Net Income: The Company’s net income for the year ended December 31, 2011 was $180.7 million as compared to net income
of $153.1 million for the year ended December 31, 2010. Diluted earnings per share was $1.91 for the year ended
December 31, 2011 and $1.64 for the year ended December 31, 2010. The weighted average shares used in computing diluted
earnings per share were 94.4 million and 93.2 million during the years ended December 31, 2011 and 2010, respectively.
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Table of Contents
Non-GAAP Results
The Company provides non-GAAP revenue, non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net
income and non-GAAP diluted earnings per share as supplemental measures to GAAP measures regarding the Company’s
operational performance. These financial measures exclude the impact of certain items and, therefore, have not been calculated
in accordance with GAAP. A detailed explanation and a reconciliation of each non-GAAP financial measure to its most
comparable GAAP financial measure are described below.
Year Ended December 31,
2012
2011
(in thousands, except percentages and per share
data)
Total revenue
Operating income
Operating profit margin
Net income
Earnings per share – diluted:
Diluted earnings per share
Weighted average shares – diluted
As
Reported
$798,018
294,253
36.9%
Adjustments
$
Non-GAAP
Results
9,636 (1) $807,654
404,543
110,290 (2)
As
Reported
Adjustments
Non-GAAP
Results
$ 691,449
$
9,621 (4) $ 701,070
265,559
86,550 (5)
352,109
50.1%
38.4%
50.2%
$203,483
$
73,304 (3) $276,787
$ 180,675
$
58,301 (6) $ 238,976
$
2.14
94,954
$
2.91
$
1.91
94,954
94,381
$
2.53
94,381
(1) Amount represents the revenue not reported during the period as a result of the acquisition accounting adjustment
associated with accounting for deferred revenue in business combinations.
(2) Amount represents $67.3 million of amortization expense associated with intangible assets acquired in business
combinations, $32.4 million of stock-based compensation expense, the $9.6 million adjustment to revenue as reflected
in (1) above and $0.9 million of transaction expenses related to the Esterel acquisition.
(3) Amount represents the impact of the adjustments to operating income referred to in (2) above, adjusted for the related
income tax impact of $37.0 million.
(4) Amount represents the revenue not reported during the period as a result of the acquisition accounting adjustment
associated with accounting for deferred revenue in business combinations.
(5) Amount represents $51.7 million of amortization expense associated with intangible assets acquired in business
combinations, $23.1 million of stock-based compensation expense, the $9.6 million adjustment to revenue as reflected
in (4) above and $2.1 million of transaction expenses related to the Apache acquisition.
(6) Amount represents the impact of the adjustments to operating income referred to in (5) above, adjusted for the related
income tax impact of $28.2 million.
Note: The 2011 GAAP and non-GAAP net income and earnings per share data reflected above include $4.8 million, or $0.05
per share, related to income tax expense associated with reductions to the Japanese corporate tax rate, beginning with the 2013
tax year. This legislation, enacted on November 30, 2011, resulted in an additional $4.8 million in deferred tax expense due to
the reduction in the value of certain net deferred tax assets of the Company's Japanese subsidiaries.
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Table of Contents
(in thousands, except percentages and per
share data)
Total revenue
Operating income
Operating profit margin
Net income
Earnings per share—diluted:
Year Ended December 31,
2011
As
Reported
$ 691,449
265,559
Non-GAAP
Adjustments
$
Results
9,621 (1) $ 701,070
352,109
86,550 (2)
As
Reported
$ 580,236
219,268
38.4%
50.2%
37.8%
$ 180,675
$
58,301 (3) $ 238,976
$ 153,132
$
$
2010
Non-GAAP
Adjustments
67,749 (4)
Results
$ 580,236
287,017
49.5%
44,977 (5) $ 198,109
Diluted earnings per share
Weighted average shares—diluted
$
1.91
94,381
$
2.53
94,381
$
1.64
93,209
$
2.13
93,209
(1) Amount represents the revenue not reported during the period as a result of the acquisition accounting adjustment
associated with accounting for deferred revenue in business combinations.
(2) Amount represents $51.7 million of amortization expense associated with intangible assets acquired in business
combinations, $23.1 million of stock-based compensation expense, the $9.6 million adjustment to revenue as reflected
in (1) above and $2.1 million of transaction expenses related to the Apache acquisition.
(3) Amount represents the impact of the adjustments to operating income referred to in (2) above, adjusted for the related
income tax impact of $28.2 million.
(4) Amount represents $48.7 million of amortization expense associated with intangible assets acquired in business
combinations and a $19.0 million charge for stock-based compensation.
(5) Amount represents the impact of the adjustments to operating income referred to in (4) above, adjusted for the related
income tax impact of $22.8 million.
Note: The 2011 GAAP and non-GAAP net income and earnings per share data reflected above include $4.8 million, or $0.05
per share, related to income tax expense associated with reductions to the Japanese corporate tax rate, beginning with the 2013
tax year. This legislation, enacted on November 30, 2011, resulted in an additional $4.8 million in deferred tax expense due to
the reduction in the value of certain net deferred tax assets of the Company's Japanese subsidiaries.
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Table of Contents
Non-GAAP Measures
Management uses non-GAAP financial measures (a) to evaluate the Company’s historical and prospective financial
performance as well as its performance relative to its competitors, (b) to set internal sales targets and spending budgets, (c) to
allocate resources, (d) to measure operational profitability and the accuracy of forecasting, (e) to assess financial discipline over
operational expenditures and (f) as an important factor in determining variable compensation for management and its
employees. In addition, many financial analysts that follow the Company focus on and publish both historical results and future
projections based on non-GAAP financial measures. The Company believes that it is in the best interest of its investors to
provide this information to analysts so that they accurately report the non-GAAP financial information. Moreover, investors
have historically requested and the Company has historically reported these non-GAAP financial measures as a means of
providing consistent and comparable information with past reports of financial results.
While management believes that these non-GAAP financial measures provide useful supplemental information to investors,
there are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are
not prepared in accordance with GAAP, are not reported by all of the Company’s competitors and may not be directly
comparable to similarly titled measures of the Company’s competitors due to potential differences in the exact method of
calculation. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to
GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable
GAAP financial measures.
The adjustments to these non-GAAP financial measures, and the basis for such adjustments, are outlined below:
Acquisition accounting for deferred revenue and its related tax impact. Historically, the Company has consummated
acquisitions in order to support its strategic and other business objectives. In accordance with the fair value provisions
applicable to the accounting for business combinations, acquired deferred revenue is often recorded on the opening balance
sheet at an amount that is lower than the historical carrying value. Although this purchase accounting requirement has no
impact on the Company’s business or cash flow, it adversely impacts the Company’s reported GAAP revenue in the reporting
periods following an acquisition. In order to provide investors with financial information that facilitates comparison of both
historical and future results, the Company provides non-GAAP financial measures which exclude the impact of the acquisition
accounting adjustment. The Company believes that this non-GAAP financial adjustment is useful to investors because it allows
investors to (a) evaluate the effectiveness of the methodology and information used by management in its financial and
operational decision-making and (b) compare past and future reports of financial results of the Company as the revenue
reduction related to acquired deferred revenue will not recur when related annual lease licenses and software maintenance
contracts are renewed in future periods.
Amortization of intangibles from acquisitions and its related tax impact. The Company incurs amortization of intangibles,
included in its GAAP presentation of amortization expense, related to various acquisitions it has made in recent years.
Management excludes these expenses and their related tax impact for the purpose of calculating non-GAAP operating income,
non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share when it evaluates the
continuing operational performance of the Company because these costs are fixed at the time of an acquisition, are then
amortized over a period of several years after the acquisition and generally cannot be changed or influenced by management
after the acquisition. Accordingly, management does not consider these expenses for purposes of evaluating the performance of
the Company during the applicable time period after the acquisition, and it excludes such expenses when making decisions to
allocate resources. The Company believes that these non-GAAP financial measures are useful to investors because they allow
investors to (a) evaluate the effectiveness of the methodology and information used by management in its financial and
operational decision-making and (b) compare past reports of financial results of the Company as the Company has historically
reported these non-GAAP financial measures.
Stock-based compensation expense and its related tax impact. The Company incurs expense related to stock-based
compensation included in its GAAP presentation of cost of software licenses; cost of maintenance and service; research and
development expense and selling, general and administrative expense. Although stock-based compensation is an expense of the
Company and viewed as a form of compensation, management excludes these expenses for the purpose of calculating non-
GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share
when it evaluates the continuing operational performance of the Company. Specifically, the Company excludes stock-based
compensation during its annual budgeting process and its quarterly and annual assessments of the Company’s and
management’s performance. The annual budgeting process is the primary mechanism whereby the Company allocates
resources to various initiatives and operational requirements. Additionally, the annual review by the board of directors during
which it compares the Company’s historical business model and profitability to the planned business model and profitability for
the forthcoming year excludes the impact of stock-based compensation. In evaluating the performance of senior management
and department managers, charges related to stock-based compensation are excluded from expenditure and profitability results.
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In fact, the Company records stock-based compensation expense into a stand-alone cost center for which no single operational
manager is responsible or accountable. In this way, management is able to review, on a period-to-period basis, each manager’s
performance and assess financial discipline over operational expenditures without the effect of stock-based compensation. The
Company believes that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate
the Company’s operating results and the effectiveness of the methodology used by management to review the Company’s
operating results, and (b) review historical comparability in its financial reporting as well as comparability with competitors’
operating results.
Transaction costs related to business combinations. The Company incurs expenses for professional services rendered in
connection with business combinations, which are included in its GAAP presentation of selling, general and administrative
expense. These expenses are generally not tax-deductible. Management excludes these acquisition-related transaction costs for
the purpose of calculating non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-
GAAP diluted earnings per share when it evaluates the continuing operational performance of the Company, as it generally
would not have otherwise incurred these expenses in the periods presented as a part of its continuing operations. The Company
believes that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate the
Company’s operating results and the effectiveness of the methodology used by management to review the Company’s operating
results, and (b) review historical comparability in its financial reporting as well as comparability with competitors’ operating
results.
Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. The Company’s non-GAAP financial
measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be
read only in conjunction with the Company’s consolidated financial statements prepared in accordance with GAAP.
The Company has provided a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP
financial measures as listed below:
GAAP Reporting Measure
Revenue
Operating Income
Operating Profit Margin
Net Income
Diluted Earnings Per Share
Non-GAAP Reporting Measure
Non-GAAP Revenue
Non-GAAP Operating Income
Non-GAAP Operating Profit Margin
Non-GAAP Net Income
Non-GAAP Diluted Earnings Per Share
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Table of Contents
Liquidity and Capital Resources
Cash, cash equivalents and short-term investments: As of December 31, 2012, the Company had cash, cash equivalents and
short-term investments totaling $577.2 million and working capital of $436.0 million as compared to cash, cash equivalents and
short-term investments of $472.4 million and working capital of $301.3 million at December 31, 2011.
Cash and cash equivalents consist primarily of highly liquid investments such as money market mutual funds and deposits held
at major banks. Short-term investments consist primarily of deposits held by certain foreign subsidiaries of the Company with
original maturities of three months to one year. Cash, cash equivalents and short-term investments include $177.9 million held
by the Company’s foreign subsidiaries as of December 31, 2012. If these foreign balances were repatriated to the U.S., they
would be subject to domestic tax, resulting in a tax obligation in the period of repatriation. The amount of cash, cash
equivalents and short-term investments held by these subsidiaries is subject to translation adjustments caused by changes in
foreign currency exchange rates as of the end of each respective reporting period, the offset to which is recorded in
accumulated other comprehensive income on the Company’s consolidated balance sheet.
Cash flows from operating activities: The Company’s operating activities provided cash of $298.4 million in 2012, $307.7
million in 2011 and $166.9 million in 2010. The net $9.2 million decrease in operating cash flows for the year ended
December 31, 2012 as compared to the year ended December 31, 2011 was primarily related to:
• A $41.6 million decrease in cash flows from operating assets and liabilities whereby these fluctuations produced a net
cash inflow of $8.9 million during the year ended December 31, 2012 as compared to $50.4 million during the year
ended December 31, 2011.
Included in the $8.9 million net cash inflow in 2012 was a reduction of $9.3 million in the amount of income tax
payments that otherwise would have been made in 2012 as a result of the tax impact associated with the merger of the
Company's Japan subsidiaries, as compared to a reduction of $18.0 million in 2011. Please see below for a complete
discussion of the expected future cash flow benefits associated with the merger of the Company's Japan subsidiaries.
• An increase in net income of $22.8 million from $180.7 million for the year ended December 31, 2011 to $203.5
million for the year ended December 31, 2012.
• An increase in other non-cash operating adjustments of $9.5 million from $76.6 million for the year ended
December 31, 2011 to $86.1 million for the year ended December 31, 2012.
The net $140.8 million increase in the Company's cash flow from operating activities in 2011 as compared to 2010 was
primarily the result of a $79.9 million increase in cash flows from operating assets and liabilities, a $33.3 million increase in
other non-cash operating adjustments and a $27.5 million increase in net income. The 2010 operating cash flows were
adversely impacted by increased tax payments of $55.1 million related to the merger of the Company's Japan subsidiaries.
Cash flows from investing activities: The Company’s investing activities used net cash of $69.0 million and $291.6 million for
the years ended December 31, 2012 and December 31, 2011, respectively. The Company had net acquisition-related cash
outlays of $45.1 million and $269.5 million during the years ended December 31, 2012 and December 31, 2011, respectively.
Total capital spending was $24.0 million and $22.1 million for the years ended December 31, 2012 and 2011, respectively. In
May 2012, the Company acquired an office building adjacent to its Canonsburg headquarters for $4.8 million. This building
will serve primarily as a data center and customer training space, and will provide flexibility for future expansion and the
growing employee population. The Company currently plans capital spending of $35 million to $45 million during fiscal year
2013, including spending on the Company's new headquarters facilities that are expected to be completed in 2014. The
Company has occupied its current headquarters facility since 1997. The overall level of capital spending in 2013 will be
dependent upon various factors, including growth of the business and general economic conditions.
The Company's investing activities used net cash of $291.6 million and $6.6 million in 2011 and 2010, respectively. The
change in cash used was primarily driven by the $269.5 million net cash outlay for the acquisition of Apache in August 2011.
Cash flows used in financing activities: Financing activities used cash of $124.8 million and $9.7 million for the years ended
December 31, 2012 and 2011, respectively. This change of $115.2 million was primarily the result of an increase in cash used
for treasury stock repurchases of $82.8 million and a $42.5 million increase in required principal payments on long-term debt in
2012 as compared to 2011.
Financing activities used cash of $9.7 million and $29.6 million in 2011 and 2010, respectively. This change of $20.0 million
was primarily driven by a $33.7 million decrease in principal payments on long-term debt, partially offset by $12.7 million in
treasury stock repurchases in 2011. There were no treasury stock repurchases in 2010.
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The Company’s term loan includes covenants related to the consolidated leverage ratio and the consolidated fixed charge
coverage ratio, as well as certain restrictions on additional investments and indebtedness. As of December 31, 2012, the
Company is in compliance with all financial covenants as stated in the credit agreement. The Company's term loan matures on
July 31, 2013.
The Company believes that existing cash and cash equivalent balances of $576.7 million, together with cash generated from
operations, will be sufficient to meet the Company’s working capital, capital expenditure and debt service requirements through
the next twelve months. The Company’s cash requirements in the future may also be financed through additional equity or debt
financings. There can be no assurance that such financings can be obtained on favorable terms, if at all.
As of December 31, 2012, 1.5 million shares remain authorized for repurchase under the Company’s stock repurchase program.
The Company continues to generate positive cash flows from operating activities and believes that the best use of its excess
cash is to repay its long-term debt, to invest in the business and, under certain favorable conditions, to repurchase
stock. Additionally, the Company has in the past, and expects in the future, to acquire or make investments in complementary
companies, products, services and technologies. Any future acquisitions may be funded by available cash and investments, cash
generated from operations, existing or additional credit facilities, or from the issuance of additional securities.
On August 1, 2012, the Company completed its acquisition of Esterel, a leading provider of embedded software simulation and
automatic generation of certified code solutions for mission critical applications. Under the terms of the acquisition agreement,
ANSYS acquired 100% of Esterel for a purchase price of $58.2 million, which included $13.1 million in acquired cash. The
acquisition agreement also includes retention provisions for key members of Esterel's management and employees. The
Company funded the transaction entirely with existing cash balances.
The Company's operating cash flow has been favorably impacted by the 2010 merger of the Company's Japan subsidiaries. The
Company saw a reduction in these cash flow savings of $16.8 million for the year ended December 31, 2012 when compared to
the year ended December 31, 2011. This merger is expected to favorably impact the Company’s cash flow from operations in
future periods as follows:
Fiscal year 2013
Fiscal year 2014 - 2015
Fiscal year 2016 - 2017
Fiscal year 2018
Uncertain timing
Total future benefits
Estimated Future Cash Flow Savings
$8 - $9 million
$9 - $10 million per year
$10 - $11 million per year
$4 - $5 million
$21 million
$71 - $77 million
With respect to the amounts in the preceding table whereby the timing is listed as “uncertain,” the realization of these benefits
is affected by the resolution of an audit of the Company’s amended tax return refund claims, which the Internal Revenue
Service (“IRS”) began in the second quarter of 2012. The Company continues to expect that it will realize these cash flow
benefits.
Off-Balance Sheet Arrangements
The Company does not have any special purpose entities or off-balance sheet financing.
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Contractual Obligations
The Company's significant contractual obligations as of December 31, 2012 are summarized below:
(in thousands)
Long-term debt
Total
Within 1 year
2 – 3 years
4 – 5 years
After 5 years
Payments Due by Period
Principal payments
Interest payments(1)
Capital lease obligations
Global headquarters operating leases(2)
Other operating leases(3)
Unconditional purchase obligations(4)
Obligations related to uncertain tax positions,
including interest and penalties(5)
Other long-term obligations(6)
Total contractual obligations
$
$
$
53,149
215
—
69,818
44,155
3,502
—
34,198
205,037
$
53,149
215
—
1,429
12,177
3,313
—
9,676
79,959
$
$
— $
—
—
5,707
16,581
189
—
16,776
39,253
$
— $
—
—
8,556
7,150
—
—
5,364
21,070
$
—
—
—
54,126
8,247
—
—
2,382
64,755
(1) See Note 8 to the consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K. The interest
rate on the outstanding term loan balance of $53.1 million is set for the quarter ending March 31, 2013 at 1.06%, which
is based on LIBOR + 0.75%. The estimated payments assume an interest rate of 1.06% on the remaining loan balance,
and are calculated assuming contractual quarterly principal payments are made with no additional prepayments.
(2) On September 14, 2012, the Company entered into a lease agreement for a to-be-built office facility in Canonsburg,
Pennsylvania, which will serve as the Company's new headquarters. The lease was effective as of September 14, 2012,
but because the premises are to-be-built, the Company will not be obligated to pay rent until January 1, 2015 (the
“Commencement Date”). The term of the lease is 183 months, beginning on the Commencement Date. The Company
shall have a one-time right to terminate the lease effective upon the last day of the tenth full year following the
Commencement Date (anticipated to be December 31, 2025), by providing the landlord with at least 18 months’ prior
written notice of such termination. The Company's lease for its existing headquarters expires on December 31, 2014.
(3) Other operating leases primarily include noncancellable lease commitments for the Company’s other domestic and
international offices as well as certain operating equipment.
(4) Unconditional purchase obligations primarily include software licenses and long-term purchase contracts for network,
communication and office maintenance services, which are unrecorded as of December 31, 2012.
(5) The Company has $36.9 million of unrecognized tax benefits, including estimated interest and penalties, that have been
recorded as liabilities in accordance with income tax accounting guidance for which the Company is uncertain as to if
or when such amounts may be settled. As a result, such amounts are excluded from the table above.
(6) Includes long-term retention bonus and Apache-related deferred compensation of $21.8 million (including estimated
imputed interest of $520,000 within 1 year, $550,000 within 2-3 years and $210,000 within 4-5 years), contingent
consideration of $6.6 million (including estimated imputed interest of $110,000 within 1 year and $200,000 within 2-3
years) and pension obligations of $3.7 million for certain foreign locations of the Company.
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Critical Accounting Policies and Estimates
The Company believes that the following critical accounting policies affect the more significant judgments and estimates used
in the preparation of its consolidated financial statements.
Revenue is derived principally from the licensing of computer software products and from related maintenance contracts.
Revenue from perpetual licenses is classified as license revenue and is recognized upon delivery of the licensed product and the
utility that enables the customer to access 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. The Company
determines the fair value of post-contract customer support (“PCS”) sold together with perpetual licenses based on the rate
charged for PCS when sold separately. Revenue from PCS contracts is classified as maintenance and service revenue and is
recognized ratably over the term of the contract.
Revenue for software lease licenses is classified as license revenue and is recognized over the period of the lease contract.
Typically, the Company’s software leases include PCS which, due to the short term (principally one year or less) of the
Company’s software lease licenses, cannot be separated from lease revenue for accounting purposes. As a result, both the lease
license and PCS are recognized ratably over the lease period. Due to the short-term nature of the software lease licenses and the
frequency with which the Company provides major product upgrades (typically every 12–18 months), the Company does not
believe that a significant portion of the fee paid under the arrangement is attributable to the PCS component of the arrangement
and, as a result, includes the revenue for the entire arrangement within software license revenue in the consolidated statements
of income.
The Company's Apache products are typically licensed via longer term leases of 24–36 months. The Company recognizes
revenue for these licenses over the term of the lease contract. Because the Company does not have vendor-specific objective
evidence of the fair value of these leases, the Company also recognizes revenue from perpetual licenses over the term of the
lease contract during the infrequent occurrence of these licenses being sold with Apache leases in multiple-element
arrangements.
Revenue from training, support and other services is recognized as the services are performed. The Company applies the
specific performance method to contracts in which the service consists of a single act, such as providing a training class to a
customer, and the proportional performance method to other service contracts that are longer in duration and often include
multiple acts (for example, both training and consulting). In applying the proportional performance method, the Company
typically utilizes output-based estimates for services with contractual billing arrangements that are not based on time and
materials, and estimates output based on the total tasks completed as compared to the total tasks required for each work
contract. Input-based estimates are utilized for services that involve general consultations with contractual billing arrangements
based on time and materials, utilizing direct labor as the input measure.
The Company also executes arrangements through independent channel partners in which the channel partners are authorized
to market and distribute the Company’s software products to end-users of the Company’s products and services in specified
territories. In sales facilitated by channel partners, the channel partner bears the risk of collection from the end-user customer.
The Company recognizes revenue from transactions with channel partners when the channel partner submits a written purchase
commitment, collectibility from the channel partner is probable, a signed license agreement is received from the end-user
customer and delivery has occurred, provided that all other revenue recognition criteria are satisfied. Revenue from channel
partner transactions is the amount remitted to the Company by the channel partners. This amount includes a fee for PCS that is
compensation for providing technical enhancements and the second level of technical support to the end-user, which is based
on the rate charged for PCS when sold separately, and is recognized over the period that PCS is to be provided. The Company
does not offer right of return, product rotation or price protection to any of its channel partners.
Non-income related taxes collected from customers and remitted to governmental authorities are recorded on the consolidated
balance sheet as accounts receivable and accrued expenses. The collection and payment of these amounts are reported on a net
basis in the consolidated statements of income and do not impact reported revenues or expenses.
The Company warrants to its customers that its software will substantially perform as specified in the Company’s most current
user manuals. The Company has not experienced significant claims related to software warranties beyond the scope of
maintenance support, which the Company is already obligated to provide, and consequently, the Company has not established
reserves for warranty obligations.
The Company’s agreements with its customers generally require it to indemnify the customer against claims that the
Company’s software infringes third-party patent, copyright, trademark or other proprietary rights. Such indemnification
obligations are generally limited in a variety of industry-standard respects, including the Company’s right to replace an
infringing product. As of December 31, 2012, the Company had not experienced any losses related to these indemnification
obligations and no claims with respect thereto were outstanding. The Company does not expect significant claims related to
these indemnification obligations, and consequently, the Company has not established any related reserves.
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The Company 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 value and delinquency perspectives. For those invoices not specifically reviewed, provisions are provided at
differing rates based upon the age of the receivable and the geographic area of origin. In determining these percentages, the
Company considers 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.
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.
Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement
and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to
reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period of the
enactment date.
The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In
making such determination, the Company considers all available positive and negative evidence, including scheduled reversals
of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In the event
the Company determines that it will be able to realize deferred income tax assets in the future in excess of their net recorded
amount, an adjustment to the valuation allowance would be recorded that would reduce the provision for income taxes.
Tax benefits related to uncertain tax positions taken or expected to be taken on a tax return are recorded when such benefits
meet a more likely than not threshold. Otherwise, these tax benefits are recorded when a tax position has been effectively
settled, which means that the statute of limitations has expired or the appropriate taxing authority has completed their
examination even though the statute of limitations remains open. The Company recognizes interest and penalties related to
unrecognized tax benefits within the income tax expense line in the consolidated statements of income. Accrued interest and
penalties are included within the related tax liability line in the consolidated balance sheets.
The Company tests goodwill for impairment at least annually by performing a qualitative assessment of whether there is
sufficient evidence that it is more likely than not that the fair value of each reporting unit exceeds its carrying amount. The
application of a qualitative assessment requires the Company to assess and make judgments regarding a variety of factors
which potentially impact the fair value of a reporting unit, including general economic conditions, industry and market-specific
conditions, customer behavior, cost factors, the Company’s financial performance and trends, the Company’s strategies and
business plans, capital requirements, management and personnel issues, and the Company’s stock price, among others. The
Company then considers the totality of these and other factors, placing more weight on the events and circumstances that are
judged to most affect a reporting unit's fair value or the carrying amount of its net assets, to reach a qualitative conclusion
regarding whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
If it is determined that it is more likely than not that the reporting unit's fair value is less than its carrying amount, then the fair
value of the reporting unit is estimated and an impairment loss is measured (if any). Fair value is estimated using discounted
cash flow and other valuation methodologies. In preparing the estimate of fair value, the Company relies on a number of
factors, including historical operating results, business plans, anticipated future cash flows, economic projections and other
market data. Because there are inherent uncertainties involved in these factors, the Company’s estimates of fair value are
imprecise and the resulting carrying value of goodwill and intangible assets may be misstated.
The Company tests indefinite-lived intangible assets for impairment at least annually by comparing the estimated fair value of
each asset to its carrying value. Fair value is estimated using a discounted cash flow valuation methodology. In preparing the
estimate of fair value, the Company relies on a number of factors, including historical operating results, business plans,
anticipated future cash flows, economic projections and other market data. Because there are inherent uncertainties involved in
these factors, the Company's estimates of fair value are imprecise and the resulting carrying value of indefinite-lived intangible
assets may be misstated. When the Company assigns fair value to a trademark, it also estimates whether it has a finite or
indefinite life, thus impacting whether the value is amortized or not. Events such as product and naming strategy changes can
occur whereby the Company may reconsider the life (whether finite or indefinite), resulting in changes to amortization expense.
Amortization periods may also be reconsidered for identifiable intangible assets with finite lives.
On January 1, 2012, the Company completed the annual impairment tests for goodwill and indefinite-lived intangible assets
and determined that these assets had not been impaired as of the test date. For goodwill, the Company performed a qualitative
assessment, and as of the test date, there was sufficient evidence that it was more likely than not that the fair values of its two
reporting units exceeded their carrying amounts. Due to the August 1, 2012 acquisition of Esterel, the Company now has three
reporting units. The fair value of the Company's indefinite-lived intangible assets substantially exceeded their carrying values
as of the test date. The key assumptions utilized in determining the fair value of the indefinite-lived intangible assets are
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revenue growth rates, growth rates of cash expenditures and related operating margin percentages, income tax rates, and factors
that influence the Company's weighted average cost of capital, including interest rates, the ratio of the Company's debt capital
to its total capital and the Company's systematic risk or beta.
Of the preceding factors, fair value estimates are most sensitive to changes in revenue growth rate assumptions. Factors that
could adversely affect the Company's revenue growth rates include adverse economic conditions in certain geographies or
industries, especially key industrial and electronics industries; enhanced competition and related pricing pressures; integration
issues associated with acquisitions; strengthening of the U.S. Dollar or other adverse foreign currency fluctuations; reduced
renewal rates for the Company's annual lease and maintenance contracts; and the Company's ability to attract and retain key
personnel. Any of these factors individually or in combination could cause the Company's growth rates to decline over a
defined period of time. The Company has demonstrated an ability in the past to adjust its cost structure through reductions in
discretionary spending, delayed hiring or workforce reductions when faced with periods of reduced revenue growth. If adverse
conditions would persist over a longer period of time and would cause a revision to the Company's long-term revenue growth
rate projections without a similar cost reduction response, or if other factors would occur that would result in a similar growth
rate revision or a material revision to the other inputs to reporting unit fair value, it could cause the fair value of the Company's
reporting unit to fall below its carrying value, potentially resulting in an impairment.
The Company is involved in various investigations, claims and legal proceedings that arise in the ordinary course of business
including alleged infringement of intellectual property rights, commercial disputes, labor and employment matters, tax audits
and other matters. The Company reviews the status of these matters, assesses its financial exposure and records a related
accrual if the potential loss from an investigation, claim or legal proceeding is probable and the amount is reasonably estimable.
Significant judgment is involved in the determination of probability and in the determination of whether an exposure is
reasonably estimable. As a result of the uncertainties involved in making these estimates, the Company may have to revise its
estimates as facts and circumstances change. The revision of these estimates could have a material impact on the Company’s
financial position and results of operations.
The Company grants options and stock awards to employees and directors under the Company’s stock option and grant plan.
Eligible employees can also purchase shares of the Company’s common stock at a discount under the Company’s employee
stock purchase plan. The benefits provided under these plans are share-based payments subject to the provisions of share-based
payment accounting guidance. The Company uses the fair value method to apply the provisions of share-based payment
accounting guidance. Share-based compensation expense for 2012, 2011 and 2010 was $32.4 million, $23.1 million and $19.0
million, respectively. As of December 31, 2012, total unrecognized estimated compensation expense related to unvested stock
options granted prior to that date was $61.9 million, which is expected to be recognized over a weighted average period of 2.0
years.
The value of each share-based award was estimated on the date of grant or date of acquisition for options issued in a business
combination using the Black-Scholes option pricing model (“Black-Scholes model”). The determination of the fair value of
share-based payment awards using an option pricing model is affected by the Company’s stock price as well as assumptions
regarding a number of complex and subjective variables. These variables include the Company’s expected stock price volatility
over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rates and
expected dividends. The table below presents the weighted average input assumptions used and resulting fair values for options
granted or issued in business combinations during each respective year. The stock-based compensation expense for options is
recorded ratably over their requisite service period. The interest rates used were determined by using the five-year U.S.
Treasury Note yield on the date of grant or date of acquisition.
Risk-free interest rate
Expected dividend yield
Expected volatility
Expected term
Weighted average fair value per share
Year Ended December 31,
2012
0.59% to 1.04%
0%
38%
6.0 years
$24.82
2011
0.91% to 2.11%
0%
39%
5.8 years
$25.84
2010
1.27% to 2.34%
0%
39%
6.1 years
$19.41
Prior to 2012, the Company issued both non-qualified and incentive stock options; however, the Company no longer issues
incentive stock options. The tax benefits associated with the outstanding incentive stock options are unpredictable, as they are
predicated upon an award recipient triggering an event that disqualifies the award and that then results in a tax deduction to the
Company. Share-based payment accounting guidance requires that these tax benefits be recorded at the time of the triggering
event. The triggering events for each option holder are not easily projected. In order to estimate the tax benefits related to
incentive stock options, the Company makes many assumptions and estimates, including the number of incentive stock options
that will be exercised during the period by U.S. employees, the number of incentive stock options that will be disqualified
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during the period and the fair market value of the Company’s stock price on the exercise dates. Each of these items is subject to
significant uncertainty. Additionally, a significant portion of the tax benefits related to disqualified incentive stock options is
accounted for as an increase to equity (additional paid-in capital) rather than as a reduction in income tax expense. Although all
such benefits continue to be realized through the Company’s tax filings, this accounting treatment has the effect of increasing
tax expense and reducing net income. For example, the Company realized a tax benefit of $7.6 million during the year ended
December 31, 2012 related to disqualified dispositions of incentive stock options; however, only $1.7 million of such amount
was recorded as a reduction in income tax expense.
Under the terms of the ANSYS, Inc. Long-Term Incentive Plan, in the first quarter of 2012, 2011 and 2010, the Company
granted 100,000, 92,500 and 80,500 performance-based restricted stock units, respectively. Vesting of the full award or a
portion thereof is based on the Company’s performance as measured by total shareholder return relative to the median
percentage appreciation of the NASDAQ Composite Index over a specified measurement period, subject to each participant’s
continued employment with the Company through the conclusion of the measurement period. The measurement period for the
restricted stock units granted pursuant to the Long-Term Incentive Plan is a three-year period beginning January 1 of the year of
the grant. Each restricted stock unit relates to one share of the Company’s common stock. The estimated grant-date value of
each restricted stock unit granted in 2012, 2011 and 2010 was $33.16, $32.05 and $25.00, respectively. The estimate of the
grant-date value of the restricted stock units was made using a Monte Carlo simulation model. The determination of the fair
value of the awards was affected by the grant date and a number of variables, each of which has been identified in the chart
below. Share-based compensation expense based on the fair value of the award is being recorded from the grant date through
the conclusion of the three-year measurement period. On December 31, 2012, employees earned 76,500 restricted stock units,
which will be issued in the first quarter of 2013.
Risk-free interest rate
Expected dividend yield
Expected volatility—ANSYS Stock Price
Expected volatility—NASDAQ Composite Index
Expected term
Correlation factor
Year Ended December 31,
2012
0.16%
0%
28%
20%
2.8 years
0.75
2011 and 2010
1.35%
0%
40%
25%
2.9 years
0.70
In addition, the Company grants deferred stock units to non-affiliate Independent Directors, which are rights to receive shares
of common stock upon termination of service as a Director. The deferred stock units are issued in arrears and vest immediately.
As of December 31, 2012, 95,227 deferred stock units have been earned with the underlying shares remaining unissued until
the service termination of the respective Director owners. Of this amount, 28,523 units were earned during the year ended
December 31, 2012.
In accordance with the Apache merger agreement, the Company granted performance-based restricted stock units to key
members of Apache management and employees, with a maximum of $13.0 million to be earned annually over a three-fiscal-
year period beginning January 1, 2012. Vesting of the full award or a portion thereof is determined discretely for each of the
three fiscal years based on the achievement of certain revenue and operating income targets by the Apache subsidiary, and the
recipient's continued employment through the measurement period. The value of each restricted stock unit on the August 1,
2011 grant date was $50.30, the closing price of ANSYS stock as of that date. On December 31, 2012, employees earned
76,658 restricted stock units, which will be issued in the first quarter of 2013.
If factors change and the Company employs different assumptions in the application of share-based payment accounting
guidance in future periods, the compensation expense that the Company will record may differ significantly from what the
Company has recorded in the current period. Therefore, it is important for investors to be aware of the high degree of
subjectivity involved when using option pricing models to estimate share-based compensation. Option pricing models were
developed for use in estimating the value of traded options that have no vesting or hedging restrictions, are fully transferable
and do not cause dilution. Because the Company’s share-based payments have characteristics significantly different from those
of freely-traded options and because changes in the input assumptions can materially affect the Company’s estimates of fair
values, in the Company’s opinion, existing valuation models may not provide reliable measures of the fair values of the
Company’s share-based compensation. Consequently, there is a risk that the Company’s estimates of the fair values of the
Company’s share-based compensation awards on the grant dates may bear little resemblance to the actual values realized upon
the exercise, expiration, early termination or forfeiture of those share-based payments in the future. Certain share-based
payments, such as employee stock options, may expire worthless or otherwise result in zero intrinsic value as compared to the
fair values originally estimated on the grant date and reported in the Company’s financial statements. Alternatively, value may
be realized from these instruments that is significantly in excess of the fair values originally estimated on the grant date and
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reported in the Company’s financial statements. There is currently no market-based mechanism or other practical application to
verify the reliability and accuracy of the estimates stemming from these valuation models, nor is there a means to compare and
adjust the estimates to actual values. Although the fair value of employee share-based awards is determined in accordance with
share-based payment accounting guidance using an option pricing model, that value may not be indicative of the fair value
observed in a willing buyer/seller market transaction.
Estimates of share-based compensation expenses are significant to the Company’s financial statements, but these expenses are
based on the aforementioned option valuation models and will never result in the payment of cash by the Company. For this
reason, and because the Company does not view share-based compensation as related to its operational performance, the Board
of Directors and management exclude estimated share-based compensation expense when evaluating the Company’s
underlying business performance.
Recent Accounting Guidance
For information regarding recent accounting guidance and the impact of this guidance on the Company’s consolidated financial
statements, see Note 2 to the consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Income Rate Risk. Changes in the overall level of interest rates affect the interest income that is generated from the
Company’s cash and short-term investments. For the year ended December 31, 2012, total interest income was $3.4 million.
Cash and cash equivalents consist primarily of highly liquid investments such as money market mutual funds and deposits held
at major banks.
Interest Expense Rate Risk. The Company entered into a $355.0 million term loan with variable interest rates as of July 31,
2008. The term loan is scheduled to mature on July 31, 2013 and provides for tiered pricing with the initial rate at the prime
rate +0.50%, or the LIBOR rate +1.50%, with step downs permitted after the initial six months under the credit agreement
down to a flat prime rate or the LIBOR rate +0.75%. Such tiered pricing is determined by the Company’s consolidated leverage
ratio. The Company’s consolidated leverage ratio has been reduced to the lowest pricing tier in the credit agreement. The credit
agreement includes quarterly financial covenants, requiring the Company to maintain certain financial ratios and, as is
customary for facilities of this type, certain events of default that permit the acceleration of the loan. Borrowings outstanding
under this facility totaled $53.1 million as of December 31, 2012.
The Company entered into an interest rate swap agreement in order to hedge a portion of each of the first eight forecasted
quarterly variable rate interest payments on the Company’s term loan. Under the swap agreement, the Company received the
variable, three-month LIBOR rate required under its term loan and paid a fixed LIBOR interest rate of 3.32% on the notional
amount. The initial notional amount of $300.0 million was amortized equally at an amount of $37.5 million per quarter over
eight quarters through June 30, 2010. The interest rate swap agreement terminated on June 30, 2010.
For the years ended December 31, 2012, 2011 and 2010, the Company recorded interest expense related to the term loan at
average interest rates of 1.22%, 1.05% and 1.53%, respectively. If the Company did not enter into the interest rate swap
agreement, the weighted average interest rate would have been 1.08% for the year ended December 31, 2010. The interest
expense on the term loan and amortization related to debt financing costs were as follows:
(in thousands)
July 31, 2008 term loan (interest
expense includes $0, $0 and
$864 loss, respectively, on
interest rate swap)
Year Ended December 31,
2012
2011
2010
Interest
Expense
Amortization
Interest
Expense
Amortization
Interest
Expense
Amortization
$
1,342
$
698
$
1,605
$
953
$
2,960
$
1,107
Based on the effective interest rates and remaining outstanding borrowings at December 31, 2012, a 0.50% increase in interest
rates would not impact the Company’s interest expense for the quarter ending March 31, 2013. Based on the effective interest
rates and remaining outstanding borrowings at December 31, 2012, assuming contractual quarterly principal payments are
made, a 0.50% increase in interest rates would increase the Company’s interest expense by $45,000 for the seven months
ending July 31, 2013, also the maturity date of the term loan.
The interest rate on the outstanding term loan balance is set for the quarter ending March 31, 2013 at 1.06%, which is based on
LIBOR +0.75%. As of December 31, 2012, the fair value of the debt approximated the recorded value.
47
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Foreign Currency Transaction Risk. As the Company continues to expand its business 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 will affect the Company’s financial position, results of
operations and cash flows. The Company is most impacted by movements in and among the Euro, British Pound, Japanese Yen,
Indian Rupee, Korean Won and the U.S. Dollar.
The Company's operating results are favorably impacted when the U.S. Dollar weakens against the Company's primary foreign
currencies and are adversely impacted when the U.S. Dollar strengthens against the Company's primary foreign currencies.
With respect to revenue, on average for the year ended December 31, 2012, the U.S. Dollar was 3.7% stronger, when measured
against the Company’s primary foreign currencies, than for the year ended December 31, 2011. The net overall strengthening
resulted in decreased revenue and operating income of $15.4 million and $7.4 million, respectively, during the year ended
December 31, 2012, as compared to the year ended December 31, 2011.
The Company has foreign currency denominated intercompany payables/receivables with certain foreign subsidiaries. In order
to provide a natural hedge, the Company will purchase foreign currencies and hold these currencies in cash until the
intercompany payables/receivables are settled. These natural hedges mitigate a portion of the foreign currency exchange risk on
the intercompany payables/receivables.
In August 2012, the Company entered into a foreign currency futures contract with a third-party U.S. financial institution,
which will be settled in July 2013. The purpose of this contract is to mitigate the Company's exposure to foreign exchange risk
arising from intercompany receivables from a United Kingdom subsidiary. As of December 31, 2012, the Company's foreign
exchange future is in a liability position of $240,000. The foreign exchange future is measured at fair value each reporting
period, with gains or losses recognized in other expense in the Company's consolidated statements of income.
The most significant currency impacts on revenue and operating income are typically attributable to U.S. Dollar exchange rate
changes against the Euro, British Pound and Japanese Yen. The exchange rates for these currencies are reflected in the charts
below:
As of
December 31, 2009
December 31, 2010
December 31, 2011
December 31, 2012
Twelve Months Ended
December 31, 2010
December 31, 2011
December 31, 2012
Period End Exchange Rates
EUR/USD
GBP/USD
USD/JPY
1.432
1.337
1.296
1.320
1.616
1.560
1.554
1.625
93.084
81.215
76.917
86.730
Average Exchange Rates
EUR/USD
GBP/USD
USD/JPY
1.327
1.392
1.286
1.546
1.604
1.580
87.563
79.659
79.794
48
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ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following table sets forth selected unaudited quarterly information. The Company believes that the amounts stated below
present fairly the results of such periods when read in conjunction with the consolidated financial statements and related notes
included in Part IV, Item 15 of this Annual Report on Form 10-K.
Other information required by this Item is included in Part IV, Item 15 of this Annual Report on Form 10-K.
(in thousands, except per share data)
Revenue
Gross profit
Operating income
Net income
Earnings per share—basic
Earnings per share—diluted
(in thousands, except per share data)
Revenue
Gross profit
Operating income
Net income
Earnings per share—basic
Earnings per share—diluted
December 31,
2012
September 30,
2012
June 30,
2012
March 31,
2012
Fiscal Quarter Ended
$
$
$
$
$
$
220,748
184,067
81,639
56,063
0.61
0.59
December 31,
2011
198,209
164,867
73,143
47,457
0.51
0.50
$
$
$
$
$
$
196,909
163,153
73,652
51,619
0.56
0.54
$
$
$
195,016
160,279
71,134
50,262
0.54
0.53
Fiscal Quarter Ended
September 30,
2011
June 30,
2011
172,935
141,908
65,329
45,546
0.49
0.48
$
$
$
162,258
134,195
64,813
45,431
0.49
0.48
$
$
$
$
$
$
185,345
151,003
67,828
45,539
0.49
0.48
March 31,
2011
158,047
131,465
62,274
42,241
0.46
0.45
49
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ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. As required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of
1934, as amended, or the Exchange Act, the Company has evaluated, with the participation of management, including the Chief
Executive Officer and the Chief Financial Officer, the effectiveness of the design and operation 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, as defined in Rule 13a-15(e) of the
Exchange Act.
The Company has 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, Apache President,
Global Controller, General Counsel, Investor Relations and Global Insurance Officer, Vice President of Worldwide Sales and
Support, Vice President of Human Resources, Vice President of Marketing and Business Unit General Managers. This
committee is advised by external counsel, particularly on SEC-related matters. Additionally, other members of the Company’s
global management team advise the committee with respect to disclosure via a sub-certification process.
The Company believes, based on its knowledge, that the financial statements and other financial information included in this
report fairly present, in all material respects, the financial condition, results of operations and cash flows of the Company as of
and for the periods presented in this report. The Company is committed to both a sound internal control environment and to
good corporate governance.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
From time to time, the Company reviews the disclosure controls and procedures, and may from time to time make changes to
enhance their effectiveness and to ensure that the Company’s systems evolve with its business.
Report on Internal Control over Financial Reporting. The Company’s management is responsible for establishing and
maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). 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 has conducted an evaluation of the effectiveness of its internal control over financial
reporting based upon the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission. This assessment excluded the acquisition on August 1, 2012 of Esterel as described in Note 3 of the
Notes to the Consolidated Financial Statements. Based on this evaluation, the Company’s Chief Executive Officer and Chief
Financial Officer have concluded that the Company’s internal control over financial reporting was effective at December 31,
2012.
Additionally, Deloitte & Touche LLP, an independent registered public accounting firm, has issued an attestation report on the
Company’s internal control over financial reporting. This report is included in Item 15 of this Annual Report on Form 10-K.
Changes in Internal Controls. The Company is in the process of extending its internal controls to its acquisition of Esterel.
There were no changes in the Company’s internal controls over financial reporting that occurred during the three months ended
December 31, 2012 that materially affected, or were reasonably likely to materially affect, the Company’s internal control over
financial reporting.
ITEM 9B. OTHER INFORMATION
None.
50
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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item is incorporated by reference to the Company’s 2013 Proxy Statement and is set forth
under “Our Board of Directors,” “Our Executive Officers” and “Ownership of Our Common Stock” therein.
PART III
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the Company’s 2013 Proxy Statement and is set forth
under “Our Board of Directors” and “Our Executive Officers” therein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference to the Company’s 2013 Proxy Statement and is set forth
under “Ownership of Our Common Stock” therein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated by reference to the Company’s 2013 Proxy Statement and is set forth
under “Our Board of Directors” therein.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated by reference to the Company’s 2013 Proxy Statement and is set forth
under “Independent Registered Public Accounting Firm” therein.
51
Table of Contents
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
Documents Filed as Part of this Annual Report on Form 10-K:
PART IV
1.
Financial Statements: The following consolidated financial statements and reports of independent registered
public accounting firm are filed as part of this report:
-
-
-
-
-
-
-
-
Management's Report on Internal Control over Financial Reporting
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2012 and 2011
Consolidated Statements of Income for the years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Comprehensive Income for the years ended December 31, 2012,
2011 and 2010
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2012, 2011
and 2010
Notes to Consolidated Financial Statements
53
54
56
57
58
59
60
61
2.
Financial Statement Schedule: The following financial statement schedule is filed as part of this report and
should be read in conjunction with the consolidated financial statements.
-
Schedule II - Valuation and Qualifying Accounts
85
Schedules not listed above have been omitted because they are not applicable, or are not required, or the
information required to be set forth therein is included in the consolidated financial statements or notes thereto.
3.
Exhibits: The Exhibits listed in the accompanying Exhibit Index immediately following the financial statement
schedule are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K.
(b)
Exhibits:
The Company hereby files as part of this Annual Report on Form 10-K the Exhibits listed in the attached Exhibit Index
on pages 85 through 87 of this Annual Report on Form 10-K.
1.
Financial Statement Schedule
The Company hereby files as part of this Annual Report on Form 10-K the financial statement schedule listed in
Item 15(a)(2) as set forth above.
52
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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting for
the Company. In order to evaluate the effectiveness of internal control over financial reporting, management has conducted an
assessment, including testing, using the financial reporting criteria in the Internal Control—Integrated Framework, issued by
the Committee of Sponsoring Organizations of the Treadway Commission. This assessment excluded the acquisition on
August 1, 2012 of Esterel Technologies, S.A. (“Esterel”) as described in Note 3 of the Notes to Consolidated Financial
Statements. The Esterel financial statements constitute 3% of total assets, 2% of net income and less than 1% of revenue of the
consolidated financial statement amounts as of and for the year ended December 31, 2012. Management’s election to exclude
Esterel was a result of the Company needing additional time to properly evaluate and transition Esterel’s existing internal
controls over financial reporting and disclosures.
The Company’s system of internal control over financial reporting is designed to provide reasonable assurance to the
Company’s management and board of directors regarding the reliability of financial records used in preparation of the
Company’s published financial statements. As all internal control systems have inherent limitations, even systems determined
to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Based on
its assessment, management has concluded that the Company maintained an effective system of internal control over financial
reporting as of December 31, 2012. Deloitte & Touche LLP, an independent registered public accounting firm, has audited the
Company’s internal control over financial reporting as of December 31, 2012, as stated in their report which appears on page
55.
/s/ JAMES E. CASHMAN III
James E. Cashman III
President and Chief Executive Officer
February 28, 2013
/s/ MARIA T. SHIELDS
Maria T. Shields
Chief Financial Officer
February 28, 2013
53
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of ANSYS, Inc.
Canonsburg, Pennsylvania
We have audited the accompanying consolidated balance sheets of ANSYS, Inc. and subsidiaries (the “Company”) as of
December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income, stockholders’ equity,
and cash flows for each of the three years in the period ended December 31, 2012. Our audits also included the financial
statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the
responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of ANSYS,
Inc. and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2012, in conformity with accounting principles generally accepted in the United
States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the Company’s internal control over financial reporting as of December 31, 2012, based on the criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated February 28, 2013 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
February 28, 2013
54
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of ANSYS, Inc.
Canonsburg, Pennsylvania
We have audited the internal control over financial reporting of ANSYS, Inc. and subsidiaries (the “Company”) as of
December 31, 2012, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. As described in Management’s Report on Internal Control over
Financial Reporting, management excluded from its assessment the internal control over financial reporting at Esterel
Technologies, S.A. which was acquired on August 1, 2012, and whose financial statements constitute 3% of total assets, 2% of
net income, and less than 1% of revenue of the consolidated financial statement amounts as of and for the year ended
December 31, 2012. Accordingly, our audit did not include the internal control over financial reporting at Esterel Technologies,
S.A. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s
principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s
board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future
periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2012, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2012 of the
Company and our report dated February 28, 2013 expressed an unqualified opinion on those financial statements and financial
statement schedule.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
February 28, 2013
55
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ANSYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, less allowance for doubtful accounts of $4,800 and $4,101,
respectively
Other receivables and current assets
Deferred income taxes
Total current assets
Property and equipment, net
Goodwill
Other intangible assets, net
Other long-term assets
Deferred income taxes
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations
Accounts payable
Accrued bonuses and commissions
Accrued income taxes
Deferred income taxes
Other accrued expenses and liabilities
Deferred revenue
Total current liabilities
Long-term liabilities:
Long-term debt and capital lease obligations, less current portion
Deferred income taxes
Other long-term liabilities
Total long-term liabilities
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value; 2,000,000 shares authorized; zero shares issued or
outstanding
Common stock, $.01 par value; 300,000,000 shares authorized; 93,201,905 and
92,651,739 shares issued, respectively
Additional paid-in capital
Retained earnings
Treasury stock, at cost: 536,231 and 0 shares, respectively
Accumulated other comprehensive income
Total stockholders’ equity
Total liabilities and stockholders’ equity
December 31,
2012
2011
$
576,703
452
$
471,828
576
$
$
96,598
216,268
23,338
913,359
52,253
1,251,247
351,173
24,393
14,992
2,607,417
53,149
4,924
42,601
8,182
1,409
61,329
305,793
477,387
—
92,822
96,917
189,739
84,602
163,296
19,731
740,033
45,638
1,225,375
383,420
46,942
7,062
2,448,470
74,423
6,987
36,164
6,213
—
55,809
259,155
438,751
53,149
101,618
100,479
255,246
—
—
932
927,368
1,039,491
(36,151)
8,651
1,940,291
2,607,417
$
927
905,662
836,008
—
11,876
1,754,473
2,448,470
$
$
$
The accompanying notes are an integral part of the consolidated financial statements.
56
Table of Contents
ANSYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Revenue:
Software licenses
Maintenance and service
Total revenue
Cost of sales:
Software licenses
Amortization
Maintenance and service
Total cost of sales
Gross profit
Operating expenses:
Selling, general and administrative
Research and development
Amortization
Total operating expenses
Operating income
Interest expense
Interest income
Other expense, net
Income before income tax provision
Income tax provision
Net income
Earnings per share – basic:
Basic earnings per share
Weighted average shares – basic
Earnings per share – diluted:
Diluted earnings per share
Weighted average shares – diluted
Year Ended December 31,
2012
2011
2010
$
501,870
$
425,881
$
351,033
296,148
798,018
24,512
40,889
74,115
139,516
658,502
205,178
132,628
26,443
364,249
294,253
(2,661)
3,360
(1,405)
293,547
90,064
203,483
2.20
92,622
$
$
265,568
691,449
15,884
33,728
69,402
119,014
572,435
180,357
108,530
17,989
306,876
265,559
(3,332)
3,000
(369)
264,858
84,183
180,675
1.96
92,120
$
$
2.14
$
1.91
$
94,954
94,381
229,203
580,236
10,770
32,757
57,352
100,879
479,357
155,096
88,990
16,003
260,089
219,268
(4,488)
1,911
(297)
216,394
63,262
153,132
1.69
90,684
1.64
93,209
$
$
$
The accompanying notes are an integral part of the consolidated financial statements.
57
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ANSYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments
Net gains on interest rate swap
Comprehensive income
Year Ended December 31,
2012
203,483
$
2011
2010
$
180,675
$
153,132
(3,225)
—
(5,086)
—
7,618
532
$
200,258
$
175,589
$
161,282
The accompanying notes are an integral part of the consolidated financial statements.
58
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ANSYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Deferred income tax benefit
Provision for bad debts
Stock-based compensation expense
Excess tax benefits from stock options
Other
Changes in operating assets and liabilities:
Accounts receivable
Other receivables and current assets
Other long-term assets
Accounts payable, accrued expenses and current liabilities
Accrued income taxes
Deferred revenue
Other long-term liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Acquisitions, net of cash acquired
Capital expenditures
Purchases of short-term investments
Maturities of short-term investments
Net cash used in investing activities
Cash flows from financing activities:
Principal payments on long-term debt
Principal payments on capital leases
Purchase of treasury stock
Contingent consideration payments
Proceeds from issuance of common stock under Employee Stock Purchase Plan
Proceeds from exercise of stock options
Excess tax benefits from stock options
Net cash used in financing activities
Effect of exchange rate fluctuations on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental disclosures of cash flow information:
Income taxes paid
Interest paid
Year Ended December 31,
2012
2011
2010
$ 203,483
$ 180,675
$ 153,132
85,422
(18,896)
938
32,415
(13,888)
69
(12,401)
(50,485)
5,027
9,548
14,616
47,748
(5,181)
298,415
(45,075)
(23,977)
(228)
324
(68,956)
(74,408)
(14)
(95,477)
(3,241)
2,446
31,960
13,888
(124,846)
262
104,875
471,828
65,955
(3,021)
404
23,088
(10,046)
180
(8,086)
(16,926)
(1,390)
18,222
9,668
49,973
(1,035)
307,661
(269,486)
(22,063)
(351)
257
(291,643)
(31,889)
(87)
(12,704)
—
2,167
22,791
10,046
(9,676)
(6,993)
(651)
472,479
60,826
(26,641)
1,757
19,019
(11,753)
19
(11,149)
(61,467)
(60,365)
16,542
10,608
28,817
47,539
166,884
—
(14,260)
(1,075)
8,687
(6,648)
(65,630)
(283)
—
—
1,592
22,929
11,753
(29,639)
6,004
136,601
335,878
$ 576,703
$ 471,828
$ 472,479
$ 103,196
$
64,731
$ 131,861
1,970
1,858
2,980
The accompanying notes are an integral part of the consolidated financial statements.
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ANSYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
Shares
Amount
Common Stock
Additional
Paid-in
Capital
Retained
Earnings
Treasury Stock
Shares
Amount
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
89,716
$
897
$
801,574
$
502,201
41
$
(853) $
8,812
$
1,312,631
Balance, January 1,
2010
Stock-based compensation
activity, including tax
benefit of $12,022
Issuance of common stock
under Employee Stock
Purchase Plan
Net gains on interest rate
swap, net of tax of $321
Other comprehensive gain
Net income for the year
Balance, December 31,
2010
Treasury shares acquired
Stock-based compensation
awards issued in Apache
acquisition
Stock-based compensation
activity, including tax
benefit of $9,984
Issuance of common stock
under Employee Stock
Purchase Plan
Other comprehensive loss
Net income for the year
Balance, December 31,
2011
Treasury shares acquired
Stock-based compensation
activity, including tax
benefit of $14,216
Issuance of common stock
under Employee Stock
Purchase Plan
Other comprehensive loss
Net income for the year
Balance, December 31,
2012
1,883
19
53,552
(41)
853
48
1,592
153,132
91,647
916
856,718
655,333
—
247
—
(12,704)
54,424
1,592
532
7,618
153,132
532
7,618
16,962
1,529,929
955
50
10
1
3,170
43,608
2,166
(247)
12,704
180,675
(5,086)
92,652
927
905,662
836,008
—
1,500
—
(95,477)
11,876
1,754,473
525
25
5
20,791
(939)
57,795
915
(25)
1,531
(3,225)
203,483
93,202
$
932
$
927,368
$ 1,039,491
536
$
(36,151) $
8,651
$
1,940,291
(12,704)
3,170
56,322
2,167
(5,086)
180,675
(95,477)
78,591
2,446
(3,225)
203,483
The accompanying notes are an integral part of the consolidated financial statements.
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1. Organization
ANSYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012
ANSYS, Inc. (hereafter the "Company" or "ANSYS") develops and globally markets engineering simulation software and
services widely used by engineers, designers, researchers and students across a broad spectrum of industries and academia,
including aerospace, automotive, manufacturing, electronics, biomedical, energy and defense.
In connection with its acquisitions of Esterel Technologies, S.A. ("Esterel") and Apache Design, Inc. ("Apache") on August 1,
2012 and 2011, respectively, the Company has reviewed the accounting guidance issued for disclosures about segments of an
enterprise. As defined by the accounting guidance, the Company operates as three segments. However, the Company
determined that its three operating segments are sufficiently similar and should be aggregated under the criteria provided in the
related accounting guidance.
Given the integrated approach to the multi-discipline problem-solving needs of the Company’s customers, a single sale of
software may contain components from multiple product areas and include combined technologies. The Company also has a
multi-year product and integration strategy that will result in new, combined products or changes to the historical product
offerings. As a result, it is impracticable for the Company to provide accurate historical or current reporting among its various
product lines.
2. Accounting Policies
ACCOUNTING PRINCIPLES: The financial statements and accompanying notes are prepared in accordance with accounting
principles generally accepted in the United States.
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in
the United States requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the
amounts of revenue and expenses during the reported periods. Significant estimates included in these consolidated financial
statements include allowances for doubtful accounts receivable, income tax accruals, uncertain tax positions and tax valuation
reserves, fair value of stock-based compensation, contract revenue, useful lives for depreciation and amortization, loss
contingencies, valuation of goodwill and indefinite-lived intangible assets, contingent consideration and deferred
compensation. Actual results could differ from these estimates. Changes in estimates are recorded in the results of operations in
the period that the changes occur.
REVENUE RECOGNITION: Revenue is derived principally from the licensing of computer software products and from
related maintenance contracts. Revenue from perpetual licenses is classified as license revenue and is recognized upon delivery
of the licensed product and the utility that enables the customer to access 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. The Company determines the fair value of post-contract customer support (“PCS”) sold together with
perpetual licenses based on the rate charged for PCS when sold separately. Revenue from PCS contracts is classified as
maintenance and service revenue and is recognized ratably over the term of the contract.
Revenue for software lease licenses is classified as license revenue and is recognized over the period of the lease contract.
Typically, the Company’s software leases include PCS which, due to the short term (principally one year or less) of the
Company’s software lease licenses, cannot be separated from lease revenue for accounting purposes. As a result, both the lease
license and PCS are recognized ratably over the lease period. Due to the short-term nature of the software lease licenses and the
frequency with which the Company provides major product upgrades (typically every 12–18 months), the Company does not
believe that a significant portion of the fee paid under the arrangement is attributable to the PCS component of the arrangement
and, as a result, includes the revenue for the entire arrangement within software license revenue in the consolidated statements
of income.
The Company's Apache products are typically licensed via longer term leases of 24–36 months. The Company recognizes
revenue for these licenses over the term of the lease contract. Because the Company does not have vendor-specific objective
evidence of the fair value of these leases, the Company also recognizes revenue from perpetual licenses over the term of the
lease contract during the infrequent occurrence of these licenses being sold with Apache leases in multiple-element
arrangements.
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Revenue from training, support and other services is recognized as the services are performed. The Company applies the
specific performance method to contracts in which the service consists of a single act, such as providing a training class to a
customer, and the proportional performance method to other service contracts that are longer in duration and often include
multiple acts (for example, both training and consulting). In applying the proportional performance method, the Company
typically utilizes output-based estimates for services with contractual billing arrangements that are not based on time and
materials, and estimates output based on the total tasks completed as compared to the total tasks required for each work
contract. Input-based estimates are utilized for services that involve general consultations with contractual billing arrangements
based on time and materials, utilizing direct labor as the input measure.
The Company also executes arrangements through independent channel partners in which the channel partners are authorized
to market and distribute the Company’s software products to end end-users of the Company’s products and services in specified
territories. In sales facilitated by channel partners, the channel partner bears the risk of collection from the end-user customer.
The Company recognizes revenue from transactions with channel partners when the channel partner submits a written purchase
commitment, collectibility from the channel partner is probable, a signed license agreement is received from the end-user
customer and delivery has occurred, provided that all other revenue recognition criteria are satisfied. Revenue from channel
partner transactions is the amount remitted to the Company by the channel partners. This amount includes a fee for PCS that is
compensation for providing technical enhancements and the second level of technical support to the end-user, which is based
on the rate charged for PCS when sold separately, and is recognized over the period that PCS is to be provided. The Company
does not offer right of return, product rotation or price protection to any of its channel partners.
Non-income related taxes collected from customers and remitted to governmental authorities are recorded on the consolidated
balance sheet as accounts receivable and accrued expenses. The collection and payment of these amounts are reported on a net
basis in the consolidated statements of income and do not impact reported revenues or expenses.
The Company warrants to its customers that its software will substantially perform as specified in the Company’s most current
user manuals. The Company has not experienced significant claims related to software warranties beyond the scope of
maintenance support, which the Company is already obligated to provide, and consequently the Company has not established
reserves for warranty obligations.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents consist primarily of highly liquid investments such as
deposits held at major banks and money market mutual funds with original maturities of three months or less. Cash equivalents
are carried at cost, which approximates fair value. The Company’s cash and cash equivalents balances comprise the following:
(in thousands, except percentages)
Cash accounts
Money market mutual funds
Time deposits
Total
December 31, 2012
December 31, 2011
Amount
% of Total
Amount
% of Total
$
$
369,724
206,979
—
576,703
64.1
35.9
—
$
$
289,298
181,198
1,332
471,828
61.3
38.4
0.3
The Company held 98% and 100% of its money market mutual fund balances in various funds of a single issuer as of
December 31, 2012 and December 31, 2011, respectively.
SHORT-TERM INVESTMENTS: Short-term investments consist primarily of deposits held by certain foreign subsidiaries of
the Company with original maturities of three months to one year. The Company considers investments backed by government
agencies or financial institutions with maturities of less than one year to be highly liquid and classifies such investments as
short-term investments. Short-term investments are recorded at fair value. The Company uses the specific identification method
to determine the realized gain or loss upon the sale of such securities.
The Company is averse to principal loss and seeks to preserve invested funds by limiting default risk, market risk and
reinvestment risk by placing its investments with high-quality credit issuers.
PROPERTY AND EQUIPMENT: Property and equipment is stated at cost. Depreciation is computed on the straight-line
method over the estimated useful lives of the various classes of assets, which range from one to 40 years. Repairs and
maintenance are charged to expense as incurred. Gains or losses from the sale or retirement of property and equipment are
included in operating income.
RESEARCH AND DEVELOPMENT COSTS: Research and development costs, other than certain capitalized software
development costs, are expensed as incurred.
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CAPITALIZED SOFTWARE: Internally developed computer software costs and costs of product enhancements are
capitalized subsequent to the determination of technological feasibility; such capitalization continues until the product becomes
available for commercial release. Judgment is required in determining when technological feasibility of a product is
established. The Company has determined that technological feasibility is reached after all high-risk development issues have
been resolved through coding and testing. Generally, the time between the establishment of technological feasibility and
commercial release of software is minimal, resulting in insignificant or no capitalization of internally developed software costs.
Amortization of capitalized software costs, both for internally developed as well as for purchased software products, is
computed on a product-by-product basis over the estimated economic life of the product, which is generally three years.
Amortization is the greater of the amount computed using: (i) the ratio of the current year’s gross revenue to the total current
and anticipated future gross revenue for that product or (ii) the straight-line method over the estimated life of the product.
Amortization expense related to capitalized and acquired software costs, including the related trademarks, was $40.9 million,
$33.7 million and $32.8 million for the years ended December 31, 2012, 2011 and 2010, respectively.
The Company periodically reviews the carrying value of capitalized software. Impairments are recognized in the results of
operations when the expected future undiscounted operating cash flow derived from the capitalized costs of internally
developed software is less than the carrying value. No impairment charges have been required to date.
GOODWILL AND OTHER INTANGIBLE ASSETS: Goodwill represents the excess of the consideration transferred over the
fair value of net identifiable assets acquired. Intangible assets consist of trademarks, customer lists, contract backlog, and
acquired software and technology.
The Company tests goodwill for impairment at least annually by performing a qualitative assessment of whether there is
sufficient evidence that it is more likely than not that the fair value of each reporting unit exceeds its carrying amount. The
application of a qualitative assessment requires the Company to assess and make judgments regarding a variety of factors
which potentially impact the fair value of a reporting unit, including general economic conditions, industry and market-specific
conditions, customer behavior, cost factors, the Company’s financial performance and trends, the Company’s strategies and
business plans, capital requirements, management and personnel issues, and the Company’s stock price, among others. The
Company then considers the totality of these and other factors, placing more weight on the events and circumstances that are
judged to most affect a reporting unit’s fair value or the carrying amount of its net assets, to reach a qualitative conclusion
regarding whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
If it is determined that it is more likely than not that the fair value of a reporting unit exceeds its carrying value, no further
analysis is necessary. If it is determined that it is more likely than not the reporting unit's carrying value exceeds its fair value, a
quantitative two-step analysis is performed where the fair value of the reporting unit is estimated and the impairment loss, if
any, is recorded.
The Company tests indefinite-lived intangible assets for impairment at least annually by comparing the carrying value of the
asset to its estimated fair value. The Company performs its annual goodwill and indefinite-lived intangible assets impairment
test on January 1 of each year unless there is an indicator that would require a test during the year.
The Company periodically reviews the carrying value of other intangible assets and will recognize impairments when events or
circumstances indicate that such assets may be impaired.
No impairment charges have been required to date for the Company's goodwill and other intangible assets.
CONCENTRATIONS OF CREDIT RISK: The Company has a concentration of credit risk with respect to revenue and trade
receivables due to the use of certain significant channel partners to market and sell the Company’s products. The Company
performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. The
following table outlines concentrations of risk with respect to the Company’s revenue:
(as a % of revenue, except customer data)
Revenue from channel partners
Largest channel partner
2nd largest channel partner
Direct sale customers exceeding 5% of revenue
Year Ended December 31,
2012
2011
2010
26%
6%
3%
—
26%
4%
3%
—
27%
4%
3%
—
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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 certain cash and cash equivalent accounts that are
currently insured by the Federal Deposit Insurance Corporation (“FDIC”) for up to $250,000 per depositor or by the Securities
Investor Protection Corporation (“SIPC”) for up to $500,000 per customer. As of December 31, 2012, the Company had cash
and cash equivalent balances of $394.6 million held in the U.S. which were uninsured by the FDIC or SIPC, and $164.5 million
of uninsured cash and cash equivalent balances held outside of the U.S. The Company held cash and cash equivalent balances
with one U.S. financial institution as of December 31, 2012 in the amount of $296.3 million.
ALLOWANCE FOR DOUBTFUL ACCOUNTS: The Company 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 value and delinquency perspectives. For those invoices
not specifically reviewed, provisions are provided at differing rates based upon the age of the receivable and the geographic
area of origin. In determining these percentages, the Company considers its historical collection experience and current
economic trends in the customer’s industry and geographic region. The Company recorded provisions for doubtful accounts of
$0.9 million, $0.4 million and $1.8 million for the years ended December 31, 2012, 2011 and 2010, respectively.
INCOME TAXES: The Company accounts for income taxes under the asset and liability method, which requires the
recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in
the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between
the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in
income in the period of the enactment date.
The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In
making such determination, the Company considers all available positive and negative evidence, including scheduled reversals
of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In the event
the Company determines that it will be able to realize deferred income tax assets in the future in excess of their net recorded
amount, an adjustment to the valuation allowance would be recorded that would reduce the provision for income taxes.
Tax benefits related to uncertain tax positions taken or expected to be taken on a tax return are recorded when such benefits
meet a more likely than not threshold. Otherwise, these tax benefits are recorded when a tax position has been effectively
settled, which means that the statute of limitations has expired or the appropriate taxing authority has completed their
examination even though the statute of limitations remains open. The Company recognizes interest and penalties related to
unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of income. Accrued
interest and penalties are included within the related tax liability line in the consolidated balance sheets.
FOREIGN CURRENCIES: Certain of the Company’s sales and intercompany transactions are denominated in foreign
currencies. These transactions are translated to the functional currency at the exchange rate on the transaction date. Accounts
receivable and intercompany balances in foreign currencies at year end are translated at the effective exchange rate on the
balance sheet date. Gains and losses resulting from foreign exchange transactions are included in other income. The Company
recorded net foreign exchange losses of $1.4 million, $0.4 million and $0.4 million for the years ended December 31, 2012,
2011 and 2010, respectively.
The financial statements of the Company’s foreign subsidiaries are translated from the functional (local) currency to U.S.
Dollars. Assets and liabilities are translated at the exchange rates on the balance sheet date. Results of operations are translated
at average exchange rates, which approximate rates in effect when the underlying transactions occur.
ACCUMULATED OTHER COMPREHENSIVE INCOME: Accumulated other comprehensive income is composed entirely
of foreign currency translation adjustments.
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EARNINGS PER SHARE: Basic earnings per share (“EPS”) amounts are computed by dividing earnings by the weighted
average number of common shares outstanding during the period. Diluted EPS amounts assume the issuance of common stock
for all potentially dilutive equivalents outstanding. To the extent stock options are anti-dilutive, they are excluded from the
calculation of diluted EPS. The details of basic and diluted EPS are as follows:
(in thousands, except per share data)
Net income
Weighted average shares outstanding – basic
Dilutive effect of stock plans
Weighted average shares outstanding – diluted
Basic earnings per share
Diluted earnings per share
Anti-dilutive options
Year Ended December 31,
2012
2011
2010
$
$
$
203,483
92,622
2,332
94,954
2.20
2.14
1,506
$
$
$
180,675
92,120
2,261
94,381
1.96
1.91
1,421
$
$
$
153,132
90,684
2,525
93,209
1.69
1.64
1,867
STOCK-BASED COMPENSATION: The Company accounts for stock-based compensation in accordance with share-based
payment accounting guidance. The guidance requires an entity to measure the cost of employee services received in exchange
for an award of equity instruments based on the grant-date fair value of the award. The cost is recognized over the period
during which an employee is required to provide service in exchange for the award, typically the vesting period.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The Company accounts for certain assets and liabilities at fair value in
accordance with the accounting guidance applicable to fair value measurements and disclosures. The carrying values of cash,
cash equivalents, accounts receivable, accounts payable, accrued expenses, other accrued liabilities and short-term obligations
are deemed to be reasonable estimates of their fair values because of their short-term nature. The fair values of investments are
based on quoted market prices for those or similar investments. The carrying value of long-term debt is considered a reasonable
estimate of fair value due to the variable interest rate underlying the Company’s credit facility.
DERIVATIVE FINANCIAL INSTRUMENTS: Until its maturity on June 30, 2010, the Company held a derivative financial
instrument to manage interest rate risk on its term loan. The Company accounted for this instrument as a cash flow hedge in
accordance with derivative instruments and hedging activities accounting guidance, which requires that every derivative
instrument be recorded on the balance sheet as either an asset or liability measured at its fair value as of the reporting date. This
guidance also requires that changes in the Company’s derivative fair value be recognized in earnings unless specific hedge
accounting and documentation criteria are met. The Company recorded the effective portion of its derivative financial
instrument in accumulated other comprehensive income on the consolidated balance sheets. Any ineffective portion or excluded
portion of the designated cash flow hedge was recognized in earnings. The Company’s cash flow hedge did not have an
ineffective or excluded portion. The Company utilized the hypothetical derivative method to ensure the hedge was effective in
offsetting variability in interest expense associated with its credit facility. The Company used the dollar offset method for
calculating ineffectiveness by comparing the cumulative fair value of the swap to the cumulative fair value of the hypothetical
derivative.
NEW ACCOUNTING GUIDANCE:
Fair Value Measurements: In May 2011, new accounting guidance was issued to provide a consistent definition of fair value
and to ensure that the fair value measurement and disclosure requirements are similar between generally accepted accounting
principles in the United States and International Financial Reporting Standards. The guidance changes certain fair value
measurement principles and enhances the disclosure requirements, particularly for Level 3 fair value measurements. This
guidance was adopted by the Company effective January 1, 2012, and it did not have any impact on the Company’s financial
position, results of operations or cash flows.
Presentation of Comprehensive Income: In June 2011, new accounting guidance was issued regarding the presentation of
comprehensive income in consolidated financial statements. This guidance requires that all non-owner changes in stockholders’
equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive
statements. This guidance was retrospectively adopted by the Company effective January 1, 2012, and all non-owner changes
in stockholders’ equity were presented in a separate statement.
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Testing Goodwill for Impairment: In September 2011, new accounting guidance was issued which simplifies how entities test
goodwill for impairment and permits an entity to first assess qualitative factors to determine whether it is more likely than not
that the fair value of a reporting unit is less than its carrying value amount and as a basis for determining whether it is necessary
to perform the two-step goodwill impairment test. Alternatively, the Company may elect to proceed directly to the two-step
goodwill impairment test. If, after assessing the totality of qualitative factors, an entity determines it is not more likely than not
that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is
unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment
test. This guidance was adopted by the Company effective January 1, 2012, and it did not have any impact on the Company's
financial position, results of operations or cash flows.
Testing Indefinite-Lived Intangible Assets for Impairment: In July 2012, new accounting guidance was issued regarding the
requirement to test indefinite-lived intangible assets for impairment on at least an annual basis. Previous guidance required an
entity to test indefinite-lived intangible assets for impairment, on at least an annual basis, by comparing the fair value of the
asset with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an entity should recognize
an impairment loss in the amount of that excess. Under the new guidance, an entity will have an option not to calculate
annually the fair value of an indefinite-lived intangible asset if the entity determines that it is not more likely than not that the
asset is impaired. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not
that the asset is impaired, then performing the quantitative test is unnecessary. However, if an entity concludes otherwise, then
it is required to perform the quantitative test and record any impairment if necessary. This guidance will be effective for the
Company as of January 1, 2013.
3. Acquisitions
Esterel Technologies, S.A.
On August 1, 2012, the Company completed its acquisition of Esterel. Under the terms of the acquisition agreement, ANSYS
acquired 100% of Esterel for a purchase price of $58.2 million, which included $13.1 million in acquired cash. The acquisition
agreement also includes retention provisions for key members of Esterel's management and employees, which are accounted
for outside of the business combination. The Company funded the transaction entirely with existing cash balances.
Esterel's software enables software and systems engineers to design, simulate and automatically produce certified embedded
software, which is the control code built into the electronics in aircraft, rail transportation, automotive, energy systems, medical
devices and other industrial products that have central processing units. The complementary combination is expected to
accelerate development of new and innovative products to the marketplace while lowering design and engineering costs for
customers.
The operating results of Esterel have been included in the Company's consolidated financial statements since the date of
acquisition, August 1, 2012. The acquired business contributed revenues of $3.3 million and a net loss of $3.8 million to the
Company during the period from August 1, 2012 to December 31, 2012.
During the year ended December 31, 2012, the Company incurred $0.9 million in acquisition-related transaction costs. These
costs are included in selling, general and administrative expenses in the Company's consolidated statements of income for the
year ended December 31, 2012.
In valuing deferred revenue on the Esterel balance sheet as of the acquisition date, the Company applied the fair value
provisions applicable to the accounting for business combinations. Although this acquisition accounting requirement had no
impact on the Company’s business or cash flow, the Company’s reported revenue under accounting principles generally
accepted in the United States, primarily for the first 12 months post-acquisition, will be less than the sum of what would
otherwise have been reported by Esterel and ANSYS absent the acquisition. Acquired deferred revenue of $1.1 million was
recorded on the opening balance sheet. This amount was $11.0 million lower than the historical carrying value. The impact on
reported revenue for the year ended December 31, 2012 was $6.2 million. The expected impact on reported revenue is $1.6
million and $4.1 million for the quarter ending March 31, 2013 and for the year ending December 31, 2013, respectively.
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The assets and liabilities of Esterel have been recorded based upon management's estimates of their fair market values as of the
acquisition date. The following tables summarize the fair value of consideration transferred and the fair values of identified
assets acquired and liabilities assumed at the acquisition date:
Fair Value of Consideration Transferred:
(in thousands)
Cash
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
(in thousands)
Cash
Accounts receivable and other tangible assets
Customer relationships (12-year life)
Developed software (10-year life)
Platform trade name (indefinite life)
Accounts payable and other liabilities
Deferred revenue
Net deferred tax liabilities
Total identifiable net assets
Goodwill
$
$
$
$
58,150
13,075
4,737
21,421
10,717
2,695
(4,936)
(1,139)
(9,286)
37,284
20,866
The goodwill, which is not tax-deductible, is attributed to intangible assets that do not qualify for separate recognition,
including the assembled workforce of the acquired business and the synergies expected to arise as a result of the acquisition of
Esterel. The fair values of the assets acquired and liabilities assumed that are listed above are based on preliminary calculations
and the estimates and assumptions for these items are subject to change as additional information about what was known and
knowable at the acquisition date is obtained during the measurement period (up to one year from the acquisition date). The
purchase price for Esterel was based on a preliminary estimate of the acquiree's net cash position, as defined in the merger
agreement. As a result of the post-acquisition settlement of Esterel's net cash position, the purchase price was reduced by $1.3
million, resulting in a reduction to goodwill of the same amount.
Pro forma results of operations have not been presented as the effects of the Esterel business combination were not material to
the Company's consolidated results of operations.
Apache Design, Inc.
On August 1, 2011, the Company completed its acquisition of Apache, a leading simulation software provider for advanced,
low-power solutions in the electronics industry. Under the terms of the merger agreement, ANSYS acquired 100% of the
outstanding shares of Apache for a purchase price of $314.0 million, which included $31.9 million in acquired cash and short-
term investments on Apache’s balance sheet, $3.2 million in ANSYS replacement stock options issued to holders of partially-
vested Apache stock options and $9.5 million in contingent consideration that is based on the retention of a key member of
Apache’s management. The Company funded the transaction entirely with existing cash balances. The operating results of
Apache have been included in the Company’s consolidated financial statements since the date of acquisition, August 1, 2011.
The merger agreement includes a contingent consideration arrangement that requires additional payments of up to $12.0
million to be paid by the Company in equal installments to the Apache stockholders and holders of vested Apache options on
each of the first three anniversaries of the closing of the acquisition. To receive these payments, a key member of Apache’s
management must remain an employee of ANSYS on each of the first three anniversaries of the acquisition closing date.
Management estimated that it was probable that all three payments would be made, and recorded the fair value of the
contingent payments as a liability on the date of acquisition. The portion of contingent payments attributable to the key member
of Apache management was determined to be compensation, and is accounted for outside of the business combination. The
portion of the contingent payments attributable to other shareholders was determined to be contingent purchase price
consideration and was estimated to be $9.5 million based on the net present value of the expected payments. Refer to Note 9 for
a description of the valuation technique and inputs used to estimate the fair value of the contingent consideration. The
Company made the first contingent payment of $4.0 million on August 1, 2012.
In accordance with the merger agreement, the Company granted performance-based restricted stock units to key members of
Apache management and employees, with a maximum value of $13.0 million to be earned annually over a three-fiscal-year
period beginning January 1, 2012. Vesting of the full award or a portion thereof is determined discretely for each of the three
fiscal years based on the achievement of certain revenue and operating income targets by the Apache subsidiary, and the
recipient’s continued employment through the measurement period. The value of each restricted stock unit on the August 1,
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2011 grant date was $50.30, the closing price of ANSYS stock as of that date. Stock-based compensation expense based on the
fair value of the awards is being recorded from the January 1, 2012 service inception date through the conclusion of the three-
year measurement period based on management’s estimates concerning the probability of vesting. As of December 31, 2012,
employees earned 76,658 units, which will be issued in the first quarter of 2013, and the Company recorded related stock-based
compensation expense in the amount of $3.9 million for the year ended December 31, 2012.
Under the merger agreement, holders of partially-vested Apache options at the date of acquisition received options to purchase
ANSYS shares of common stock based on an agreed-upon conversion ratio (“the Replacement Awards”). The value of the
Replacement Awards attributable to pre-combination service was estimated to be $3.2 million at the acquisition date, and was
included in consideration transferred. The value of the Replacement Awards attributable to post-combination service is
recognized as stock-based compensation in earnings during the post-acquisition period.
In valuing deferred revenue on the Apache balance sheet as of the acquisition date, the Company applied the fair value
provisions applicable to the accounting for business combinations. Acquired deferred revenue of $10.1 million was recorded on
the opening balance sheet. This amount was $13.6 million lower than the historical carrying value. The impact on reported
revenue for the year ended December 31, 2012 was $3.4 million, primarily in lease license revenue. The expected impact on
reported revenue is $0.1 million and $0.5 million for the quarter ending March 31, 2013 and the year ending December 31,
2013, respectively.
The assets and liabilities of Apache have been recorded based on management’s estimates of their fair market values as of the
acquisition date. The following tables summarize the fair value of consideration transferred and the fair values of identifiable
assets acquired and liabilities assumed at the acquisition date:
Fair Value of Consideration Transferred:
(in thousands)
Cash
Contingent consideration
ANSYS replacement stock options
Total consideration transferred at fair value
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
(in thousands)
Cash and short-term investments
Accounts receivable and other tangible assets
Developed software (7-year life)
Customer relationships (15-year life)
Contract backlog (3-year life)
Platform trade names (indefinite lives)
Apache trade name (6-year life)
Accounts payable and other liabilities
Deferred revenue
Net deferred tax liabilities
Total identifiable net assets
Goodwill
$
$
$
$
$
301,306
9,501
3,170
313,977
31,948
6,011
82,500
36,100
13,500
21,900
2,100
(16,867)
(10,100)
(47,229)
119,863
194,114
The goodwill, which is not tax-deductible, is attributed to intangible assets that do not qualify for separate recognition,
including the assembled workforce of the acquired business and the synergies expected to arise as a result of the acquisition of
Apache. During the one-year measurement period since the Apache acquisition date, the Company increased the values of net
deferred tax liabilities from $46.1 million to $47.2 million, and identifiable intangible assets from $153.8 million to $156.1
million, with the offset recorded to goodwill. These adjustments were based on refinements to assumptions used in the
preliminary valuation of intangible assets and new information regarding what was known and knowable as of the acquisition
date in the calculation of the net deferred tax liabilities.
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The following unaudited pro forma information presents the 2010 and 2011 results of operations of the Company as if the
acquisition had occurred on January 1, 2010. The unaudited pro forma results are not necessarily indicative of results that
would have occurred had the acquisition been in effect for the periods presented, nor are they necessarily indicative of future
results. The 2010 pro forma results are based on the year ended December 31, 2010 for ANSYS, as reported, combined with the
year ended December 31, 2010 results of Apache. The 2011 pro forma results are based on ANSYS’s stand-alone results for the
year ended December 31, 2011 combined with Apache’s results for the year ended December 31, 2011. The unaudited pro
forma financial information for all periods presented includes the business combination accounting effects on amortization
expense from acquired intangible assets, lost interest income on the cash paid for the acquisition and the related tax effects. The
unaudited pro forma financial information excludes contingent payments, transaction costs, IPO-related costs incurred by
Apache prior to the acquisition, expenses related to performance awards issued as part of the acquisition and the income
statement effects of the acquisition accounting adjustment to deferred revenue. No pro forma adjustments were made to stock-
based compensation expense previously recorded by Apache.
(in thousands, except per share data)
Total revenue
Net income
Earnings per share:
Basic
Diluted
4. Other Current Assets
Year Ended December 31,
2011
2010
(Unaudited)
(Unaudited)
$
$
$
$
730,632
181,718
1.97
1.93
$
$
$
$
624,283
144,605
1.59
1.55
The Company reports accounts receivable related to the current portion of annual lease licenses and software maintenance that
has not yet been recognized as revenue as components of other receivables and current assets. The amounts reported in other
receivables and current assets totaled $149.3 million and $112.8 million as of December 31, 2012 and December 31, 2011,
respectively.
The Company reports income taxes receivable, including amounts related to overpayments and refunds, as a component of
other receivables and current assets. These amounts totaled $48.9 million and $36.0 million as of December 31, 2012 and
December 31, 2011, respectively.
5. Other Long-Term Liabilities
The Company reports reserves for uncertain tax positions, including estimated penalties and interest, as a component of other
long-term liabilities. These amounts totaled $37.0 million and $35.5 million as of December 31, 2012 and December 31, 2011,
respectively.
6. Property and Equipment
Property and equipment consists of the following:
(dollars in thousands)
Equipment
Computer software
Buildings
Leasehold improvements
Furniture
Land
Less: Accumulated depreciation and amortization
Estimated Useful Lives
1-10 years
1-5 years
10-40 years
1-10 years
1-13 years
December 31,
2012
2011
$
$
59,580
26,864
15,122
7,334
4,457
2,178
115,535
(63,282)
52,253
$
$
55,221
26,709
10,469
7,394
5,007
1,749
106,549
(60,911)
45,638
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Depreciation and amortization expense related to property and equipment, including the amounts acquired through capital lease
commitments, was $17.4 million, $13.3 million and $10.9 million for the years ended December 31, 2012, 2011 and 2010,
respectively.
7. Goodwill and Intangible Assets
Goodwill represents the excess of the fair value of the consideration transferred over the value of net tangible and identifiable
intangible assets of acquired businesses. Identifiable intangible assets acquired in business combinations are recorded based
upon their fair values on the date of acquisition.
During the first quarter of 2012, the Company completed the annual impairment test for goodwill and indefinite-lived
intangible assets and determined that these assets had not been impaired as of the test date, January 1, 2012. The Company
performed a qualitative assessment to test goodwill for impairment, and as of the test date, there was sufficient evidence that it
was not more likely than not that the fair values of its reporting units were less than their carrying amounts.
The Company tested the indefinite-lived intangible assets utilizing estimated cash flow methodologies and market-based
information to estimate the fair value of the assets, and determined the assets were not impaired as of the test date.
No events occurred or circumstances changed during the year ended December 31, 2012 that would indicate that the fair values
of the Company’s reporting units and indefinite-lived intangible assets are below their carrying amounts.
As of December 31, 2012 and December 31, 2011, the Company’s intangible assets and estimated useful lives are classified as
follows:
(in thousands)
Amortized intangible assets:
December 31, 2012
December 31, 2011
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Developed software and core technologies (7 – 10 years)
$
298,802
Customer lists and contract backlog (3 – 15 years)
Trade names (6 – 10 years)
Total
Unamortized intangible assets:
Trade names
$
$
$ (175,988) $
(100,702)
(40,436)
$ (317,126) $
287,392
223,037
102,580
613,009
$ (144,836)
(76,630)
(30,380)
$ (251,846)
241,721
102,629
643,152
25,147
$
22,257
The increase in the intangible assets reflected above was due to the August 1, 2012 acquisition of Esterel. Amortization expense
for the intangible assets reflected above was $67.3 million, $51.7 million and $48.7 million for the years ended December 31,
2012, 2011 and 2010, respectively.
As of December 31, 2012, estimated future amortization expense for the intangible assets reflected above is as follows:
(in thousands)
2013
2014
2015
2016
2017
Thereafter
Total intangible assets subject to amortization
Indefinite-lived trade names
Other intangible assets, net
70
$
$
59,952
53,832
50,232
43,079
39,483
79,448
326,026
25,147
351,173
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The changes in goodwill during the years ended December 31, 2012 and 2011 are as follows:
(in thousands)
Beginning balance – January 1, 2012
Acquisitions of Esterel and Apache, respectively
Currency translation and other
Ending balance – December 31, 2012
8. Long-Term Debt
Borrowings consist of the following:
Year Ended December 31,
2012
2011
$ 1,225,375
$ 1,035,083
20,866
5,006
$ 1,251,247
190,947
(655)
$ 1,225,375
(in thousands)
Term loan payable in quarterly installments with a final maturity of July 31, 2013
Capitalized lease obligations
Total
Less current portion
Long-term debt and capital lease obligations, net of current portion
December 31,
2012
2011
53,149
$
127,557
—
53,149
(53,149)
— $
15
127,572
(74,423)
53,149
$
$
On July 31, 2008, ANSYS borrowed $355.0 million from a syndicate of banks. The interest rate on the indebtedness provides
for tiered pricing with the initial rate at the prime rate +0.50%, or the LIBOR rate +1.50%, with step downs permitted after the
initial six months under the credit agreement down to a flat prime rate or the LIBOR rate +0.75%. Such tiered pricing is
determined by the Company’s consolidated leverage ratio. The Company’s consolidated leverage ratio has been reduced to the
lowest pricing tier in the debt agreement. During the year ended December 31, 2012, the Company made the required quarterly
principal payments of $74.4 million in the aggregate.
The Company entered into an interest rate swap agreement in order to hedge a portion of each of the first eight forecasted
quarterly variable rate interest payments on the Company’s term loan. The interest rate swap agreement terminated on June 30,
2010.
For the years ended December 31, 2012, 2011 and 2010, the Company recorded interest expense related to the term loan at
average interest rates of 1.22%, 1.05% and 1.53%, respectively. If the Company did not enter into the interest rate swap
agreement, the weighted average interest rate would have been 1.08% for the year ended December 31, 2010. The interest
expense on the term loan and amortization related to debt financing costs were as follows:
(in thousands)
July 31, 2008 term loan (interest
expense includes $0, $0 and
$864 loss, respectively, on
interest rate swap)
2012
Year Ended December 31,
2011
2010
Interest
Expense
Amortization
Interest
Expense
Amortization
Interest
Expense
Amortization
$
1,342
$
698
$
1,605
$
953
$
2,960
$
1,107
The interest rate on the outstanding term loan balance of $53.1 million is set for the quarter ending March 31, 2013 at 1.06%,
which is based on LIBOR +0.75%. The required future principal payments on the Company’s term loan as of December 31,
2012 are scheduled as follows:
(in thousands)
March 31, 2013
July 31, 2013 (maturity)
Term loan balance payable as of December 31, 2012
$
$
26,574
26,575
53,149
The credit agreement includes covenants related to the consolidated leverage ratio and the consolidated fixed charge coverage
ratio, as well as certain restrictions on additional investments and indebtedness.
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9. Fair Value Measurement
The valuation hierarchy for disclosure of assets and liabilities reported at fair value prioritizes the inputs for such valuations
into three broad levels:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or
liability, either directly or indirectly through market corroboration, for substantially the full term of the financial
instrument; or
• Level 3: unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair
value.
A financial asset's or liability’s classification within the hierarchy is determined based on the lowest level input that is
significant to the fair value measurement.
The following tables provide the assets and liabilities carried at fair value and measured on a recurring basis:
(in thousands)
Assets
Cash equivalents
Short-term investments
Liabilities
Contingent consideration
Deferred compensation
Foreign currency future
(in thousands)
Assets
Cash equivalents
Short-term investments
Liabilities
Contingent consideration
Deferred compensation
Fair Value Measurements at Reporting Date Using:
December 31,
2012
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
206,979
452
$
$
206,979
$
— $
(6,436) $
(1,394) $
(240) $
— $
— $
— $
— $
452
$
— $
— $
(240) $
—
—
(6,436)
(1,394)
—
Fair Value Measurements at Reporting Date Using:
December 31,
2011
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
182,530
576
$
$
181,198
$
— $
1,332
576
$
$
—
—
(9,571) $
(2,073) $
— $
— $
— $
— $
(9,571)
(2,073)
$
$
$
$
$
$
$
$
$
The cash equivalents in the preceding tables represent money market mutual funds and time deposits.
The short-term investments in the preceding tables represent deposits held by certain foreign subsidiaries of the Company. The
deposits have fixed interest rates with maturity dates ranging from three months to one year. There were no unrealized gains or
losses associated with these deposits for the years ended December 31, 2012 and 2011.
In August 2012, the Company entered into a foreign currency futures contract with a third-party U.S. financial institution,
which will be settled in July 2013. The purpose of this contract is to mitigate the Company's exposure to foreign exchange risk
arising from intercompany receivables from a United Kingdom subsidiary. As of December 31, 2012, the Company's foreign
exchange future is in a liability position of $240,000. The foreign exchange future is measured at fair value each reporting
period, with gains or losses recognized in other expense in the Company's consolidated statements of income.
On August 1, 2011, the Company completed its acquisition of Apache, a leading simulation software provider for advanced,
low-power solutions in the electronics industry. The merger agreement includes a contingent consideration arrangement that
requires additional payments of up to $12.0 million to be paid by the Company in equal installments to the Apache stockholders
and holders of vested Apache options on each of the first three anniversaries of the closing of the acquisition. To receive these
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payments, a key member of Apache’s management must remain an employee of ANSYS on each of the first three anniversaries
of the acquisition closing date. Management estimated that it was probable that all three payments would be made, and
recorded the fair value of the contingent payments as a liability on the date of acquisition. The portion of contingent payments
attributable to the key member of Apache management was determined to be deferred compensation, and is accounted for
outside of the business combination. The Company paid the first $4.0 million installment for these contingent payments on
August 1, 2012. A liability of $1.4 million for deferred compensation was recorded as of December 31, 2012 based on the net
present value of the expected remaining payments. The portion of the contingent payments attributable to other shareholders
was determined to be contingent purchase price consideration and was estimated to be $6.4 million based on the net present
value of the expected remaining payments as of December 31, 2012. The net present value calculations for the deferred
compensation and contingent consideration include a significant unobservable input in the assumption that the two remaining
payments will be made, and therefore the liabilities were classified as Level 3 in the fair value hierarchy.
The following table presents the changes during the year ended December 31, 2012 in the Company’s Level 3 liabilities for
contingent consideration and deferred compensation that are measured at fair value on a recurring basis:
(in thousands)
Balance as of January 1, 2012
Contingent payments
Interest expense included in earnings
Balance as of December 31, 2012
Fair Value Measurement Using
Significant Unobservable Inputs
Contingent
Consideration
Deferred
Compensation
$
$
9,571
(3,288)
153
6,436
$
$
2,073
(712)
33
1,394
The Company had no transfers of amounts between Level 1 or Level 2 fair value measurements during the year ended
December 31, 2012.
The carrying values of cash, accounts receivable, accounts payable, accrued expenses, other accrued liabilities and short-term
obligations approximate their fair values because of their short-term nature. The carrying value of long-term debt approximates
its fair value due to the variable interest rate underlying the Company’s credit facility.
10. Income Taxes
Income before income taxes includes the following components:
(in thousands)
Domestic
Foreign
Total
The provision for income taxes is composed of the following:
(in thousands)
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Total
Year Ended December 31,
2012
2011
2010
234,497
59,050
293,547
$
$
205,966
58,892
264,858
$
$
162,921
53,473
216,394
Year Ended December 31,
2012
2011
2010
79,028
7,886
22,046
(21,026)
(3,913)
6,043
90,064
$
$
57,423
5,770
24,011
(11,768)
(1,314)
10,061
84,183
$
$
62,350
5,589
21,964
(15,173)
(2,102)
(9,366)
63,262
$
$
$
$
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The reconciliation of the U.S. federal statutory tax rate to the consolidated effective tax rate is as follows:
Federal statutory tax rate
State income taxes, net of federal benefit
Stock-based compensation
Changes in tax rates
Net tax (benefit) of unrepatriated earnings
Uncertain tax positions
Benefit from restructuring activities
Domestic production activity benefit
Foreign rate differential
Research and experimentation credits
Adjustments of prior year taxes
Other
Year Ended December 31,
2012
2011
2010
35.0%
1.2
1.0
0.8
0.7
0.3
(3.1)
(3.3)
(1.9)
(0.1)
(1.3)
1.4
30.7%
35.0%
1.1
1.0
2.2
—
0.2
(3.5)
(2.9)
(1.1)
(0.9)
(0.3)
1.0
31.8%
35.0%
0.7
1.4
—
(0.3)
(0.8)
(1.0)
(2.8)
(0.7)
(0.7)
(1.1)
(0.5)
29.2%
In general, it is the practice and intention of the Company to repatriate previously taxed earnings and to reinvest all other
earnings of its non-U.S. subsidiaries. The Company has not made a provision for U.S. taxes on $145.6 million, representing the
excess of the amount for financial reporting over the tax bases of investments in foreign subsidiaries that are essentially
permanent in duration. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under
certain other circumstances. The residual U.S. tax cost associated with this difference is estimated to be $35.1 million. The
Company has made a tax provision of $2.0 million related to $22 million of earnings that it expects to repatriate from a foreign
subsidiary.
The components of deferred tax assets and liabilities are as follows:
(in thousands)
Deferred tax assets:
Net operating loss carryforwards
Employee benefits
Stock-based compensation
Foreign tax credits
Other accruals not currently deductible
Research and development credits
Uncertain tax positions
Deferred revenue
Allowance for doubtful accounts
Other
Valuation allowance
Deferred tax liabilities:
Other intangible assets
Property and equipment
Unremitted foreign earnings
Net deferred tax liabilities
December 31,
2012
2011
$
$
$
26,228
17,670
16,092
558
1,207
2,254
7,790
5,139
1,661
2,227
(14)
80,812
(128,671)
(5,838)
(2,204)
(136,713)
(55,901) $
18,624
16,697
11,888
7,219
6,090
4,542
3,145
3,096
1,259
1,241
(8)
73,793
(141,949)
(6,529)
(140)
(148,618)
(74,825)
As of December 31, 2012, the Company had federal net operating loss carryforwards of $4.6 million. These losses expire
between 2020 - 2028, and are subject to limitations on their utilization. The Company had state net operating loss
carryforwards of $4.1 million, which expire between 2014 and 2020, of which $4.1 million are subject to limitations on their
utilization. The Company had total foreign net operating loss carryforwards of $70.5 million, of which $20.0 million are not
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currently subject to expiration dates. The remainder, $50.5 million, expires between 2019 and 2021. The Company had tax
credit carryforwards of $4.9 million, of which $1.5 million are subject to limitations on their utilization. Approximately $2.5
million of these tax credit carryforwards are not currently subject to expiration dates. The remainder, $2.4 million, expires in
various years between 2029 and 2032.
The following is a reconciliation of the total amounts of unrecognized tax benefits:
(in thousands)
Unrecognized tax benefit as of January 1
Acquired unrecognized tax benefit
Gross increases—tax positions in prior period
Gross decreases—tax positions in prior period
Gross increases—tax positions in current period
Reductions due to a lapse of the applicable statute of limitations
Changes due to currency fluctuation
Settlements
Unrecognized tax benefit as of December 31
Year Ended December 31,
2012
2011
2010
$
$
31,582
3,845
2,048
(2,167)
2,660
(1,314)
625
(76)
37,203
$
$
19,993
5,813
6,814
(2,697)
2,297
(190)
(448)
—
31,582
$
$
10,041
—
177
(2,415)
13,001
(674)
(84)
(53)
19,993
The Company does not expect any uncertain tax positions to be resolved within the next twelve months. Of the total
unrecognized tax benefit as of December 31, 2012, $3.8 million would not affect the effective tax rate, if recognized.
The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. As of December 31,
2012, the Company accrued a liability for penalties of $2.1 million and interest of $2.5 million. As of December 31, 2011, the
Company accrued a liability for penalties of $2.2 million and interest of $2.6 million.
The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. The Company’s 2008 through 2011
tax years are open to examination by the Internal Revenue Service. The 2009 and 2010 federal returns are currently under
examination. The Company also has various foreign and state tax filings subject to examination for various years.
11. Pension and Profit-Sharing Plans
The Company has a 401(k)/profit-sharing plan for all qualifying full-time domestic employees that permits participants to make
contributions by salary reduction pursuant to Section 401(k) of the Internal Revenue Code. The Company makes matching
contributions on behalf of each eligible participant in an amount equal to 100% of the first 3% and an additional 25% of the
next 5%, for a maximum total of 4.25% of the employee’s compensation. The Company may make a discretionary contribution
based on the participant’s eligible compensation, provided the employee is employed at the end of the year and has worked at
least 1,000 hours. The qualifying domestic employees of the Company’s Apache subsidiary, which was acquired on August 1,
2011, also participated in a 401(k) plan, which was merged into the ANSYS 401(k) plan in 2012. There is no matching
employer contribution associated with the former Apache 401(k) plan as of December 31, 2012. The Company also maintains
various defined contribution and defined benefit pension arrangements for its international employees. The Company funds the
foreign defined benefit and contribution plans with at least the minimum required deposits according to the local statutory
requirements. The unfunded portion of the defined benefit obligation for each plan is accrued in other long-term liabilities.
Expenses related to the Company’s retirement programs were $7.1 million in 2012, $5.3 million in 2011 and $3.9 million in
2010.
12. Non-Compete and Employment Agreements
Employees of the Company have signed agreements under which they have agreed not to disclose trade secrets or confidential
information and, where legally permitted, that restrict engagement in or connection with any business that is competitive with
the Company anywhere in the world while employed by the Company (and, in some cases, for specified periods thereafter),
and that any products or technology created by them during their term of employment are the property of the Company. In
addition, the Company requires all channel partners to enter into agreements not to disclose the Company’s trade secrets and
other proprietary information.
The Company has an employment agreement with the Chairman of its Board of Directors. In the event the Chairman is
terminated without cause, his employment agreement provides for severance at an annual rate of $300,000 for the earlier of a
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period of one year after termination or when he accepts other employment. The Chairman is subject to a one-year restriction on
competition following termination of employment under the circumstances described in the contract.
The Company has an employment agreement with the Chief Executive Officer. This agreement provides for, among other
things, minimum severance payments equal to his base salary, target bonus and then-existing benefits through the earlier of the
second anniversary of the termination date if the Chief Executive Officer is terminated without cause or when he accepts other
employment. The Chief Executive Officer is subject to a two-year restriction on competition following termination of
employment under the circumstances described in the contract.
The Company also has employment agreements with several other employees, primarily in foreign jurisdictions. The terms of
these employment agreements generally include annual compensation, severance payment provisions and non-compete clauses.
13. Stock Option and Grant Plan
The Company has a stock option and grant plan—the Fourth Amended and Restated 1996 Stock Option and Grant Plan (“Stock
Plan”). The Stock Plan, as amended, authorizes the grant of up to 30,400,000 shares of the Company’s common stock in the
form of: (i) incentive stock options (“ISOs”), (ii) nonqualified stock options or (iii) the issuance or sale of common stock with
or without vesting or other restrictions. Additionally, the Stock Plan permits (a) the grant of common stock upon the attainment
of specified performance goals, (b) the grant of the right to receive cash dividends with the holders of the common stock as if
the recipient held a specified number of shares of the common stock, (c) the grant of deferred stock awards, (d) the grant of
stock appreciation rights and (e) the grant of cash-based awards.
The Stock Plan provides that: (i) the exercise price of an ISO must be no less than the fair value of the stock at the date of grant
and (ii) the exercise price of an ISO held by an optionee who possesses more than 10% of the total combined voting power of
all classes of stock must be no less than 110% of the fair market value of the stock at the time of grant. The Compensation
Committee of the Board of Directors has the authority to set expiration dates no later than ten years from the date of grant (or
five years for an optionee who meets the 10% criteria), payment terms and other provisions for each grant. The majority of
options granted have a four year vesting period. Shares associated with unexercised options or reacquired shares of common
stock (except those shares withheld as a result of tax withholding or net issuance) become available for options or issuances
under the Stock Plan. The Compensation Committee of the Board of Directors may, at its sole discretion, accelerate or extend
the date or dates on which all or any particular award or awards granted under the Stock Plan may vest or be exercised.
In the event of a “sale event” as defined in the Stock Plan, all outstanding awards will be assumed or continued by the
successor entity, with appropriate adjustment in the awards to reflect the transaction. In such event, except as the Compensation
Committee may otherwise specify with respect to particular awards in the award agreements, if the service relationship of the
holder of an award is terminated without cause within 18 months after the sale event, then all awards held by such holder will
become fully vested and exercisable at that time. If there is a sale event in which the successor entity refuses to assume or
continue outstanding awards, then subject to the consummation of the sale event, all awards with time-based vesting conditions
will become fully vested and exercisable at the effective time of the sale event and all awards with performance-based vesting
conditions may become vested and exercisable in accordance with the award agreements at the discretion of the Compensation
Committee. If awards are not assumed or continued after a sale event, then all such awards will terminate at the time of the sale
event. In the event of the termination of stock options or stock appreciation rights in connection with a sale event, the
Compensation Committee may either make or provide for a cash payment to the holders of such awards equal to the difference
between the per share transaction consideration and the exercise price of such awards or permit each holder to have at least a 15
day period to exercise such awards prior to their termination. In addition, options granted to Independent Directors and certain
key executives prior to February 17, 2011 vest automatically upon a sale event.
The Company grants deferred stock units to non-affiliate Independent Directors, which are rights to receive shares of common
stock upon termination of service as a Director. The deferred stock units are issued in arrears and vest immediately. As of
December 31, 2012, 95,227 deferred stock units have been earned with the underlying shares remaining unissued until the
service termination of the respective Director owners. Of this amount, 28,523 units were earned during the year ended
December 31, 2012.
The Company currently issues shares related to exercised stock options from its existing pool of treasury shares and has no
specific policy to repurchase treasury shares as stock options are exercised. If the treasury pool is depleted, the Company will
issue new shares.
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Information regarding stock option transactions is summarized below:
(options in thousands)
Outstanding, beginning of year
Granted
Issued pursuant to Apache
acquisition
Exercised
Forfeited
Outstanding, end of year
Vested and Exercisable, end of year
Year Ended December 31,
2012
2011
2010
Weighted
Average
Exercise
Price
Options
Weighted
Average
Exercise
Price
Options
Weighted
Average
Exercise
Price
Options
7,545
1,109
$
$
— $
(1,464) $
(68) $
$
$
7,122
4,094
35.10
67.53
—
21.85
36.90
42.85
33.91
7,319
1,104
$
$
418
$
(1,179) $
(117) $
$
7,545
$
4,251
29.92
58.50
18.66
19.33
33.27
35.10
27.98
8,110
1,204
$
$
— $
(1,924) $
(71) $
$
$
7,319
4,214
22.94
48.35
—
11.92
32.40
29.92
23.11
Weighted Average Remaining Contractual Term (in years)
Outstanding
Vested and Exercisable
Aggregate Intrinsic Value (in thousands)
Outstanding
Vested and Exercisable
2012
2011
2010
6.78
5.48
6.66
5.20
6.54
5.16
$
$
174,383
136,851
$
$
168,837
124,550
$
$
162,099
122,022
Historical and future expected forfeitures have not been significant and, as a result, the outstanding option amounts reflected in
the tables above approximate the options expected to vest.
Total stock-based compensation expense recognized for the years ended December 31, 2012, 2011 and 2010 is as follows:
(in thousands, except per share amounts)
Cost of sales:
Software licenses
Maintenance and service
Operating expenses:
Selling, general and administrative
Research and development
Stock-based compensation expense before taxes
Related income tax benefits
Stock-based compensation expense, net of taxes
Net impact on earnings per share:
Basic earnings per share
Diluted earnings per share
Year Ended December 31,
2012
2011
2010
$
$
$
$
$
1,478
2,232
15,278
13,427
32,415
(8,509)
23,906
$
(0.26) $
(0.25) $
$
556
1,897
12,501
8,134
23,088
(5,552)
17,536
$
(0.19) $
(0.19) $
135
1,541
11,755
5,588
19,019
(4,254)
14,765
(0.16)
(0.16)
The fair value of each option grant is estimated on the date of grant or date of acquisition for options issued in a business
combination using the Black-Scholes option pricing model, which was developed for use in estimating the fair value of traded
options that have no vesting restrictions and are fully transferable. The Company’s options have characteristics significantly
different from those of traded options, and changes in input assumptions can materially affect the fair value estimates. The
interest rates used were determined by using the five-year Treasury Note yield at the date of grant or date of acquisition for
options issued in a business combination. The volatility was determined based on the historic volatility of the Company’s stock
during the preceding six years for 2012, 2011 and 2010.
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The table below presents the weighted average input assumptions used and resulting fair values for options granted or issued in
business combinations during each respective year:
Risk-free interest rate
Expected dividend yield
Expected volatility
Expected term
Weighted average fair value per share
Year Ended December 31,
2012
0.59% to 1.04%
0%
38%
6.0 years
$24.82
2011
0.91% to 2.11%
0%
39%
5.8 years
$25.84
2010
1.27% to 2.34%
0%
39%
6.1 years
$19.41
As stock-based compensation expense recognized in the consolidated statements of income is based on awards ultimately
expected to vest, it must be reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those estimates. The effect of pre-vesting forfeitures on the
Company’s recorded expense has historically been negligible due to the relatively low turnover of stock option holders.
The Company’s determination of fair value of share-based payment awards on the date of grant using an option pricing model
is affected by the Company’s stock price as well as assumptions regarding a number of variables. The total estimated grant date
fair values of stock options that vested during the years ended December 31, 2012, 2011 and 2010 were $23.3 million, $20.2
million and $16.7 million, respectively. At December 31, 2012, total unrecognized estimated compensation cost related to
unvested stock options granted prior to that date was $61.9 million, which is expected to be recognized over a weighted
average period of 2.0 years. The total intrinsic values of stock options exercised during the years ended December 31, 2012,
2011 and 2010 were $64.7 million, $42.6 million and $88.0 million, respectively. At December 31, 2012, 3.0 million unvested
options with an aggregate intrinsic value of $37.9 million are expected to vest and have a weighted average exercise price of
$54.94 and a weighted average remaining contractual term of 8.5 years. The Company recorded cash received from the
exercise of stock options of $32.0 million and related tax benefits of $18.6 million (including an excess tax benefit of $13.9
million) for the year ended December 31, 2012.
Information regarding stock options outstanding as of December 31, 2012 is summarized below:
(options in thousands)
Options Outstanding
Options Exercisable
Range of Exercise Prices
$ 3.77 - $24.01
$ 25.32 - $40.87
$ 40.89 - $48.97
$ 51.52 - $67.34
$ 67.44 - $69.70
Weighted
Average
Remaining
Contractual
Life (years)
Weighted
Average
Exercise
Price
4.15
5.16
7.25
8.67
9.82
$
$
$
$
$
19.71
33.36
45.13
58.69
67.66
Options
1,530
1,425
1,962
1,139
1,066
Weighted
Average
Exercise
Price
19.75
33.34
44.38
58.43
—
Options
$
1,264
$
1,406
$
1,153
271
$
— $
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Under the terms of the ANSYS, Inc. Long-Term Incentive Plan, in the first quarter of 2012, 2011 and 2010, the Company
granted 100,000, 92,500 and 80,500 performance-based restricted stock units, respectively. Vesting of the full award or a
portion thereof is based on the Company’s performance as measured by total shareholder return relative to the median
percentage appreciation of the NASDAQ Composite Index over a specified measurement period, subject to each participant’s
continued employment with the Company through the conclusion of the measurement period. The measurement period for the
restricted stock units granted pursuant to the Long-Term Incentive Plan is a three-year period beginning January 1 of the year of
the grant. Each restricted stock unit relates to one share of the Company’s common stock. The value of each restricted stock
unit granted in 2012, 2011 and 2010 was estimated on the grant date to be $33.16, $32.05 and $25.00, respectively. The
estimate of the grant-date value of the restricted stock units was made using a Monte Carlo simulation model. The
determination of the fair value of the awards was affected by the grant date and a number of variables, each of which has been
identified in the chart below. Share-based compensation expense based on the fair value of the award is being recorded from
the grant date through the conclusion of the three-year measurement period. On December 31, 2012, employees earned 76,500
restricted stock units, which will be issued in the first quarter of 2013. Total compensation expense associated with the awards
recorded for the years ended December 31, 2012, 2011 and 2010 was $2.6 million, $1.6 million and $590,000, respectively.
Total compensation expense associated with the awards granted for the years ending December 31, 2013 and 2014 is expected
to be $2.2 million and $1.2 million, respectively.
Assumption used in Monte Carlo lattice pricing model
Risk-free interest rate
Expected dividend yield
Expected volatility—ANSYS Stock Price
Expected volatility—NASDAQ Composite Index
Expected term
Correlation factor
Year Ended December 31,
2012
0.16%
0%
28%
20%
2.80
0.75
2011 and 2010
1.35%
0%
40%
25%
2.90
0.70
In accordance with the merger agreement, the Company granted performance-based restricted stock units to key members of
Apache management and employees, with a maximum value of $13.0 million to be earned annually over a three-fiscal-year
period beginning January 1, 2012. Additional details regarding these awards are provided within Note 3.
14. Stock Repurchase Program
In February 2012, ANSYS announced that its Board of Directors approved an increase to its authorized stock repurchase
program. Under the Company’s stock repurchase program, ANSYS repurchased 1.5 million shares during the year ended
December 31, 2012 at an average price per share of $63.65, for a total cost of $95.5 million. During the year ended
December 31, 2011, the Company repurchased 247,443 shares at an average price per share of $51.34, for a total cost of $12.7
million. As of December 31, 2012, 1.5 million shares remained authorized for repurchase under the program.
15. Employee Stock Purchase Plan
The Company’s 1996 Employee Stock Purchase Plan (the “Purchase Plan”) was adopted by the Board of Directors on April 19,
1996 and was subsequently approved by the Company’s stockholders. The stockholders approved an amendment to the
Purchase Plan on May 6, 2004 to increase the number of shares available for offerings to 1.6 million shares. The Purchase Plan
was amended and restated in 2007. The Purchase Plan is administered by the Compensation Committee. Offerings under the
Purchase Plan commence on each February 1 and August 1, and have a duration of six months. An employee who owns or is
deemed to own shares of stock representing in excess of 5% of the combined voting power of all classes of stock of the
Company may not participate in the Purchase Plan.
During each offering, an eligible employee may purchase shares under the Purchase Plan by authorizing payroll deductions of
up to 10% of his or her cash compensation during the offering period. The maximum number of shares that may be purchased
by any participating employee during any offering period is limited to 3,840 shares (as adjusted by the Compensation
Committee from time to time). Unless the employee has previously withdrawn from the offering, his accumulated payroll
deductions will be used to purchase common stock on the last business day of the period at a price equal to 90% of the fair
market value of the common stock on the first or last day of the offering period, whichever is lower. Under applicable tax rules,
an employee may purchase no more than $25,000 worth of common stock in any calendar year. At December 31, 2012,
1,233,385 shares of common stock had been issued under the Purchase Plan, of which 1,184,082 were issued as of
December 31, 2011. The total compensation expense recorded under the Purchase Plan during the years ended December 31,
2012, 2011 and 2010 was $710,000, $650,000 and $500,000, respectively.
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16. Leases
The Company's executive offices and those related to certain domestic product development, marketing, production and
administration are located in a 107,000 square foot office facility in Canonsburg, Pennsylvania. In May 2004, the Company
entered into the first amendment to its existing lease agreement on this facility, effective January 1, 2004. The lease was
extended from its original period to a period through 2014. The Company incurred lease rental expense related to this facility of
$1.3 million in each of the years ended December 31, 2012, 2011 and 2010. The future minimum lease payments are $1.4
million per annum from January 1, 2013 through December 31, 2014.
On September 14, 2012, the Company entered into a lease agreement for 186,000 square feet of rentable space to be located in
a to-be-built office facility in Canonsburg, Pennsylvania, which will serve as the Company's new headquarters. The lease was
effective as of September 14, 2012, but because the leased premises are to-be-built, the Company will not be obligated to pay
rent until the later of (i) three months following the date that the leased premises are delivered to ANSYS, which delivery,
subject to certain limited exceptions, shall occur no later than October 1, 2014, or (ii) January 1, 2015 (such later date, the
“Commencement Date”). The term of the lease is 183 months, beginning on the Commencement Date. Absent the exercise of
options in the lease for additional rentable space or early lease termination, the Company's base rent will be $4.3 million per
annum for the first five years of the lease term, $4.5 million per annum for years six through ten and $4.7 million for years
eleven through fifteen.
As part of the acquisition of Apache on August 1, 2011, the Company acquired certain leased office property, including
executive offices, which comprise a 52,000 square foot office facility in San Jose, California. In June 2012, the Company
entered into a new lease for this property, with the lease term commencing July 1, 2012 and ending June 30, 2022. Total
remaining minimum payments under the operating lease as of December 31, 2012 are $9.2 million, of which $0.9 million will
be paid in 2013.
The Company has entered into various other noncancellable operating leases for office space.
Office space lease expense totaled $13.7 million, $12.8 million and $11.5 million for the years ended December 31, 2012, 2011
and 2010, respectively. Future minimum lease payments under noncancellable operating leases for office space in effect at
December 31, 2012 are $12.6 million in 2013, $10.7 million in 2014, $10.0 million in 2015, $8.2 million in 2016 and $7.4
million in 2017.
17. Royalty Agreements
The Company has entered into various renewable, nonexclusive license agreements under which the Company has been
granted access to the licensor’s technology and the right to sell the technology in the Company’s product line. Royalties are
payable to developers of the software at various rates and amounts, which generally are based upon unit sales or revenue.
Royalty fees are reported in cost of goods sold and were $9.3 million, $8.4 million and $6.8 million for the years ended
December 31, 2012, 2011 and 2010, respectively.
18. Geographic Information
Revenue to external customers is attributed to individual countries based upon the location of the customer. Revenue by
geographic area is as follows:
(in thousands)
United States
Japan
Germany
Canada
Other European
Other international
Total revenue
Year Ended December 31,
2012
$ 265,436
2011
2010
$ 215,924
$ 188,649
122,437
112,171
82,008
12,384
177,069
138,684
72,301
12,069
166,551
112,433
95,498
60,399
9,875
138,157
87,658
$ 798,018
$ 691,449
$ 580,236
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Property and equipment by geographic area is as follows:
(in thousands)
United States
United Kingdom
India
France
Germany
Japan
Canada
Other European
Other international
Total property and equipment
December 31,
2012
2011
$
36,716
$
30,917
3,532
3,392
2,378
2,087
1,253
753
1,173
969
3,077
3,092
2,388
1,843
1,447
938
957
979
$
52,253
$
45,638
19. Unconditional Purchase Obligations
The Company has entered into various unconditional purchase obligations which primarily include software licenses and long-
term purchase contracts for network, communication and office maintenance services. The Company expended $4.0 million,
$5.0 million and $2.9 million related to unconditional purchase obligations that existed as of the beginning of each year for the
years ended December 31, 2012, 2011 and 2010, respectively. Future expenditures under these obligations in effect at
December 31, 2012 are $3.3 million in 2013, $0.2 million in 2014 and $30,000 in 2015.
20. Contingencies and Commitments
The Company is subject to various investigations, claims and legal proceedings that arise in the ordinary course of business,
including alleged infringement of intellectual property rights, commercial disputes, labor and employment matters, tax audits
and other matters. In the opinion of the Company, the resolution of pending matters is not expected to have a material, adverse
effect on the Company’s consolidated results of operations, cash flows or financial position. However, each of these matters is
subject to various uncertainties and it is possible that an unfavorable resolution of one or more of these proceedings could
materially affect the Company’s results of operations, cash flows or financial position.
An Indian subsidiary of the Company received a formal inquiry after a service tax audit. The service tax issues raised in the
Company’s notice are very similar to the case, M/s Microsoft Corporation (I) (P) Ltd. Vs Commissions of Service Tax, currently
being appealed to the Delhi Customs, Excise and Service Tax Appellate Tribunal (CESTAT). If the ruling is in favor of
Microsoft, the Company expects a similar outcome for its audit case. If the ruling is unfavorable in the case of Microsoft, the
Company could incur tax charges and related liabilities, including those related to the service tax audit case, of $6 million. Of
the two judicial members assigned to the Microsoft appeal, one member has ruled in favor of Microsoft and one has ruled in
favor of the Commission. A third deciding judge will be appointed for a final decision. The Company can provide no
assurances as to the outcome of the Microsoft appeal or to the impact of the Microsoft appeal on the Company’s audit case. The
Company is uncertain as to when the service tax audit will be completed.
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, expenses and liabilities from damages that are 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
December 31, 2012. For several reasons, including the lack of prior material indemnification claims, the Company cannot
determine the maximum amount of potential future payments, if any, related to such indemnification provisions.
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21. Subsidiary Merger Activities
To improve the effectiveness of the Company’s operations in Japan, the Company completed the merger of its Japan
subsidiaries during the third quarter of 2010. For tax purposes in Japan, this transaction resulted in a step-up in the tax basis of
certain assets and liabilities of the merged subsidiary to fair value as of the date of the merger and gave rise to a taxable gain in
Japan, resulting in a liability of $77.3 million which was paid during the fourth quarter of 2010. The unamortized portion of the
corresponding prepaid tax, which is deductible over the succeeding five-year period in Japan for the stepped-up tax basis of the
assets and liabilities, is included on the consolidated balance sheets as of December 31, 2012 and 2011.
For U.S. tax purposes, this taxable gain in Japan gave rise to a foreign tax credit that reduced the current U.S. tax on foreign
income. The Company’s U.S. tax payments were reduced by $22.4 million in 2010 as a result of this credit. The Company filed
an amended tax return in order to request a refund of $26.3 million for a portion of this foreign tax credit which can be carried
back to reduce the tax obligation of previous years.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
ANSYS, Inc.
Date: February 28, 2013
By:
/s/ JAMES E. CASHMAN III
James E. Cashman III
President and Chief Executive Officer
Date: February 28, 2013
By:
/s/ MARIA T. SHIELDS
Maria T. Shields
Chief Financial Officer,
Vice President, Finance and Administration
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POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints
James E. Cashman III, his or her attorney-in-fact, with the power of substitution, for such person in any and all capacities, to
sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-
fact, or substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated below.
Signature
Title
Date
/s/ JAMES E. CASHMAN III
James E. Cashman III
President and Chief Executive Officer
(Principal Executive Officer)
February 28, 2013
/s/ MARIA T. SHIELDS
Maria T. Shields
Chief Financial Officer, Vice President, Finance and
Administration; (Principal Financial Officer and
Accounting Officer)
February 28, 2013
/s/ PETER J. SMITH
Peter J. Smith
/s/ DR. AJEI GOPAL
Dr. Ajei Gopal
/s/ RONALD W. HOVSEPIAN
Ronald W. Hovsepian
/s/ WILLIAM R. MCDERMOTT
William R. McDermott
/s/ JACQUELINE C. MORBY
Jacqueline C. Morby
/s/ BRADFORD C. MORLEY
Bradford C. Morley
/s/ MICHAEL C. THURK
Michael C. Thurk
/s/ PATRICK J. ZILVITIS
Patrick J. Zilvitis
Chairman of the Board of Directors
February 28, 2013
Director
February 28, 2013
Director
February 28, 2013
Director
February 28, 2013
Director
February 28, 2013
Director
February 28, 2013
Director
February 28, 2013
Director
February 28, 2013
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ANSYS, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
SCHEDULE II
(in thousands)
Description
Year ended December 31, 2012
Allowance for doubtful accounts
Year ended December 31, 2011
Allowance for doubtful accounts
Year ended December 31, 2010
Allowance for doubtful accounts
Balance at
Beginning
of Year
Additions–
Charges to Costs
and Expenses
Deductions–
Returns and
Write-Offs
Balance at
End
of Year
$
$
$
4,101
4,503
4,418
$
$
$
938
404
1,757
$
$
$
239
806
1,672
$
$
$
4,800
4,101
4,503
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Exhibit No.
3.1
Exhibit
Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1996 and incorporated herein by reference).
3.2
3.3
3.4
3.5
3.6
3.7
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Certificate of Amendment to the Company’s Restated Certificate of Incorporation as filed with the Secretary of
State of the State of Delaware (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed June 21,
2006, and incorporated herein by reference).
Certificate of Amendment to the Company’s Restated Certificate of Incorporation as filed with the Secretary of
State of the State of Delaware (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed May 17,
2011, and incorporated herein by reference).
Certificate of Amendment to the Company’s Restated Certificate of Incorporation as filed with the Secretary of
State of the State of Delaware (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed May 21,
2012, and incorporated herein by reference).
Second Amended and Restated By-laws of the Company (filed as Exhibit 3.1 to the Company’s Current Report
on Form 8-K, filed February 19, 2008 and incorporated herein by reference).
Amendment No. 1 to the Second Amended and Restated By-laws of the Company (filed as Exhibit 3.1 to the
Company’s Current Report on Form 8-K, filed July 23, 2008, and incorporated herein by reference).
Amendment No. 2 to the Second Amended and Restated By-laws of the Company (filed as Exhibit 3.1 to the
Company’s Current Report on Form 8-K, filed December 20, 2011, and incorporated herein by reference).
ANSYS, Inc. Second Amended and Restated Employee Stock Purchase Plan (filed as Exhibit 10.1 to the
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2007 and incorporated herein by
reference). *
Employment Agreement between a subsidiary of the Company and Peter J. Smith dated as of March 28, 1994
(filed as Exhibit 10.10 to the Company’s Registration Statement on Form S-1 (File No. 333-4278) and
incorporated herein by reference). *
Lease between National Build to Suit Washington County, L.L.C. and the Company for the Southpointe property
(filed as Exhibit 10.19 to the Company’s Registration Statement on Form S-1 (File No. 333-4278) and
incorporated herein by reference).
First Amended Lease Agreement between Southpointe Park Corp. and ANSYS, Inc. (filed as Exhibit 10.2 to the
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2004 and incorporated herein by reference).
The Company’s Pension Plan and Trust, as amended (filed as Exhibit 10.20 to the Company’s Registration
Statement on Form S-1 (File No. 333-4278) and incorporated herein by reference). *
Form of Director Indemnification Agreement (filed as Exhibit 10.21 to the Company’s Registration Statement
on Form S-1 (File No. 333-4278) and incorporated herein by reference).
Employment Agreement between the Registrant and James E. Cashman III dated as of April 21, 2003 (filed as
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 and
incorporated herein by reference). *
Description of Executive Bonus Plan, Director Stock Option Program and Officer Stock Option Program,
Including Forms of Option Agreements for Option Grants to Directors and Officers (filed as Exhibits 99.1 – 99.5
to the Company’s Current Report on Form 8-K, filed February 8, 2005, and incorporated herein by reference).*
Options Granted to Independent Directors Related to the 2005 Annual Meeting of Stockholders on May 10,
2005 (filed as disclosure in the Company’s Current Report on Form 8-K, filed May 13, 2005, and incorporated
herein by reference). *
10.10
10.11
10.12
Indemnification Agreement, dated February 9, 2006, between ANSYS, Inc. and Sheila S. DiNardo (filed as
Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed February 15, 2006, and incorporated herein by
reference).
Amendment to Non-Affiliate Independent Director Compensation on February 9, 2006 (filed as disclosure in the
Company’s Current Report on Form 8-K, filed February 15, 2006, and incorporated herein by reference). *
Amended and Restated ANSYS, Inc. Cash Bonus Plan, adopted on March 2, 2006 (filed as Exhibit 10.1 to the
Company’s Current Report on Form 8-K, filed March 8, 2006, and incorporated herein by reference). *
86
Table of Contents
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
Form of Deferred Stock Unit Agreement under the Third Amended and Restated ANSYS, Inc. 1996 Stock
Option and Grant Plan (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed July 6, 2006,
and incorporated herein by reference).*
Indemnification Agreement, dated July 12, 2007, between ANSYS, Inc. and William R. McDermott, a director
of the Company (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed July 13, 2007, and
incorporated herein by reference).
Indemnification Agreement, dated May 21, 2007, between ANSYS, Inc. and Michael C. Thurk, a director of the
Company (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed May 24, 2007, and
incorporated herein by reference).
Agreement and Plan of Merger, dated June 29, 2011, by and among ANSYS, Inc., Power Play Merger Sub, Inc.,
Apache Design Solutions, Inc. and Papachey, Inc. (filed as Exhibit 2.1 to the Company’s Current Report on
Form 8-K, filed June 30, 2011, and incorporated herein by reference).
Credit Agreement, dated July 31, 2008, by and among ANSYS, Inc., each lender from time to time party thereto,
Bank of America, N.A., as Administrative Agent, Banc of America Securities LLC, as Sole Lead Arranger and
Sole Book Manager, National City Bank, as Syndication Agent, and Citizens Bank of Pennsylvania, Sumitomo
Mitsui Banking Corporation and TD Bank, N.A., as Co-Documentation Agents (filed as Exhibit 10.1 to the
Company’s Current Report on Form 8-K, filed July 31, 2008, and incorporated herein by reference).
Subsidiary Guarantee Agreement by and among the domestic subsidiaries of ANSYS, Inc., in favor of Bank of
America, N.A., as Administrative Agent, and each lender from time to time party to the Credit Agreement (filed
as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed July 31, 2008, and incorporated herein by
reference).
Deferred Stock Unit Agreement under the Third Amended and Restated ANSYS, Inc. 1996 Stock Option and
Grant Plan (filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2008 and incorporated herein by reference).*
Amended and Restated ANSYS, Inc. Cash Bonus Plan (filed as Exhibit 10.5 to the Company’s Quarterly Report
on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference).*
First Amendment of the Employment Agreement Between the Company and James E. Cashman III as of
November 6, 2008 (filed as Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2008 and incorporated herein by reference).*
First Amendment of the Employment Agreement Between the Company and Peter J. Smith as of November 6,
2008 (filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2008 and incorporated herein by reference).*
Amendment to the Compensatory Arrangement for Peter J. Smith (filed as Item 5.02 to the Company’s Current
Report on Form 8-K, filed May 15, 2009, and incorporated herein by reference).*
ANSYS, Inc. Long-Term Incentive Plan, dated February 17, 2010 (filed as Exhibit 10.1 to the Company’s
Current Report on Form 8-K, filed February 23, 2010, and incorporated herein by reference).*
ANSYS, Inc. Executive Severance Plan, dated February 17, 2010 (filed as Exhibit 10.2 to the Company’s
Current Report on Form 8-K, filed February 23, 2010, and incorporated herein by reference).*
Form of Award Notice under the ANSYS, Inc. Long-Term Incentive Plan (filed as Exhibit 10.3 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 and incorporated herein by
reference).*
ANSYS, Inc. Amended and Restated Long-Term Incentive Plan, dated August 2, 2010 (filed as Exhibit 10.1 to
the Company’s Current Report on Form 8-K, filed August 6, 2010, and incorporated herein by reference).*
Indemnification Agreement, dated February 17, 2011, between ANSYS, Inc. and Ajei S. Gopal, a director of the
Company (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed February 23, 2011, and
incorporated herein by reference).
Second Amendment of the Employment Agreement Between ANSYS, Inc. and James E. Cashman III dated
March 14, 2011 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed March 18, 2011, and
incorporated herein by reference).*
Form of Non-Employee Director Non-Qualified Stock Option Agreement under the Fourth Amended and
Restated ANSYS, Inc. 1996 Stock Option and Grant Plan (filed as Exhibit 10.2 to the Company’s Quarterly
Report on Form 10-Q, filed August 2, 2012, and incorporated herein by reference).*
87
Table of Contents
10.31
10.32
10.33
10.34
10.35
10.36
10.37
14.1
21.1
23.1
24.1
31.1
31.2
32.1
32.2
Form of Employee Incentive Stock Option Agreement under the Fourth Amended and Restated ANSYS, Inc.
Stock Option and Grant Plan (filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed
March 18, 2011, and incorporated herein by reference).*
Form of Employee Non-Qualified Stock Option Agreement under the Fourth Amended and Restated ANSYS,
Inc. Stock Option and Grant Plan (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed
August 2, 2012, and incorporated herein by reference).*
First Amendment to Letter Agreement between ANSYS, Inc. and Maria T. Shields, dated March 14, 2011 (filed
as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed March 18, 2011, and incorporated herein
by reference).*
Consent of the Compensation Committee of the ANSYS, Inc. Board of Directors dated March 14, 2011 (filed as
Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed March 18, 2011, and incorporated herein by
reference).*
Fourth Amended and Restated ANSYS, Inc. 1996 Stock Option and Grant Plan (filed as Exhibit 10.1 to the
Company’s Current Report on Form 8-K, filed May 17, 2011, and incorporated herein by reference).*
Indemnification Agreement, dated February 27, 2012, between ANSYS, Inc. and Ronald W. Hovsepian, a
director of the Company (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed February 29,
2012, and incorporated herein by reference).
Lease by and between ANSYS, Inc. and Quattro Investment Group, L.P., dated as of September 14, 2012 (filed
as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed September 18, 2012, and incorporated
herein by reference).
Code of Business Conduct and Ethics (filed as Exhibit 14.1 to the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2003, filed March 12, 2004 and incorporated herein by reference).
Subsidiaries of the Registrant; filed herewith.
Consent of Deloitte & Touche LLP, independent registered public accounting firm.
Powers of Attorney. Contained on page 84 of the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2012 and incorporated herein by reference.
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
101.DEF
XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE
XBRL Taxonomy Extension Presentation Linkbase
*
Indicates management contract or compensatory plan, contract or arrangement.
88
Subsidiaries of the Registrant
Jurisdiction of Incorporation
EXHIBIT 21.1
Apache Design, Inc.
Esterel Technologies, Inc.
SAS IP, Inc.
ANSYS Canada Limited
2011767 Ontario Inc.
ANSYS Belgium, S.A.
ANSYS France SAS
Apache Design Solutions Sarl.
Esterel Technologies, S.A.
ANSYS Germany GmbH
Apache Design Solutions GmbH
Esterel Technologies, GmbH
ANSYS Iberia S.L.
ANSYS Italia, Srl.
ANSYS Luxembourg Holding Company Sarl
ANSYS Sweden, AB
ANSYS UK Limited
Century Dynamics, Limited
ANSYS UK Holding Company Limited
ANSYS UK Simulation Software Limited
Apache Design Solutions, Ltd.
Silver Nugget Limited
ANSYS Japan K.K.
Apache Design Solutions K.K.
Apache Design Solutions Yuhan Hoesa
Apache Design Solutions Pte. Ltd.
Apache Design Solutions Inc.
Fluent China Holdings Limited
Delaware
California
Wyoming
Ontario
Ontario
Belgium
France
France
France
Germany
Germany
Germany
Spain
Italy
Luxembourg
Sweden
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Japan
Japan
Korea
Singapore
Taiwan
Barbados
Fluent Software (Shanghai) Co., Limited
People's Republic of China
ANSYS-Fluent (Shanghai) Engineering Software Trading Co., Ltd.
People's Republic of China
Apache Science and Technology (Shanghai) Co. Ltd.
Apache Design Solutions, Inc.
ANSYS Hong Kong Ltd.
ANSYS Software Private Limited
Fluent India Private Limited
People's Republic of China
People's Republic of China
Hong Kong
India
India
Apache Design Solutions Private Ltd.
Sequence Design India Private Ltd.
Apache Power Solutions Israel Ltd.
ANSYS OOO
India
India
Israel
Russia
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-08613, 333-69506, 333-110728, 333-137274,
333-152765, 333-174670, and 333-177030 on Form S-8 of our reports dated February 28, 2013, relating to the consolidated
financial statements and financial statement schedule of ANSYS, Inc. and subsidiaries, and the effectiveness of ANSYS, Inc.
and subsidiaries' internal control over financial reporting, appearing in this Annual Report on Form 10-K of ANSYS, Inc. and
subsidiaries for the year ended December 31, 2012.
EXHIBIT 23.1
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
February 28, 2013
EXHIBIT 31.1
I, James E. Cashman III, certify that:
CHIEF EXECUTIVE OFFICER CERTIFICATION
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of ANSYS, Inc. (“ANSYS”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of ANSYS as of, and for, the periods
presented in this report;
ANSYS’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for ANSYS and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to ANSYS, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this
report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
Evaluated the effectiveness of ANSYS’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
Disclosed in this report any change in ANSYS’s internal control over financial reporting that occurred during
ANSYS’s most recent fiscal quarter (ANSYS’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, ANSYS’s internal control over financial reporting;
and
5.
ANSYS’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to ANSYS’s auditors and the audit committee of ANSYS’s board of directors (or persons performing
the equivalent functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect ANSYS’s ability to record, process, summarize and
report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in
ANSYS’s internal control over financial reporting.
Date: February 28, 2013
/s/ James E. Cashman III
James E. Cashman III
President and Chief Executive Officer
EXHIBIT 31.2
I, Maria T. Shields, certify that:
CHIEF FINANCIAL OFFICER CERTIFICATION
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of ANSYS, Inc. (“ANSYS”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of ANSYS as of, and for, the periods
presented in this report;
ANSYS’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for ANSYS and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to ANSYS, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this
report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
Evaluated the effectiveness of ANSYS’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
Disclosed in this report any change in ANSYS’s internal control over financial reporting that occurred during
ANSYS’s most recent fiscal quarter (ANSYS’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, ANSYS’s internal control over financial reporting;
and
5.
ANSYS’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to ANSYS’s auditors and the audit committee of ANSYS’s board of directors (or persons performing
the equivalent functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect ANSYS’s ability to record, process, summarize and
report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in
ANSYS’s internal control over financial reporting.
Date: February 28, 2013
/s/ Maria T. Shields
Maria T. Shields
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with the Annual Report of ANSYS, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2012
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James E. Cashman III, President
and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)
(2)
The Report fully complies with requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended, and
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, and shall not be deemed to be part of the Report or filed for any purpose whatsoever.
/s/ James E. Cashman III
James E. Cashman III
President and Chief Executive Officer
February 28, 2013
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
In connection with the Annual Report of ANSYS, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2012
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Maria T. Shields, Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to my knowledge:
(1)
(2)
The Report fully complies with requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended, and
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, and shall not be deemed to be part of the Report or filed for any purpose whatsoever.
/s/ Maria T. Shields
Maria T. Shields
Chief Financial Officer
February 28, 2013
Customers trust ANSYS simulation
software to help ensure the integrity
of their products and drive business
success through innovation.
We’ll help you realize your product promise.
ANSYS, Inc.
www.ansys.com
ansysinfo@ansys.com
866.267.9724
ANSYS is dedicated exclusively to developing engineering simulation software that
fosters rapid and innovative product design. Our technology enables you to predict
with confidence that your product will thrive in the real world. For more than 40 years,
customers in the most demanding markets have trusted our solutions to help ensure
the integrity of their products and drive business success through innovation.
ANSYS and any and all ANSYS, Inc. brand, product, service and feature names, logos and slogans are registered
trademarks or trademarks of ANSYS, Inc. or its subsidiaries in the United States or other countries. All other
brand, product, service and feature names or trademarks are the property of their respective owners.
MKT 87