Realize Your Product Promise®
Fluids
Structures
Electronics
Systems
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.
© 2014 ANSYS, Inc. All Rights Reserved.
MKT 87
LETTER TO STOCKHOLDERS
BUILDING A STRONG FOUNDATION
engineering simulation, building an incredible foundation
For the past 43 years, ANSYS has had a singular focus on
of unique talent, leading-edge technology and long-standing
customer relationships. Our success and technological leadership
didn’t happen overnight — it is a product of our innovation,
determination and many decades of hard work. Fiscal 2013 was
no exception. Despite ongoing macroeconomic challenges, we
delivered another year of solid results, reflecting the strength of
our comprehensive portfolio of simulation products and our focused
commitment to providing long-term value to both our customers
and our stockholders. Here are a few key highlights:
• Non-GAAP revenues of $866 million, an increase of 9% in constant currency
and a new record high for the Company
• Non-GAAP diluted EPS of $3.27, an increase of 12%
• Deferred revenue and backlog of $409 million, a new record balance
• Non-GAAP operating margin of 48.9%
• Increase in our internal R&D investment to $151 million
• Record operating cash flow of $333 million
• Over $116 million of common stock repurchases
• Named a 2013 Top 100 Software Company
A New Era of Engineering
Our main focus in 2013 was, as it always is, on our custom-
ers — helping them to address the challenges presented by
the trends of globalization, regulation, and rapid product
and technology innovation. In this pursuit, we continually
advance our simulation solutions by, first, developing
or acquiring the very best technology, then integrating
it into a unified and customizable simulation platform that
allows engineers to efficiently perform complex simulations
involving the interaction of multiple physics, and, finally,
providing system services to manage simulation processes
and data — all so engineers and product developers can
spend more time designing and improving products and
less time using software and searching for data. This
unifying vision is Simulation Driven Product Development™
and it is not only what differentiates us in the engineering
simulation space, but also what uniquely positions ANSYS
to take advantage of the many opportunities that lie ahead.
Our customers’ use of our technology is truly impressive:
alternative engines for cars, new composite materials with
amazing properties, energy-efficient buildings that reduce
the carbon footprint, and implantable and non-implantable
medical devices that address debilitating human diseases,
as well as innovative household appliances with features
that go beyond mere improvement, just to name a few.
Our ability to create value and drive tangible results is why
we have long and enduring relationships with more than
40,000 customers around the world, including 96 of the
top 100 industrial companies on the FORTUNE 500 list.
We provide solutions that help our customers to engineer
the impossible and support their most complex mission-
critical product development issues and processes.
LETTER TO STOCKHOLDERS
During 2013, we focused on further differentiating ANSYS
in the marketplace and strengthening our technological
capabilities. Specifically, we made unmatched investments
in our strategic technology initiatives, including fast-grow-
ing areas like systems engineering, process compression,
workflow efficiencies, and collaboration. These initiatives
play strongly into ANSYS’ historic leadership position in
engineering simulation. As always, we are continually
evolving our investment, innovation and market strategies
to lead and create new markets for our solutions.
In December 2013, we announced ANSYS® 15.0, the latest
release of our industry-leading engineering simulation
portfolio. This release introduces pre-processing capa-
bilities that boost automation and ease of setup, as well
as high-performance computing enhancements that enable
analysis of ever-larger models and faster processing times.
We continue to push the boundaries and are working now
to enable simulations on 10,000+ cores, with innovative
new solver technologies, and enhanced usability and
scalability across the full simulation process.
Not only are these advancements necessary to meet the
ever-increasing demands of our customers, they are also
key drivers of our product roadmap, outpacing the growing
complexity of today’s products and fulfilling our vision of
simulating complete products in real-world environments.
Strategic Uses of Our Strong Operating Cash Flow
Our operating cash flow generation fuels reinvestment
across our business — in R&D, sales and marketing initia-
tives, business infrastructure investments and acquisitions
of technology and talent. At the same time, we deliver
consistently strong returns to you, our stockholders.
In 2013, we continued to invest in best-in-class tech-
nologies, acquiring Evolutionary Engineering AG (EVEN),
a leader in composite simulation. EVEN has been a long
standing partner of ANSYS, offering its composite
technologies through a product called ANSYS® Composite
PrepPost™. Composites have become standard materals
for manufacturing in a range of industries, including
automotive, aerospace, energy, marine, motorsports and
leisure. By blending two or more materials that posess
very different properties, composites combine light weight,
high strength and outstanding flexibility. As a result, the
use of composites has grown dramatically in the last
decade. This acquisition emphasizes the high priority
ANSYS is giving to this emerging technology.
Most recently, in early January of 2014, we announced
the acquisition of Reaction Design, a leading developer of
chemistry simulation software, bringing the gold standard
simulation product for modeling and simulating gas-phase
and surface chemistry to our expanding portfolio of prod-
ucts. The combination of ANSYS’ proven computational
fluid dynamics (CFD) solutions with Reaction Design’s
industry-leading chemistry solvers provides the best-in-
class combustion simulation tools available on the market.
As has been our historical practice, we will continue to use
the strength of our balance sheet and cash flow generation
to take advantage of opportunities to acquire additional
assets that contribute to the growth of ANSYS’ business
and that accelerate our product roadmap, strategy and
vision. The enrichment of ANSYS capabilities, through
a combination of acquisitions and internal research and
development, not only allows us to build and strengthen
our customer base, but also our simulation reach and
penetration.
Expanding Our Market Opportunities
Our global, hybrid distribution model remains an impor-
tant differentiator for ANSYS, representing our supply
chain for global customer sales and support, as well as
a key driver of our own productivity and operational
efficiency. The combination of our global team of more
than 1,100 sales and support professionals, coupled with
our sophisticated indirect channel partner network, gives
us the scale to meet our customers’ needs across the globe.
In addition, we continue to invest in our academic pro-
grams, proliferating the use of ANSYS solutions in more
than 2,400 engineering schools worldwide. During 2013,
more than 100,000 engineering students were trained on
ANSYS, with over 10,000 graduate students using ANSYS
for their dissertations. We are very proud to be providing
world-class tools to future designers and engineers.
2 / LETTER TO STOCKHOLDERS
Geographic expansion remains an important part of our
growth agenda; as such, we continue to invest in mature
yet still under-penetrated markets, as well as priority
emerging markets. In 2013, we were particularly pleased
that revenues in North America, our largest market, grew
10 percent, and we continue to make excellent inroads
in breaking down barriers to simulation adoption. We also
delivered solid results across our European business,
increasing total revenues by 13 percent in reported
currency and 11 percent in constant currency. While we
experienced continued weakness in Japan, our second
largest market, we also saw a slowdown in the latter half
of 2013 in India, China and Brazil that tempered our
overall 2013 results. With this in mind, we made structural
and leadership improvements and are committed to
continuing to invest and drive improving performance in
these important regions.
As we enter 2014, the emphasis will be a continued focus
on execution and technological differentiation. Customer
acceptance of our vision and unique value proposition,
coupled with the investments we are making in the busi-
ness and in the expansion of our systems approach to
simulation, makes us very optimistic about our long-term
opportunity.
Our Long-Term Confidence Propels Us Forward
Our performance is a testament to our strategic position
and capabilities, the discipline of our management
processes, and the dedication and expertise of the more
than 2,600 ANSYS employees around the world. Impor-
tantly, it reflects the impact of a distinct choice we have
made about ANSYS’ business and technology model. We
have chosen the difficult path of continuous innovation
and reinvention in an industry that has historically been
slow to embrace new technologies and methodologies. We
believe that we have an amazing opportunity, and we are
ready and willing to seize it.
Our commitments to our customers, our stockholders
and our employees shape everything we do — our busi-
ness strategy, how we recruit talent, how we continually
develop our cutting-edge technology, and how we manage
and run our Company.
In closing, we are confident in our ability to continue to
drive profitable growth in 2014 and beyond, building on
our strong foundation. It is in this spirit that I express
my deep admiration for the worldwide ANSYS team for
bringing us to where we are, and my gratitude to you,
our stockholders, for your support. I hope you share in
our excitement about your Company’s performance and
the way in which ANSYS is helping our customers to create
a smarter planet and a brighter future for generations
to come.
James E. Cashman III
President and Chief Executive Officer
3 / LETTER TO STOCKHOLDERS
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:
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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 analysis 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.
Fluids
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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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
Structures
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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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.
Electronics
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
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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
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 electronics
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:
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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 electronics 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
•
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.
•
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.”
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 2,600 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
•
•
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Proven
Recognized as one of the
world’s most innovative and
fastest-growing companies*
•
•
Independent
Long-term financial stability
CAD agnostic
*BusinessWeek, FORTUNE
•
2011
ANSYS acquires Apache, adding power
analysis and optimization platforms
for electronics applications.
•
2012
ANSYS acquires Esterel Technologies SA,
adding the capability to model embedded
software, the intelligence behind today’s
smart products.
•
2013
ANSYS acquires EVEN Evolutionary AG,
further broadening our composites
capabilities
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.
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
experience, talent and drive to every situation.
Founded in 1970, ANSYS has evolved from a small group of engineers to an
international corporation that employs more than 2,600 development, sales,
finance, 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 influential engineering simulation community.
Clear vision, sound and consistent strategy, financial stability, and an
unwavering focus on engineering simulation have led the Company’s growth and
success. The Company offers an integrated, full-spectrum portfolio, re-investing
a significant 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 differ 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 filings with the SEC,
including our most recent filings 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/Affirmative 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 qualified individual with a disability in all aspects of
employment 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.
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, 2013
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 28, 2013 as reported on the NASDAQ Global Select Market, was $5,510,000,000. 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, 2014 was
92,539,594 shares.
Documents Incorporated By Reference:
Portions of the Proxy Statement for the Registrant’s 2014 Annual Meeting of Stockholders are incorporated by reference into Part III.
ANSYS, Inc.
ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR 2013
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
3
10
17
17
17
17
18
21
22
46
47
48
48
48
49
49
49
49
49
50
79
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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, 2013, 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 2,600 people as of December 31, 2013. The Company
focuses on the development of open and flexible solutions that enable users to analyze designs directly on the desktop,
providing a common platform for fast, efficient and cost-conscious product development, from design concept to final-stage
testing and validation. The Company distributes its ANSYS 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.
The Company's product portfolio consists of the following:
Simulation Platform: 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™.
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 structures, fluids, thermal and electronics
simulations. This product suite decreases turnaround time for individual simulations, allowing users to consider multiple design
ideas and make the right design decisions early in the design cycle.
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.
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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.
Structures
The Company's structures 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.
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 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.
Composites
Composites blend two or more materials that possess very different properties. The Company's EVEN - Evolutionary
Engineering AG ("EVEN") composite analysis and optimization technology is offered through ANSYS Composite PrepPost™.
It efficiently defines materials, plies and stacking sequences, and also offers a wide choice of state-of-the-art failure criteria.
ANSYS solvers provide the foundation for accurate results.
Fluids
The Company's fluids product suite enables 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 suite contains general-purpose computational fluid dynamics software and specialized products to address
specific industry applications.
Electronics
The Company's electronics 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 ("ICs") and printed circuit boards ("PCBs"), as well as electromechanical systems such as automotive components and
power electronics equipment.
Low-Power Electronics
The Company's software suite from Apache Design, Inc. ("Apache") delivers power analysis and optimization platforms along
with methodologies that manage 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.
Systems
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.
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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 physics interact in a coupled
way. ANSYS multiphysics software enables engineers and scientists to simulate the interactions between structures, heat
transfer, fluids and electronics all within a single, unified engineering simulation environment.
Embedded Software
The Company's SCADE® product suite from Esterel Technologies, S.A. ("Esterel") is a comprehensive solution for embedded
software simulation and code production. It has been developed specifically for use in critical systems with high dependability
requirements, including aerospace, rail transportation, nuclear and industrial applications. SCADE software supports the entire
development workflow, from requirements analysis and design, through verification, implementation and deployment. SCADE
solutions easily integrate with each other and the rest of the ANSYS product suite, allowing for development optimization and
increased communication among team members.
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 includes 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
away from the classroom.
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 the year ended December 31, 2013 and in the period from January 1, 2014 until the filing date, the Company completed
the following major product development activities and releases:
•
•
In January 2014, the Company released an expanded suite and new functionality for ANSYS® SIwave™. The
Company's electromagnetic simulation suite for the design of high-speed PCB and IC packages is now available via
three targeted products, SIwave-DC, SIwave-PI, and SIwave. Users can quickly identify potential power and signal
integrity problems with increased flexibility and easier access to a complete set of analysis capabilities that can be
leveraged throughout the PCB design flow. Powered by its hybrid, full-wave finite element electromagnetic solver
engine, the new SIwave suite delivers a complete signal integrity analysis solution in a single user interface.
In December 2013, the Company released version 15.0 of ANSYS software, providing new, unique capabilities and
enhancements that offer a highly advanced approach to guide and optimize product designs. ANSYS 15.0 delivers
major advancements across the entire portfolio, including structures, fluids and electronics. In addition, this enhanced
version enables complete multiphysics workflows for leading simulation practices.
Highlights for structures in this release include tools that provide greater insight into simulating composites.
Enhancements to the fluids portfolio feature the capability to study turbomachinery flow paths with greater fidelity,
while in electronics, ANSYS 15.0 offers a comprehensive electric motor design process.
The release also enhances the Company's pre-processing capabilities, enabling users to quickly and accurately mesh
the widest range of model size and complexity regardless of type of physics simulated. ANSYS 15.0 also builds on the
Company's global leadership in HPC, speeding up performance by a factor of five for specific applications.
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The Company's total research and development expenses were $151.4 million, $132.6 million and $108.5 million in 2013, 2012
and 2011, respectively, or 17.6%, 16.6% and 15.7% of total revenue, respectively. As of December 31, 2013, the Company's
product development staff consisted of approximately 930 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 these areas,
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, expanding its 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 channel partner 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 25% in
2013, 26% in 2012 and 26% in 2011 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.
During 2013, the Company continued to invest in its existing domestic and international strategic sales offices. In total, the
Company's direct sales offices employ 1,140 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 direct sale customer accounted for more than 5% of the Company's revenue in 2013, 2012 or
2011.
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.
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, Inc., Dassault Systèmes
S.A., PTC Inc., 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.
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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. In 2013, important engagements with NVIDIA and Intel occurred in the areas of accelerator
technology and graphics processing unit computing, and parallel scaling in excess of 10,000 cores was demonstrated 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 optimization, electronics, mechanical simulation, fluid simulation and CAD, this partner ecosystem
extends the depth and breadth of the Company's technology offerings. Important software engagements in 2013 included
introducing a new strategic partnership with the topology optimization leader, Vanderplaats R&D, and expanding the
Company’s development toolkit training programs in response to growing demand from partners, including Safe Technology,
FunctionBay, VirtualMotion, Pro-Lambda Solutions, FE-Design and others.
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.
In 2013, the Company entered into a new software license agreement with NICE SRL ("NICE") targeting the emerging
paradigm of data-center-based deployment of simulation. EngineFrame from NICE is bundled with the ANSYS EKM and
facilitates running interactive ANSYS applications on remote data centers.
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.
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.
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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. To the extent the Company does not choose to seek patent protection for its intellectual
property, 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
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
slowdowns of customer activities 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.
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DEFERRED REVENUE AND BACKLOG
Deferred revenue consists of billings made or payments received in advance of revenue recognition from lease license and
maintenance agreements. The deferred revenue on the Company's consolidated balance sheets does not represent the total value
of annual or multi-year, noncancellable lease license and maintenance agreements. The Company's backlog represents
installment billings for periods beyond the current quarterly billing cycle and customer orders received but not invoiced. The
Company's deferred revenue and backlog as of December 31, 2013 and 2012 consisted of the following:
(in thousands)
Deferred revenue
Backlog
Total
(in thousands)
Deferred revenue
Backlog
Total
Balance at December 31, 2013
Total
Current
Long-Term
317,730
91,786
409,516
$
$
309,775
33,446
343,221
$
$
7,955
58,340
66,295
Balance at December 31, 2012
Total
Current
Long-Term
324,429
55,198
379,627
$
$
305,793
10,036
315,829
$
$
18,636
45,162
63,798
$
$
$
$
Revenue associated with deferred revenue and backlog that will be recognized in the subsequent twelve months is classified as
current in the table above.
EMPLOYEES
As of December 31, 2013, the Company and its subsidiaries had approximately 2,600 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.
ACQUISITIONS
The Company makes targeted acquisitions in order to support its 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. The following table presents the Company's acquisitions since January 1, 2011.
Date of closing
January 3, 2014
Company
Reaction Design
April 2, 2013
EVEN - Evolutionary
Engineering AG
August 1, 2012
Esterel Technologies, S.A.
August 1, 2011
Apache Design, Inc.
Details
Reaction Design, a leading developer of chemistry simulation software, was acquired
for approximately $19 million. The combination of ANSYS's computational fluid
dynamics ("CFD") solutions with Reaction Design's chemistry solvers is expected to
provide the best-in-class combustion simulation tools available on the market.
EVEN - Evolutionary Engineering AG ("EVEN"), a leading provider of composite
analysis and optimization technology relying on cloud computing, was acquired for
$8.1 million. The acquisition strengthens the Company's simulation solutions for
composites technology, which has become a standard in manufacturing in a wide range
of industries due to its combination of light weight, high strength and outstanding
flexibility.
Esterel, a leading provider of embedded software simulation solutions for mission
critical applications, was acquired for $58.2 million. 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 acquisition extends the Company's
vision to encompass both hardware and software systems.
Apache, a leading simulation software provider for advanced, low-power solutions for
electronics, was acquired for $314.0 million. Apache’s software enables engineers to
design power-efficient devices while satisfying ever-increasing performance
requirements. The acquisition complements the Company's software solutions by
bringing together best-in-class products that drive the Company's system vision for
ICs, electronic packages and PCBs.
For further information on the Company's business combinations, see 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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AVAILABLE INFORMATION
The Company's website is www.ansys.com. The Company also maintains a presence on social media through its blog at
www.ansys-blog.com, Facebook page at www.facebook.com/ANSYSInc, Twitter account at www.twitter.com/ANSYS_Inc and
LinkedIn page at www.linkedin.com/company/ansys-inc. 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 or social media accounts 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 Company's operations and performance depend significantly on foreign and domestic
economic conditions. Though the global economy has improved, uncertainty about the depth and timing of the recovery
remains in both foreign and domestic markets. Uncertainty regarding these economic conditions may negatively impact the
Company as customers defer spending in response to tighter credit, higher unemployment, financial market volatility,
government austerity programs, negative financial news, declining valuations of investments and other factors. 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 as prior periods. 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. Since the Company is exposed to the majority of major world markets, uncertainty in any significant market may
negatively impact the Company's performance and results, particularly with respect to the Company's largest geographic
customer bases. The Company is unable to predict the likely duration and severity of the current economic conditions or the
likelihood of additional uncertainty arising in any of the Company's key markets. Should these 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. These factors may also 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 size of their workforce or cut back on
operations and may lead to a reduction in renewals of licenses or maintenance contracts with the Company. The Company's
customers may 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. If any of
the foreign economies in which the Company does business deteriorate or suffer periods of uncertainty, the Company's business
and performance may be negatively impacted through reduced customer spending, changes in purchasing cycles or timing,
reduced access to credit for its customers, or other factors impacting the Company's international sales and collections.
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As a result of its increasing international activities, the Company has revenue, expenses, cash, accounts receivable and payment
obligations denominated in foreign currencies. As a result, the Company is subject to currency exchange risk. 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; the violation of anti-corruption
laws and regulations which are applicable to the Company by third parties in countries where such conduct may be permissible
or commonplace; 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 Errors. 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 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
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. Product quality issues or failures could
result in the Company’s reputation becoming diminished, resulting in a material, adverse impact on revenue, operating margins,
net income, financial position and cash flows.
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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. Parties among the Company's current or future strategic alliances, including existing geometry partnerships,
may diminish or sever technical, software development and marketing relationships with the Company for competitive
purposes. 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 discounts or 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 or product support 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, product implementations or wider geographical license usage provisions. 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.
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Risks Associated with Security of the Company's Products, Source Code and IT Systems. The Company makes significant
efforts to maintain the security and integrity of its products, source code and computer systems and data. Despite significant
efforts to create security barriers to such programs, it is virtually impossible for the Company 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, and the like) that could attack the Company's products and computer systems. Like all
software products, the Company's software is vulnerable to such attacks. The impact of such an attack could disrupt the proper
functioning of the Company's software products, cause errors in the output of its customers' work, allow unauthorized access to
sensitive, proprietary or confidential information of the Company's or its customers and other destructive outcomes. If this were
to occur, the Company's reputation may suffer, customers may stop buying its products, it could face lawsuits and potential
liability and its financial performance could be negatively impacted.
There is also a danger of industrial espionage, cyber-attacks, misuse, theft of information or assets (including source code), or
damage to assets by people who have gained unauthorized access to the Company's facilities, systems or information. Such
cybersecurity breaches, misuse or other disruptions could lead to the disclosure of portions of the Company's product source
code or other confidential information, improper usage and distribution of its products without compensation, illegal usage of
its products, which could jeopardize the security of information stored in and transmitted through its computer systems, theft,
manipulation and destruction of private and proprietary data, resulting in defective products and production downtimes.
Although the Company actively employs measures to combat unlicensed copying, access and use of software and intellectual
property through a variety of techniques, preventing unauthorized use or infringement of the Company's rights is inherently
difficult. These events could adversely affect the Company's financial results or could result in significant claims for damages
against it, 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 the Company's 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 the Company and its products.
Policing the unauthorized distribution and use of the Company's products is difficult, and software piracy (including online
piracy) is a persistent problem. The proliferation of technology designed to circumvent typical software protection measures
used in the Company's products, and the possibility that methods of circumventing the techniques it employs in its products,
may lead to an expansion in piracy or misuse of its products and intellectual property. As a result, and despite the Company's
efforts to prevent such activities and to prosecute instances of such activities, the Company may nonetheless lose significant
revenue due to illegal use of its 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 the Company's core processes, such as software development, sales and marketing, customer service and financial
transactions, rely on its IT infrastructure and applications. Malicious software, sabotage and other cybersecurity breaches of the
types discussed above could cause an outage of the Company's 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 the Company's business, financial position, profit or cash flows.
The Company has implemented a number of measures designed to ensure the security of its information, IT resources and other
assets. Nonetheless, unauthorized users could gain access to its systems through cyber-attacks and steal, use without
authorization, and sabotage our intellectual property and confidential data. Any breach of its 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 the Company's 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.
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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.
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 significantly 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 existing products, supply new
products and services, expand its customer base and enhance its distribution channels. The Company has completed a number
of acquisitions in recent years and expects to make additional acquisitions in the future, but 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 including, 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.
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.
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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
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 leadership and/or 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.
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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 and other countries, the Foreign Corrupt Practices Act,
the United Kingdom Bribery Act of 2010 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.
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.
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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 2013 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. 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 under construction, the Company will not be obligated to pay rent until January 1,
2015. The term of the lease is 183 months, beginning on the date the Company takes possession of the facility.
The Company leases a 52,000 square foot office facility in San Jose, California that was acquired through the Apache
acquisition. 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.
The Company also leases certain office property, including executive offices, which comprise a 28,000 square foot office
facility in Pittsburgh, Pennsylvania. The lease agreement ends effective December 31, 2014, and staff working in this office
will transfer to the new headquarters facility being built in Canonsburg, Pennsylvania.
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 near its current
Canonsburg headquarters, which will serve primarily as an IT center, and customer and employee training facility. 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.
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.
17
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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 2013
Fiscal Quarter Ended 2012
Low Sale
Price
High Sale
Price
Low Sale
Price
High Sale
Price
$
$
$
$
81.20
72.19
70.66
68.33
$
$
$
$
89.42
89.71
81.52
81.55
$
$
$
$
63.22
55.45
59.28
55.21
$
$
$
$
73.51
74.37
69.34
66.56
On February 10, 2014, there were 193 stockholders of record and 82,835 beneficial holders of the Company’s common stock.
The Company has not paid cash dividends on its common stock as it has retained earnings primarily for acquisitions, future
business opportunities and to repurchase stock when authorized by the Board of Directors and such repurchase meets the
Company's objectives. 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.
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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., PTC Inc., 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, 2009 and ending December 31, 2013. 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, 2009, 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, 2009
ASSUMES DIVIDENDS REINVESTED
FIVE FISCAL YEARS ENDING DECEMBER 31, 2013
19
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Equity Compensation Plan Information as of December 31, 2013
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))
6,037,768
432,350
242,574
$
$
$
42.29
36.95
19.59
(1)
(2)
4,574,952
—
—
317,422
6,712,692
4,892,374
(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, 2013
November 1 - November 30, 2013
December 1 - December 31, 2013
Total
Total Number of
Shares Purchased
—
505,944
—
505,944
$
$
Average Price
Paid per Share
—
84.35
—
84.35
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
—
505,944
—
505,944
Maximum
Number of Shares
that May Yet Be
Purchased Under
Plans or Programs
2,011,943
1,505,999
1,505,999
1,505,999
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
$
$
$
$
$
$
$
$
2013
861,260
321,863
245,327
2.65
92,691
2.58
95,139
2,722,382
627,165
145,705
2,136,246
332,983
Year Ended December 31,
$
$
$
$
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
$
$
$
$
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
In the table above, the comparability of information among the years presented is impacted by the August 1, 2012 acquisition
of Esterel and the August 1, 2011 acquisition of Apache. For further information on Esterel and Apache, see the “Acquisitions”
section of Management’s Discussion and Analysis in Item 7 and 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, 2013 reflect growth in revenues of 7.9%, operating income of 9.4% and
diluted earnings per share of 20.6% as compared to the year ended December 31, 2012. The Company experienced higher
revenues in 2013 from growth in both license and maintenance revenue, and from the acquisition of Esterel in 2012. The 2013
results of operations include a full year of Esterel results, as compared to five months of activity in 2012. The growth in
revenue was adversely impacted by the overall strengthening of the U.S. Dollar against the Company’s primary foreign
currencies, primarily the Japanese Yen. The net overall strengthening resulted in decreased revenue and operating income of
$17.6 million and $12.2 million, respectively, for the year ended December 31, 2013 as compared to the year ended
December 31, 2012. The operating results were also impacted by an increase in Esterel operating expenses, excluding
amortization, of $8.9 million associated with a full year of activity in the current year as compared to five months of activity in
the prior year.
The Company’s non-GAAP results for the year ended December 31, 2013 reflect increases in revenue of 7.2%, operating
income of 4.6% and diluted earnings per share of 12.4% as compared to the year ended December 31, 2012. 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”.
In December 2013, the Company received a notice from the Internal Revenue Service ("IRS") that the Joint Committee on
Taxation took no exception to the Company's tax returns that were filed for 2009 and 2010. As the Company has effectively
settled uncertainty regarding the realization of refund claims filed in connection with the 2009 and 2010 returns, an $11.0
million tax benefit was recognized in the Company's 2013 financial results.
During the year ended December 31, 2013, the Company repurchased 1.5 million shares of treasury stock for $116.1 million at
an average price of $77.73 per share. The Company's financial position includes $743.0 million in cash and short-term
investments, and working capital of $627.2 million as of December 31, 2013. The Company paid off the outstanding balance of
its term loan at maturity on July 31, 2013.
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 2,600 people as of December 31, 2013 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 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 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
22
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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.
Geographic Trends
In North America, while the Company continued to experience customer caution in certain markets, the aerospace and defense,
automotive electronics, mobile electronics, and petrochemical sectors continued to make investments in 2013. This resulted in
consistent and strong revenue growth for the region in 2013. The sales pipelines and customer engagement activities in North
America remain strong.
Despite ongoing macroeconomic concerns throughout 2013, the overall sales pipeline, customer renewal rates and customer
engagements in Europe remained intact. Revenue growth in Germany was particularly strong for the year, with the region also
benefiting from increased business in Italy, Spain and Russia.
The Company’s 2013 results for the General International Area, which includes all geographies other than North America and
Europe, were mixed across the different markets. Overall, the region showed the weakest growth for the year. While the
Company continued to experience strong growth in South Korea, it was offset by relative weakness in Japan, China, India and
Brazil. In support of the Company’s sales improvement initiatives, new senior sales leadership was added for the overall
region, as well as new leadership additions in Japan and India.
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
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, expanding its 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 and capital expenditure
requirements.
• The Company's assessment of the ultimate liabilities arising from various investigations, claims and legal proceedings.
• The Company's statement regarding the strength of the features, functionality and integrated multiphysics capabilities
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.
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• The Company's expectations regarding future claims related to indemnification obligations.
• 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 estimates regarding the expected impact on reported revenue related to the acquisition accounting
treatment of deferred revenue.
• The Company's assumption that all remaining payments will be made for deferred compensation related to the Apache
acquisition and contingent consideration related to both the Apache and EVEN acquisitions.
• The Company's expectation that the combination of ANSYS's CFD solutions with Reaction Design's chemistry solvers
will provide the best-in-class combustion simulation tools available on the market.
• The Company's expectations regarding the outcome of its service tax audit case.
• The Company's estimates regarding total compensation expense associated with granted stock-based awards for future
years.
• The Company's estimates regarding a tax benefit due to planned repatriation of cash from a foreign subsidiary.
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.
Acquisitions
Date of closing
January 3, 2014
Company
Reaction Design
April 2, 2013
EVEN - Evolutionary
Engineering AG
August 1, 2012
Esterel Technologies, S.A.
August 1, 2011
Apache Design, Inc.
Details
Reaction Design, a leading developer of chemistry simulation software, was acquired
for approximately $19 million. The combination of ANSYS's computational fluid
dynamics ("CFD") solutions with Reaction Design's chemistry solvers is expected to
provide the best-in-class combustion simulation tools available on the market.
EVEN, a leading provider of composite analysis and optimization technology relying
on cloud computing, was acquired for $8.1 million. The acquisition strengthens the
Company's simulation solutions for composites technology, which has become a
standard in manufacturing in a wide range of industries due to its combination of light
weight, high strength and outstanding flexibility.
Esterel, a leading provider of embedded software simulation solutions for mission
critical applications, was acquired for $58.2 million. 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 acquisition extends the Company's
vision to encompass both hardware and software systems.
Apache, a leading simulation software provider for advanced, low-power solutions for
electronics, was acquired for $314.0 million. Apache’s software enables engineers to
design power-efficient devices while satisfying ever-increasing performance
requirements. The acquisition complements the Company's software solutions by
bringing together best-in-class products that drive the Company's system vision for
ICs, electronic packages and PCBs.
For further information on the Company's business combinations, see Note 3 to the consolidated financial statements included
in Part IV, Item 15 of this Annual Report on Form 10-K.
24
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 2013, 2012 and 2011. 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,
2013
2012
2011
$
$
528,944
332,316
861,260
$
501,870
296,148
798,018
28,363
38,298
80,031
146,692
714,568
218,907
151,439
22,359
392,705
321,863
(1,169)
2,841
(1,046)
322,489
77,162
245,327
$
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
$
$
425,881
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
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Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Revenue:
(in thousands, except percentages)
Revenue:
Lease licenses
Perpetual licenses
Software licenses
Maintenance
Service
Maintenance and service
Total revenue
Year Ended December 31,
Change
2013
2012
Amount
%
$
297,658
$
279,283
$
231,286
528,944
309,085
23,231
332,316
222,587
501,870
275,498
20,650
296,148
$
861,260
$
798,018
$
18,375
8,699
27,074
33,587
2,581
36,168
63,242
6.6
3.9
5.4
12.2
12.5
12.2
7.9
The Company’s revenue increased 7.9% in 2013 as compared to 2012, including increases in all major revenue categories. The
Company's revenue included Esterel operations for the full year in 2013 of $18.8 million as compared to five months in 2012 of
$3.3 million. The growth was partially influenced by benefits from the Company’s continued investment in its global sales and
marketing organization. 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 12.2%. Revenue
from lease licenses increased 6.6% as compared to the prior year due to an increase in Apache-related lease license revenue and
growth in sales of other lease licenses. Perpetual license revenue, which is derived entirely from new sales during the period,
increased 3.9% as compared to the prior year, due to increased perpetual license sales across most product lines, as well as a
full year of Esterel activity in 2013 as compared to five months in 2012. Service revenue increased 12.5% as compared to the
prior year due to an increase in engineering consulting projects.
With respect to revenue, on average for the year ended December 31, 2013, the U.S. Dollar was 4.0% stronger, when measured
against the Company’s primary foreign currencies, than for the year ended December 31, 2012. The net overall strengthening,
primarily related to the Japanese Yen, resulted in decreased revenue and operating income during 2013, as compared to 2012,
of $17.6 million and $12.2 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.
International and domestic revenues, as a percentage of total revenue, were 66.1% and 33.9%, respectively, during the year
ended December 31, 2013, and 66.7% and 33.3%, respectively, during the year ended December 31, 2012. The Company
derived 25.3% and 26.0% of its total revenue through the indirect sales channel for the years ended December 31, 2013 and
2012, 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, 2013 was $4.6 million. The expected impact on reported revenue is $0.4 million and $1.4 million for the quarter
ending March 31, 2014 and the year ending December 31, 2014, respectively.
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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,
2013
2012
Change
Amount
% of
Revenue
Amount
% of
Revenue
Amount
%
$
28,363
38,298
80,031
146,692
$
714,568
3.3
4.4
9.3
17.0
83.0
$
24,512
40,889
74,115
139,516
$
658,502
3.1
5.1
9.3
17.5
82.5
$
3,851
(2,591)
5,916
7,176
$
56,066
15.7
(6.3)
8.0
5.1
8.5
Software Licenses: The increase in software license costs was primarily due to the following:
•
•
•
Increased salaries and incentive compensation of $2.2 million.
Increased third-party royalties of $0.9 million.
Increased Esterel-related costs of $0.7 million, primarily as a result of a full year of Esterel activity in 2013 as
compared to five months of activity in 2012.
Amortization: The decrease in amortization expense was primarily due to a net decrease in amortization of acquired technology.
Maintenance and Service: The increase in maintenance and service costs was primarily due to the following:
•
•
•
•
Increased salaries and headcount-related costs of $2.6 million.
Increased third-party technical support of $1.4 million.
Increased Esterel-related costs of $0.6 million, primarily as a result of a full year of Esterel activity in 2013 as
compared to five months of activity in 2012.
Increased depreciation expense of $0.5 million.
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,
2013
2012
Change
Amount
% of
Revenue
Amount
% of
Revenue
Amount
%
$
218,907
151,439
22,359
25.4
17.6
2.6
$
205,178
132,628
26,443
25.7
16.6
3.3
$
392,705
45.6
$
364,249
45.6
$
$
13,729
18,811
(4,084)
28,456
6.7
14.2
(15.4)
7.8
Selling, General and Administrative: The increase in selling, general and administrative costs was primarily due to the
following:
•
•
Increased salaries of $4.9 million.
Increased Esterel-related expenses of $4.5 million, primarily as a result of a full year of Esterel activity in 2013 as
compared to five months of activity in 2012.
•
Increased stock-based compensation of $1.6 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 salaries, incentive compensation and other headcount related costs of $11.0 million.
Increased Esterel-related expenses of $3.1 million, primarily as a result of a full year of Esterel activity in 2013 as
compared to five months of activity in 2012.
Increased facilities and IT-related maintenance costs of $1.7 million.
Increased stock-based compensation of $1.4 million.
• EVEN-related research and development expenses of $1.4 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, expanding its HPC capabilities,
robust design and ongoing integration.
Amortization: The decrease in amortization expense was primarily due to a net decrease in amortization of acquired intangible
assets, including contract backlog and customer lists.
Interest Expense: The Company’s interest expense consists of the following:
(in thousands)
Discounted obligations
Term loan
Amortization of debt financing costs
Other
Total interest expense
Year Ended December 31,
2013
2012
$
$
$
722
230
149
68
1,169
$
546
1,342
698
75
2,661
Interest Income: Interest income for the year ended December 31, 2013 was $2.8 million as compared to $3.4 million during
the year ended December 31, 2012. Interest income decreased as a result of a decrease in the average rate of return on invested
cash balances.
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Other Expense, net: The Company recorded other expense of $1.0 million during the year ended December 31, 2013 as
compared to $1.4 million during the year ended December 31, 2012. The activity for both years was primarily composed of net
foreign currency transaction losses.
Income Tax Provision: The Company recorded income tax expense of $77.2 million and had income before income taxes of
$322.5 million for the year ended December 31, 2013, representing an effective tax rate of 23.9%. During the year ended
December 31, 2012, the Company recorded income tax expense of $90.1 million and had income before income taxes of
$293.5 million, representing an effective tax rate of 30.7%.
In December 2013, the Company received notice from the IRS that the Joint Committee on Taxation took no exception to the
Company's tax returns that were filed for 2009 and 2010. An $11.0 million tax benefit was recognized in the Company's 2013
financial results as the Company has effectively settled uncertainty regarding the realization of refund claims filed in
connection with the 2009 and 2010 returns.
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 the 2011 tax year. In January 2013, the U.S. Congress passed legislation that reinstated
the research and development credit retroactive to 2012. The income tax provision for the year ended December 31, 2013
includes approximately $2.3 million related to the reinstated research and development credit for 2012 activity. The 2014
research and development credit is currently not available unless legislation is passed by the U.S. Congress.
The decrease in the effective tax rate from the prior year is primarily due to the release of an uncertain tax position mentioned
above, the reinstatement of the U.S. research and development credit mentioned above, and cash repatriation activities. When
compared to the federal and state combined statutory rate, the effective tax rates for the years ended December 31, 2013 and
2012 were favorably impacted by lower statutory tax rates in many of the Company’s foreign jurisdictions, the domestic
manufacturing deduction and tax benefits associated with the merger of the Company’s Japan subsidiaries in 2010.
Net Income: The Company’s net income for the year ended December 31, 2013 was $245.3 million as compared to net income
of $203.5 million for the year ended December 31, 2012. Diluted earnings per share was $2.58 for the year ended
December 31, 2013 and $2.14 for the year ended December 31, 2012. The weighted average shares used in computing diluted
earnings per share were 95.1 million and 95.0 million for the years ended December 31, 2013 and 2012, respectively.
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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.
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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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.
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.
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.
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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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.
•
Increased stock-based compensation of $2.8 million.
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 of $5.3 million.
Increased depreciation expense of $1.5 million.
• Esterel-related research and development expenses of $1.4 million.
• Decreased incentive compensation of $1.7 million.
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.
Interest Expense: The Company’s interest expense consisted 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.
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Other Expense, net: The Company recorded other expense of $1.4 million during the year ended December 31, 2012 as
compared to $0.4 million during the year ended December 31, 2011. The activity for both years was primarily composed of net
foreign currency transaction losses.
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%.
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 for the years ended December 31, 2012 and 2011, 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,
2013
2012
(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
$861,260
321,863
37.4%
Adjustments
$
Non-GAAP
Results
4,632 (1) $865,892
423,095
101,232 (2)
As
Reported
Adjustments
Non-GAAP
Results
$ 798,018
$
9,636 (4) $ 807,654
294,253
110,290 (5)
404,543
48.9%
36.9%
50.1%
$245,327
$
66,197 (3) $311,524
$ 203,483
$
73,304 (6) $ 276,787
$
2.58
95,139
$
3.27
$
2.14
95,139
94,954
$
2.91
94,954
(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 $60.7 million of amortization expense associated with intangible assets acquired in business
combinations, $35.3 million of stock-based compensation expense, the $4.6 million adjustment to revenue as reflected
in (1) above and $0.6 million of transaction expenses related to business combinations.
(3) Amount represents the impact of the adjustments to operating income referred to in (2) above, adjusted for the related
income tax impact of $35.0 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 $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 (4) above and $0.9 million of transaction expenses related to the Esterel 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 $37.0 million.
Note: The 2013 GAAP and non-GAAP net income and earnings per share data reflected above include $11.0 million of
incremental tax benefit, or $0.12 per diluted share, related to the notification received from the IRS that the Joint Committee on
Taxation took no exception to the Company's tax returns that were filed for 2009 and 2010, thus effectively settling the
uncertainty regarding refund claims filed in connection with these returns.
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(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
Year Ended December 31,
2012
2011
As
Reported
Adjustments
Non-GAAP
Results
As
Reported
Adjustments
Non-GAAP
Results
$ 798,018
$
9,636 (1) $ 807,654
$ 691,449
$
9,621 (4) $ 701,070
294,253
110,290 (2)
404,543
265,559
86,550 (5)
352,109
36.9%
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 diluted 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.
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.
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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.
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 the Company's 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 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, 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 the Company's financial reporting as well as comparability with competitors'
operating results.
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Table of Contents
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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Liquidity and Capital Resources
(in thousands)
Cash, cash equivalents and short-term investments
Working capital
Cash, cash equivalents and short-term investments
As of December 31,
Change
2013
2012
2013 vs. 2012
$
$
742,986 $
627,165 $
577,155
435,972
$
$
165,831
191,193
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. The following table presents the Company's foreign and domestic holdings of
cash, cash equivalents and short-term investments:
(in thousands)
Cash, cash equivalents and short-term investments held domestically
Cash, cash equivalents and short-term investments held by foreign
subsidiaries
Total
2013
530,680
212,306
742,986
$
$
As of December 31,
% of
Total
71.4% $
2012
399,295
28.6%
177,860
577,155
$
% of
Total
69.2%
30.8%
If the 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. 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 amount of cash, cash equivalents and short-term investments held
by foreign 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.
Working capital
The increase in working capital is due primarily to the increase in cash, cash equivalents and short-term investments realized
through cash flows from operations.
Cash Flows from Operating Activities
(in thousands)
Net cash provided by operating activities
2013
332,983 $
$
2012
2011
2013 vs. 2012
2012 vs. 2011
298,415 $
307,661
$
34,568 $
(9,246)
Year Ended December 31,
Change
Fiscal year 2013 as compared to fiscal year 2012
Cash flows from operations increased during the current fiscal year due to increased net income (net of non-cash operating
adjustments) of $39.3 million and decreased net cash flows from operating assets and liabilities of $4.8 million.
Fiscal year 2012 as compared to fiscal year 2011
Cash flows from operations decreased during the prior fiscal year due to decreased net cash flows from operating assets and
liabilities of $41.6 million and increased net income (net of non-cash operating adjustments) of $32.3 million.
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Cash Flows from Investing Activities
(in thousands)
Net cash used in investing activities
2013
(33,177) $
2012
(68,956) $
2011
(291,643) $
$
2013 vs. 2012
2012 vs. 2011
35,779 $
222,687
Year Ended December 31,
Change
Fiscal year 2013 as compared to fiscal year 2012
Cash used in investing activities decreased during the current fiscal year due primarily to decreased acquisition-related cash
outlays of $40.9 million and increased capital spending of $4.9 million. The Company currently plans capital spending of $35
million to $45 million during fiscal year 2014 as compared to $28.8 million in the current fiscal year. The planned increase is
attributable to costs associated with the Company's new Canonsburg, Pennsylvania headquarters facility expected to be
completed in late 2014. The Company has occupied its current headquarters facility since 1997. The level of spending will be
dependent upon various factors, including growth of the business and general economic conditions.
Fiscal year 2012 as compared to fiscal year 2011
Cash used in investing activities decreased during the prior fiscal year due primarily to decreased acquisition-related cash
outlays of $224.4 million.
Cash Flows from Financing Activities:
(in thousands)
Net cash used in financing activities
2013
(129,759) $
2012
(124,846) $
$
2011
2013 vs. 2012
2012 vs. 2011
(9,676) $
(4,913) $
(115,170)
Year Ended December 31,
Change
Fiscal year 2013 as compared to fiscal year 2012
Cash used in financing activities increased during the current fiscal year due primarily to increased treasury stock repurchases
of $20.7 million, decreased excess tax benefits from stock option exercises of $3.9 million, restricted stock withholding taxes
paid in lieu of issued shares of $4.3 million, partially offset by decreased principal payments on long-term debt of $21.3
million.
Under the Company’s stock repurchase program, the Company repurchased 1.5 million shares during the year ended
December 31, 2013 at an average price per share of $77.73, for a total cost of $116.1 million. As of December 31, 2013, 1.5
million shares remain authorized for repurchase under the Company’s stock repurchase program. The Company paid the
outstanding balance of its term loan at maturity on July 31, 2013.
Fiscal year 2012 as compared to fiscal year 2011
Cash used in financing activities decreased during the prior fiscal year due primarily to increased treasury stock repurchases of
$82.8 million, an increase in principal payments on long-term debt of $42.5 million and increased proceeds from the exercise
of stock options of $9.2 million.
During the year ended December 31, 2012, the Company repurchased 1.5 million shares at an average price per share of
$63.65, for a total cost of $95.5 million.
On January 3, 2014, the Company completed the acquisition of Reaction Design, a leading developer of chemistry simulation
software, for a purchase price of approximately $19 million. The operating results of Reaction Design will be included in the
Company's consolidated financial statements from the date of acquisition and, accordingly, Reaction Design's operating results
are not included in the financial results presented in this annual report on Form 10-K.
The Company believes that existing cash and cash equivalent balances of $742.5 million, together with cash generated from
operations, will be sufficient to meet the Company’s working capital and capital expenditure 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.
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The Company continues to generate positive cash flows from operating activities and believes that the best use of its excess
cash is to invest in the business and, to repurchase stock in order to offset dilution and to return capital to stockholders in excess
of our requirements with the goal of increasing stockholder value. 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, credit facilities, or from the
issuance of additional securities.
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, 2013 are summarized below:
Payments Due by Period
(in thousands)
Global headquarters operating leases(1)
Other operating leases(2)
Unconditional purchase obligations(3)
Obligations related to uncertain tax positions,
including interest and penalties(4)
Other long-term obligations(5)
Total contractual obligations
Total
68,389
35,890
3,860
Within 1 year
1,429
$
11,401
2,872
933
35,463
144,535
$
933
11,140
27,775
$
$
$
$
2 – 3 years
4 – 5 years
8,556
12,045
988
—
17,457
39,046
$
$
After 5 years
49,848
$
7,195
—
8,556
5,249
—
—
3,780
17,585
$
—
3,086
60,129
(1) 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 under construction, the Company will not be obligated to pay rent until January 1, 2015.
The term of the lease is 183 months, beginning on the date the Company takes possession of the facility. The Company
shall have a one-time right to terminate the lease effective upon the last day of the tenth full year following the date of
possession (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.
(2) Other operating leases primarily include noncancellable lease commitments for the Company’s other domestic and
international offices as well as certain operating equipment.
(3) 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, 2013.
(4) The Company has $17.9 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.
(5) Primarily includes deferred compensation of $20.0 million (including estimated imputed interest of $250,000 within 1
year, $580,000 within 2-3 years and $90,000 within 4-5 years), contingent consideration of $8.0 million (including
estimated imputed interest of $360,000 within 1 year and $740,000 within 2-3 years) and pension obligations of $5.4
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 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.
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.
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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, 2013, 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.
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. 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.
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 consolidated statements of income. Accrued interest and
penalties are included within the related tax liability line in the consolidated balance sheets.
Goodwill and Indefinite-lived Intangible Assets: The Company tests goodwill and indefinite-lived intangible assets 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 or asset exceeds its carrying amount. Goodwill is tested at the reporting unit
level and indefinite-lived intangible assets are tested at the individual asset level. 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
the reporting unit or asset being tested, 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 the reporting unit's or asset’s fair value and carrying amount, to reach a qualitative conclusion regarding whether it is
more likely than not that the fair value of a reporting unit or asset 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 or asset exceeds its carrying value, no
further analysis is necessary. If it is determined that it is more likely than not the reporting unit's or asset's carrying value
exceeds its fair value, a quantitative two-step analysis is performed where the fair value of the reporting unit or asset is
estimated and the impairment loss, if any, is recorded. 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.
During the first quarter of 2013, 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, 2013. The Company
performed qualitative assessments to test goodwill and indefinite-lived intangible assets 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 and indefinite-lived
intangible assets were less than their carrying amounts.
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Contingencies: 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.
Stock-based Compensation: The Company grants options and other 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. Stock-based compensation expense for 2013, 2012 and 2011
was $35.3 million, $32.4 million and $23.1 million, respectively. As of December 31, 2013, total unrecognized estimated
compensation expense related to unvested stock options granted prior to that date was $39.9 million, which is expected to be
recognized over a weighted average period of 1.7 years.
The value of each stock-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 rate assumptions 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,
2013
0.68% to 1.48%
—%
37%
5.8 years
$29.85
2012
0.59% to 1.04%
—%
38%
6.0 years
$24.82
2011
0.91% to 2.11%
—%
39%
5.8 years
$25.84
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
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, there is no corresponding benefit to income tax
expense. For example, the Company realized a tax benefit of $6.1 million during the year ended December 31, 2013 related to
disqualified dispositions of incentive stock options; however, only $1.8 million of such amount was recorded as a reduction in
income tax expense.
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Under the terms of the ANSYS, Inc. Long-Term Incentive Plan, in the first quarter of 2013, 2012 and 2011, the Company
granted 94,300, 100,000 and 92,500 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 weighted average fair value of
each restricted stock unit granted in 2013, 2012 and 2011 was estimated on the grant date to be $50.05, $33.16 and $32.05,
respectively. The fair value of the restricted stock units was estimated 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. Stock-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, 2013, employees earned 92,500
restricted stock units, which will be issued in the first quarter of 2014. Total compensation expense associated with the awards
recorded for the years ended December 31, 2013, 2012 and 2011 was $3.6 million, $2.6 million and $1.6 million, respectively.
Total compensation expense associated with granted awards for the years ending December 31, 2014 and 2015 is expected to
be $2.8 million and $1.7 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,
2013
0.35%
—%
25%
20%
2.8 years
0.70
2012
0.16%
—%
28%
20%
2.8 years
0.75
2011
1.35%
—%
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, 2013, 115,842 deferred stock units have been earned with the underlying shares remaining unissued until
the service termination of the respective Director owners. Of this amount, 26,215 units were earned during the year ended
December 31, 2013.
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 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. Total compensation expense associated with the awards
recorded for the years ended December 31, 2013 and 2012, was $3.8 million and $3.9 million, respectively. For the year ended
December 31, 2013, employees earned 75,477 units, which will be issued in the first quarter of 2014.
To the extent the Company changes the terms of its stock-based compensation programs, experiences market volatility in the
pricing of its common stock that increases the implied volatility assumption used in the Black-Scholes model, refines different
assumptions in future periods such as forfeiture rates that differ from current estimates, or assumes stock awards from acquired
companies that are different in nature than the Company's stock award arrangements, among other potential impacts, the stock-
based compensation expense recorded in future periods and the related tax benefits may differ significantly from what was
recorded in previous reporting periods.
Estimates of stock-based compensation expense are significant to the Company’s financial statements, but this expense is 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 stock-based compensation as related to its operational performance, the Board of
Directors and management exclude estimated stock-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.
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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, 2013, total interest income was $2.8 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 paid the outstanding balance of its term loan at maturity on July 31, 2013. For the
years ended December 31, 2013, 2012 and 2011, the Company recorded interest expense related to the term loan at average
interest rates of 1.04%, 1.22% and 1.05%, respectively. The interest expense on the term loan and amortization related to debt
financing costs were as follows:
(in thousands)
July 31, 2008 term loan
Year Ended December 31,
2013
2012
2011
Interest
Expense
$
230
Amortization
149
$
Interest
Expense
Amortization
Interest
Expense
Amortization
$
1,342
$
698
$
1,605
$
953
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.
With respect to revenue, on average for the year ended December 31, 2013, the U.S. Dollar was 4.0% stronger, when measured
against the Company’s primary foreign currencies, than for the year ended December 31, 2012. The net overall strengthening,
primarily related to the Japanese Yen, resulted in decreased revenue and operating income of $17.6 million and $12.2 million,
respectively, during the year ended December 31, 2013, as compared to the year ended December 31, 2012.
The Company has foreign currency denominated liabilities. In order to provide a natural hedge to mitigate the foreign currency
exchange risk, the Company will purchase foreign currencies and hold these currencies in cash until the liabilities are settled.
The most significant currency impacts on revenue and operating income are typically attributable to U.S. Dollar exchange rate
changes against the British Pound, Euro and Japanese Yen. The exchange rates for these currencies are reflected in the charts
below:
As of
December 31, 2010
December 31, 2011
December 31, 2012
December 31, 2013
Twelve Months Ended
December 31, 2011
December 31, 2012
December 31, 2013
Period End Exchange Rates
GBP/USD
EUR/USD
USD/JPY
1.560
1.554
1.625
1.656
1.337
1.296
1.320
1.375
81.215
76.917
86.730
105.263
Average Exchange Rates
GBP/USD
EUR/USD
USD/JPY
1.604
1.580
1.565
1.392
1.286
1.328
79.659
79.794
97.463
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ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following tables set 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,
2013
September 30,
2013
June 30,
2013
March 31,
2013
Fiscal Quarter Ended
$
$
$
$
$
$
236,020
197,411
92,252
75,929
0.82
0.80
December 31,
2012
220,748
184,067
81,639
56,063
0.61
0.59
$
$
$
$
$
$
212,658
177,489
81,637
62,430
0.67
0.66
$
$
$
214,850
178,170
78,425
55,945
0.60
0.59
Fiscal Quarter Ended
September 30,
2012
June 30,
2012
196,909
163,153
73,652
51,619
0.56
0.54
$
$
$
195,016
160,279
71,134
50,262
0.54
0.53
$
$
$
$
$
$
197,732
161,498
69,549
51,023
0.55
0.54
March 31,
2012
185,345
151,003
67,828
45,539
0.49
0.48
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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, Director of Investor Relations and Global Insurance, Vice President of Worldwide Sales
and Support, Vice President of Human Resources, Vice President of Marketing and Chief Product Officer. 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 (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. 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,
2013.
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. There were no changes in the Company’s internal controls over financial reporting that occurred
during the three months ended December 31, 2013 that materially affected, or were reasonably likely to materially affect, the
Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
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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 2014 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 2014 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 2014 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 2014 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 2014 Proxy Statement and is set forth
under “Independent Registered Public Accounting Firm” therein.
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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, 2013 and 2012
Consolidated Statements of Income for the years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Comprehensive Income for the years ended December 31, 2013,
2012 and 2011
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2013, 2012
and 2011
Notes to Consolidated Financial Statements
51
52
54
55
56
57
58
59
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
81
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 exhibit index that
follows the Signatures page 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.
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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 (1992),
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
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, 2013. Deloitte & Touche LLP, an independent registered public accounting firm, has audited the
Company’s internal control over financial reporting as of December 31, 2013, as stated in their report which appears in Part IV,
Item 15 of this Annual Report on Form 10-K.
/s/ JAMES E. CASHMAN III
James E. Cashman III
President and Chief Executive Officer
February 27, 2014
/s/ MARIA T. SHIELDS
Maria T. Shields
Chief Financial Officer
February 27, 2014
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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, 2013 and 2012, 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, 2013. 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, 2013 and 2012, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2013, 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, 2013, based on the criteria established in Internal
Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated February 27, 2014 expressed an unqualified opinion on the Company’s internal control over financial
reporting.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
February 27, 2014
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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, 2013, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. 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, 2013, based on the criteria established in Internal Control - Integrated Framework (1992) 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, 2013 of the
Company and our report dated February 27, 2014 expressed an unqualified opinion on those financial statements and financial
statement schedule.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
February 27, 2014
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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 $5,700 and $4,800,
respectively
Other receivables and current assets
Deferred income taxes
Total current assets
Property and equipment, net
Construction in progress - leased facility
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:
Non-cash obligations for construction in progress - leased facility
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; 93,236,023 and
93,201,905 shares issued, respectively
Additional paid-in capital
Retained earnings
Treasury stock, at cost: 917,937 and 536,231 shares, respectively
Accumulated other comprehensive (loss) income
Total stockholders’ equity
Total liabilities and stockholders’ equity
December 31,
2013
2012
$
742,486
500
$
576,703
452
97,845
200,734
26,031
1,067,596
60,538
18,136
1,255,704
291,390
10,586
18,432
2,722,382
$
96,598
216,268
23,338
913,359
52,253
—
1,251,247
351,173
24,393
14,992
2,607,417
— $
7,939
43,992
9,333
49
69,343
309,775
440,431
18,136
66,899
60,670
145,705
53,149
4,924
42,601
8,182
1,409
61,329
305,793
477,387
—
92,822
96,917
189,739
—
—
932
926,031
1,284,818
(72,891)
(2,644)
2,136,246
2,722,382
$
932
927,368
1,039,491
(36,151)
8,651
1,940,291
2,607,417
$
$
$
The accompanying notes are an integral part of the consolidated financial statements.
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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,
2013
2012
2011
$
528,944
$
501,870
$
425,881
332,316
861,260
28,363
38,298
80,031
146,692
714,568
218,907
151,439
22,359
392,705
321,863
(1,169)
2,841
(1,046)
322,489
77,162
245,327
2.65
92,691
$
$
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
$
$
2.58
$
2.14
$
95,139
94,954
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
1.91
94,381
$
$
$
The accompanying notes are an integral part of the consolidated financial statements.
55
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ANSYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
Other comprehensive loss:
Foreign currency translation adjustments
Comprehensive income
Year Ended December 31,
2013
245,327
(11,295)
234,032
$
$
$
$
2012
2011
203,483
$
180,675
(3,225)
200,258
$
(5,086)
175,589
The accompanying notes are an integral part of the consolidated financial statements.
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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
Year Ended December 31,
2013
2012
2011
$
245,327
$
203,483
$
180,675
80,701
(24,025)
1,465
35,298
(9,971)
73
(2,983)
(44,162)
(462)
15,737
11,876
42,105
(17,996)
332,983
(4,224)
(28,848)
(261)
156
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
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
Net cash used in investing activities
(33,177)
(68,956)
(291,643)
Cash flows from financing activities:
Principal payments on long-term debt
Principal payments on capital leases
Purchase of treasury stock
Restricted stock withholding taxes paid in lieu of issued shares
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
Construction in progress - leased facility
(53,149)
(74,408)
(31,889)
—
(14)
(87)
(116,132)
(95,477)
(12,704)
(4,269)
(3,174)
2,987
34,007
9,971
—
(3,241)
2,446
31,960
13,888
(129,759)
(124,846)
(4,264)
165,783
576,703
742,486
97,706
736
18,136
$
$
262
104,875
471,828
576,703
103,196
1,970
—
$
$
$
$
—
—
2,167
22,791
10,046
(9,676)
(6,993)
(651)
472,479
471,828
64,731
1,858
—
The accompanying notes are an integral part of the consolidated financial statements.
57
Table of Contents
(in thousands)
Balance, January 1,
2011
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
Treasury shares acquired
Stock-based compensation
activity, including tax
benefit of $10,033
Issuance of common stock
under Employee Stock
Purchase Plan
Other comprehensive loss
Net income for the year
Balance, December 31,
2013
ANSYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Retained
Earnings
Treasury Stock
Shares
Amount
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
91,647
$
916
$
856,718
$
655,333
— $
— $
16,962
$
1,529,929
247
(12,704)
(12,704)
955
50
10
1
3,170
43,608
2,166
(247)
12,704
180,675
(5,086)
3,170
56,322
2,167
(5,086)
180,675
92,652
927
905,662
836,008
—
1,500
—
(95,477)
11,876
1,754,473
(95,477)
78,591
2,446
(3,225)
203,483
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
1,494
(36,151)
(116,132)
8,651
1,940,291
(116,132)
34
(806)
(531)
(1,063)
75,874
(49)
3,518
245,327
75,068
2,987
(11,295)
245,327
(11,295)
93,236
$
932
$
926,031
$ 1,284,818
918
$
(72,891) $
(2,644) $
2,136,246
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, 2013
ANSYS, Inc. (hereafter the "Company" or "ANSYS") develops and globally markets engineering simulation software and
technologies 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.
As defined by the accounting guidance, the Company operates as two segments. However, the Company determined that its
two 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
• Tax valuation reserves
•
Fair value of stock-based compensation
• Contract revenue
• Useful lives for depreciation and amortization
• Valuations of goodwill and other intangible assets
• Contingent consideration
• Deferred compensation
• Loss contingencies
Actual results could differ from these estimates. Changes in estimates are recorded in the results of operations in the period that
the changes occur.
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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 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.
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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
Total
December 31, 2013
December 31, 2012
Amount
% of Total
Amount
% of Total
$
$
439,348
303,138
742,486
59.2
40.8
$
$
369,724
206,979
576,703
64.1
35.9
The Company held 99% and 98% of its money market mutual fund balances in various funds of a single issuer as of
December 31, 2013 and December 31, 2012, 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
Research and development costs, other than certain capitalized software development costs, are expensed as incurred.
Software Development Costs
Internally developed software costs required to be capitalized as defined by the accounting guidance were not material to the
Company's consolidated financial statements in 2013, 2012 and 2011.
Business Combinations
When the Company consummates an acquisition, the assets acquired and the liabilities assumed are recognized separately from
goodwill, at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of the fair value of
consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While
best estimates and assumptions are used to accurately value assets acquired and liabilities assumed at the acquisition date as
well as contingent consideration, where applicable, the Company's estimates are inherently uncertain and subject to refinement.
As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records
adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill based on refinements to
information regarding what was known and knowable as of the acquisition date. Upon the earlier of the conclusion of the
measurement period or final determination of the values of assets acquired or liabilities assumed, any subsequent adjustments
are recorded in the consolidated statements of income.
Goodwill and Other Intangible Assets
Goodwill represents the excess of the consideration transferred over the fair value of net identifiable assets acquired. Other
intangible assets consist of trademarks, customer lists, contract backlog, and acquired software and technology. Intangible
assets that are not considered to have an indefinite useful life are amortized over their useful lives, which are generally three to
15 years. Amortization expense for intangible assets was $60.7 million, $67.3 million and $51.7 million for the years ended
December 31, 2013, 2012 and 2011, respectively.
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The Company tests goodwill and indefinite-lived intangible assets 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 or
asset exceeds its carrying amount. Goodwill is tested at the reporting unit level and indefinite-lived intangible assets are tested
at the individual asset level. 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 the reporting unit or asset being tested, 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 the reporting unit's or asset's fair value and carrying
amount, to reach a qualitative conclusion regarding whether it is more likely than not that the fair value of a reporting unit or
asset 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 or asset exceeds its carrying value, no
further analysis is necessary. If it is determined that it is more likely than not the reporting unit's or asset's carrying value
exceeds its fair value, a quantitative two-step analysis is performed where the fair value of the reporting unit or asset is
estimated and the impairment loss, if any, is recorded.
The Company performs its annual impairment tests for goodwill and indefinite-lived intangible assets 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.
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
Year Ended December 31,
2013
2012
2011
25%
6%
2%
26%
6%
3%
26%
4%
3%
No single direct sale customer accounted for more than 5% of the Company's revenue in 2013, 2012 or 2011.
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's cash and cash equivalent accounts are insured through various
public and private bank deposit insurance programs, foreign and domestic; however, a significant portion of the Company's
funds are not insured. The following table outlines concentrations of risk with respect to the Company's cash and cash
equivalents:
(in thousands)
Cash and cash equivalents held domestically
Cash and cash equivalents held by foreign subsidiaries
Cash and cash equivalents held in excess of deposit insurance, foreign and domestic
Cash and cash equivalents held with one U.S. financial institution, foreign and domestic
$
As of December 31,
2013
2012
$
530,680
211,806
717,589
378,562
399,295
177,408
559,023
296,270
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 $1.5 million, $0.9 million and $0.4 million for the years
ended December 31, 2013, 2012 and 2011, respectively.
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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. Assets and liabilities denominated in a
currency other than the Company's or subsidiary's functional currency are translated at the effective exchange rate on the
balance sheet date. Gains and losses resulting from foreign exchange transactions are included in other expense. The Company
recorded net foreign exchange losses of $1.1 million, $1.4 million and $0.4 million for the years ended December 31, 2013,
2012 and 2011, 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.
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,
2013
2012
2011
$
$
$
245,327
92,691
2,448
95,139
2.65
2.58
885
$
$
$
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
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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.
New Accounting Guidance
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. 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 has 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 was adopted by the Company effective January 1,
2013, and it did not have any impact on the Company's financial position, results of operations or cash flows.
3. Acquisitions
Reaction Design
On January 3, 2014, the Company completed the acquisition of Reaction Design, a leading developer of chemistry simulation
software, for a purchase price of approximately $19 million. Reaction Design's solutions enable transportation manufacturers
and energy companies to rapidly achieve their clean technology goals by automating the analysis of chemical processes via
computer simulation and modeling solutions. The operating results of Reaction Design will be included in the Company's
consolidated financial statements from the date of acquisition and, accordingly, Reaction Design's operating results are not
included in the financial results presented in this annual report on Form 10-K.
EVEN - Evolutionary Engineering AG
On April 2, 2013, the Company acquired EVEN, a leading provider of composite analysis and optimization technology. Under
the terms of the agreement, ANSYS acquired 100% of EVEN for a purchase price of $8.1 million, which consisted of $4.5
million in cash and an estimated $3.6 million of contingent consideration based on EVEN's achievement of certain technical
milestones during the three years following the acquisition date.
The operating results of EVEN have been included in the Company's consolidated financial statements since the date of
acquisition. The total consideration transferred was allocated to the assets and liabilities of EVEN based on management's
estimates of the fair values of the assets acquired and the liabilities assumed. The allocation included $2.6 million to
identifiable intangible assets, including customer lists and core technology, to be amortized over a period of five years, and $5.9
million to goodwill, which is not tax deductible. The fair values of the assets acquired and liabilities assumed 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 operating results of EVEN are not material to the consolidated financial statements.
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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. The
operating results of Esterel have been included in the Company's consolidated financial statements since the date of acquisition.
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, is 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, which was $11.0 million lower than the historical carrying value. The impact on reported revenue
for the year ended December 31, 2013 was $4.1 million. The expected impact on reported revenue is $0.4 million and $1.4
million for the quarter ending March 31, 2014 and for the year ending December 31, 2014, respectively.
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:
(dollars 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
(4,707)
(1,139)
(7,096)
39,703
18,447
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. During the one-year measurement period since the Esterel acquisition date, the Company decreased the value of net
deferred tax liabilities from $10.0 million to $7.1 million, with the offset recorded to goodwill. This adjustment was based on
additional information regarding what was known and knowable in the calculation of the net deferred tax liabilities as of the
acquisition date.
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.
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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:
(dollars 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.
4. Other Current Assets
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 $140.1 million and $149.3 million as of December 31, 2013 and 2012, 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 $42.4 million and $48.9 million as of December 31, 2013 and 2012,
respectively.
5. Other Long-Term Liabilities
The Company reports reserves for uncertain tax positions, including estimated penalties and interest, in the consolidated
balance sheets. These amounts totaled $18.8 million and $37.0 million as of December 31, 2013 and December 31, 2012,
respectively.
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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
1-10 years
December 31,
2013
2012
$
$
68,970
27,647
24,325
8,125
4,973
2,178
136,218
(75,680)
60,538
$
$
59,580
26,864
15,122
7,334
4,457
2,178
115,535
(63,282)
52,253
Depreciation and amortization expense related to property and equipment, including the amounts acquired through capital lease
commitments, was $19.9 million, $17.4 million and $13.3 million for the years ended December 31, 2013, 2012 and 2011,
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 on
their fair values on the date of acquisition.
During the first quarter of 2013, 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, 2013. The Company
performed qualitative assessments to test goodwill and indefinite-lived intangible assets 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 and indefinite-lived
intangible assets were less than their carrying amounts. No events occurred or circumstances changed during the year ended
December 31, 2013 that would indicate that the fair values of the Company’s reporting units and indefinite-lived intangible
assets are below their carrying amounts.
The Company’s intangible assets and estimated useful lives are classified as follows:
(dollars in thousands)
Finite-lived intangible assets:
December 31, 2013
December 31, 2012
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Developed software and core technologies (5 – 10 years)
$
300,493
Customer lists and contract backlog (3 – 15 years)
Trade names (6 – 10 years)
Total
Indefinite-lived intangible assets:
Trade names
$
$
$ (203,236) $
(119,368)
(50,990)
$ (373,594) $
298,802
241,721
102,629
643,152
$ (175,988)
(100,702)
(40,436)
$ (317,126)
237,173
102,651
640,317
24,667
$
25,147
Amortization expense for the intangible assets reflected above was $60.7 million, $67.3 million and $51.7 million for the years
ended December 31, 2013, 2012 and 2011, respectively.
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As of December 31, 2013, estimated future amortization expense for the intangible assets reflected above is as follows:
(in thousands)
2014
2015
2016
2017
2018
Thereafter
Total intangible assets subject to amortization
Indefinite-lived trade names
Other intangible assets, net
The changes in goodwill during the years ended December 31, 2013 and 2012 are as follows:
(in thousands)
Beginning balance - January 1
Acquisitions of EVEN and Esterel, respectively
Currency translation and other
Ending balance - December 31
8. Long-Term Debt
$
$
54,119
50,482
43,374
39,604
25,982
53,162
266,723
24,667
291,390
2013
2012
$ 1,251,247
$ 1,225,375
5,936
(1,479)
$ 1,255,704
20,866
5,006
$ 1,251,247
The Company paid the outstanding balance on its term loan at maturity on July 31, 2013. For the years ended December 31,
2013, 2012 and 2011, the Company recorded interest expense related to the term loan at average interest rates of 1.04%, 1.22%
and 1.05%, respectively. The interest expense on the term loan and amortization related to debt financing costs are as follows:
Year Ended December 31,
2013
2012
2011
Interest
Expense
$
230
Amortization
149
$
Interest
Expense
Amortization
Interest
Expense
Amortization
$
1,342
$
698
$
1,605
$
953
(in thousands)
July 31, 2008 term loan
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.
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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
(in thousands)
Assets
Cash equivalents
Short-term investments
Liabilities
Contingent consideration
Deferred compensation
Foreign currency future
Fair Value Measurements at Reporting Date Using:
December 31,
2013
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
303,138
500
$
$
303,138
$
— $
(7,389) $
(704) $
— $
— $
— $
500
$
— $
— $
—
—
(7,389)
(704)
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)
—
$
$
$
$
$
$
$
$
$
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.
The contingent consideration in the table above represents potential future payments related to the EVEN and Apache
acquisitions in accordance with the respective merger agreements. The deferred compensation in the table above is attributable
to a retention agreement for a key member of Apache management, and was accounted for outside of that business
combination. The net present value calculations for the contingent consideration and deferred compensation include significant
unobservable inputs in the assumption that all remaining payments will be made, and therefore the liabilities were classified as
Level 3 in the fair value hierarchy.
The foreign currency future contract was settled in August 2013 and did not have a material impact on the Company's results of
operations for the year ended December 31, 2013.
The following table presents the changes during the years ended December 31, 2013 and 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
EVEN contingent consideration
Contingent payments
Interest expense and foreign exchange activity included in earnings
Balance as of December 31, 2013
69
Fair Value Measurement Using
Significant Unobservable Inputs
Contingent
Consideration
Deferred
Compensation
$
$
$
$
9,571
(3,288)
153
6,436
$
3,597
(3,288)
644
7,389
$
2,073
(712)
33
1,394
—
(712)
22
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Table of Contents
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.
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,
2013
2012
2011
272,569
49,920
322,489
$
$
234,497
59,050
293,547
$
$
205,966
58,892
264,858
Year Ended December 31,
2013
2012
2011
69,268
7,197
24,722
(23,438)
(2,187)
1,600
77,162
$
$
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
$
$
$
$
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 (benefit) tax of unrepatriated earnings
Uncertain tax positions
Research and experimentation credits
Adjustments of prior year taxes
Foreign rate differential
Benefit from restructuring activities
Domestic production activity benefit
Other
Year Ended December 31,
2013
2012
2011
35.0%
1.1
0.9
0.3
(0.9)
(3.7)
(2.0)
(0.1)
(0.9)
(2.8)
(3.3)
0.3
23.9%
35.0%
1.2
1.0
0.8
0.7
0.3
(0.1)
(1.3)
(1.9)
(3.1)
(3.3)
1.4
30.7%
35.0%
1.1
1.0
2.2
—
0.2
(0.9)
(0.3)
(1.1)
(3.5)
(2.9)
1.0
31.8%
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 $173.1 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 $46.1 million. The
Company has recorded a tax benefit of $0.1 million related to $15.8 million of earnings that it expects to repatriate from a
foreign subsidiary.
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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,
2013
2012
$
$
$
26,204
18,824
20,006
403
1,165
2,331
7,977
7,816
2,014
1,953
(392)
88,301
(106,115)
(4,556)
(115)
(110,786)
(22,485) $
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)
As of December 31, 2013, the Company had federal net operating loss carryforwards of $4.6 million. These losses expire
between 2024 - 2029, and are subject to limitations on their utilization. The Company had total foreign net operating loss
carryforwards of $70.6 million, of which $19.5 million are not currently subject to expiration dates. The remainder, $51.1
million, expires between 2019 and 2021. The Company had tax credit carryforwards of $4.1 million, of which $1.2 million are
subject to limitations on their utilization. Approximately $1.8 million of these tax credit carryforwards are not currently subject
to expiration dates. The remainder, $2.3 million, expires in various years between 2030 and 2033.
In December 2013, the Company received notice from the Internal Revenue Service that the Joint Committee on Taxation took
no exception to the Company's tax returns that were filed for 2009 and 2010. An $11.0 million tax benefit was recognized in the
Company's 2013 financial results as the Company has effectively settled uncertainty regarding refund claims filed in
connection with these returns.
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,
2013
2012
2011
$
$
37,203
—
320
(18,058)
2,036
(1,734)
20
(197)
19,590
$
$
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
The Company believes that it is reasonably possible that $0.7 million of uncertain tax positions will be resolved within the next
twelve months. Of the total unrecognized tax benefit as of December 31, 2013, $15.8 million would affect the effective tax rate,
if recognized.
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The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. As of December 31,
2013, the Company accrued a liability for penalties of $1.6 million and interest of $2.7 million. As of December 31, 2012, the
Company accrued a liability for penalties of $2.1 million and interest of $2.5 million.
The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. The Company’s 2008 through 2013
tax years are open to examination by the Internal Revenue Service. The 2008 and 2011 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 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 based on 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 $8.0 million in 2013, $7.1 million in 2012 and $5.3 million in
2011.
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
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-based Compensation
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 restricted stock awards, (c) 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, (d) the grant of
deferred stock awards, (e) the grant of stock appreciation rights and (f) the grant of cash-based awards.
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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, 2013, 115,842 deferred stock units have been earned with the underlying shares remaining unissued until the
service termination of the respective Director owners. Of this amount, 26,215 units were earned during the year ended
December 31, 2013.
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.
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,
2013
2012
2011
Weighted
Average
Exercise
Price
Options
Weighted
Average
Exercise
Price
Options
Weighted
Average
Exercise
Price
Options
7,122
103
$
$
— $
(993) $
(66) $
$
$
6,166
4,351
42.85
81.87
—
34.26
53.75
44.77
38.18
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
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Weighted Average Remaining Contractual Term (in years)
Outstanding
Vested and Exercisable
Aggregate Intrinsic Value (in thousands)
Outstanding
Vested and Exercisable
2013
2012
2011
5.99
5.13
6.78
5.48
6.66
5.20
$
$
261,601
213,304
$
$
174,383
136,851
$
$
168,837
124,550
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, 2013, 2012 and 2011 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,
2013
2012
2011
$
$
$
$
$
1,349
2,293
16,847
14,809
35,298
(11,096)
24,202
$
(0.26) $
(0.25) $
$
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)
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 2013, 2012 and 2011.
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,
2013
0.68% to 1.48%
—%
37%
5.8 years
$29.85
2012
0.59% to 1.04%
—%
38%
6.0 years
$24.82
2011
0.91% to 2.11%
—%
39%
5.8 years
$25.84
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.
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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, 2013, 2012 and 2011 were $24.7 million, $23.3
million and $20.2 million, respectively. As of December 31, 2013, total unrecognized estimated compensation cost related to
unvested stock options granted prior to that date was $39.9 million, which is expected to be recognized over a weighted
average period of 1.7 years. The total intrinsic values of stock options exercised during the years ended December 31, 2013,
2012 and 2011 were $45.2 million, $64.7 million and $42.6 million, respectively. As of December 31, 2013, 1.8 million
unvested options with an aggregate intrinsic value of $48.3 million are expected to vest and have a weighted average exercise
price of $60.59 and a weighted average remaining contractual term of 8.0 years. The Company recorded cash received from the
exercise of stock options of $34.0 million and related tax benefits of $21.1 million for the year ended December 31, 2013.
Information regarding stock options outstanding as of December 31, 2013 is summarized below:
(options in thousands)
Options Outstanding
Options Exercisable
Range of Exercise Prices
$5.91 - $28.40
$29.97 - $40.89
$41.33 - $58.67
$60.49 - $88.35
Weighted
Average
Remaining
Contractual
Life (years)
Weighted
Average
Exercise
Price
3.64
4.79
7.20
8.64
$
$
$
$
22.40
39.54
53.73
68.80
Options
1,747
1,272
1,983
1,164
Weighted
Average
Exercise
Price
22.44
39.53
52.77
67.55
Options
1,662
1,269
1,170
250
$
$
$
$
Under the terms of the ANSYS, Inc. Long-Term Incentive Plan, in the first quarters of 2013, 2012 and 2011, the Company
granted 94,300, 100,000 and 92,500 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 weighted average fair value of
each restricted stock unit granted in 2013, 2012 and 2011 was estimated on the grant date to be $50.05, $33.16 and $32.05,
respectively. The fair value of the restricted stock units was estimated 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, 2013, employees earned 92,500
restricted stock units, which will be issued in the first quarter of 2014. Total compensation expense associated with the awards
recorded for the years ended December 31, 2013, 2012 and 2011 was $3.6 million, $2.6 million and $1.6 million, respectively.
Total compensation expense associated with granted awards for the years ending December 31, 2014 and 2015 is expected to
be $2.8 million and $1.7 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,
2013
0.35%
—%
25%
20%
2.8 years
0.70
2012
0.16%
—%
28%
20%
2.8 years
0.75
2011
1.35%
—%
40%
25%
2.9 years
0.70
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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 value of $13.0 million to be earned 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. 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. Total compensation expense
associated with the awards recorded for the years ended December 31, 2013 and 2012, was $3.8 million and $3.9 million,
respectively. For the year ended December 31, 2013, employees earned 75,477 restricted stock units, which will be issued in
the first quarter of 2014.
14. Stock Repurchase Program
In February 2013, the Company announced that its Board of Directors approved an increase to its authorized stock repurchase
program. Under the Company’s stock repurchase program, the Company repurchased 1.5 million shares during the year ended
December 31, 2013 at an average price per share of $77.73, for a total cost of $116.1 million. During the year ended
December 31, 2012, the Company repurchased 1.5 million shares at an average price per share of $63.65, for a total cost of
$95.5 million. As of December 31, 2013, 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. As of December 31, 2013,
1,282,578 shares of common stock had been issued under the Purchase Plan, of which 1,233,385 were issued as of
December 31, 2012. The total compensation expense recorded under the Purchase Plan during the years ended December 31,
2013, 2012 and 2011 was $0.8 million, $0.7 million and $0.7 million, respectively.
16. Leases
Office Space
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 December 31, 2014. The Company incurred lease rental expense related to
this facility of $1.3 million in each of the years ended December 31, 2013, 2012 and 2011. The minimum lease payments for
this facility are $1.4 million for 2014.
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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 under construction, 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. The term of the
lease is 183 months, beginning on the date the Company takes possession of the facility. 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 per annum for years eleven
through fifteen.
The Company leases a 52,000 square foot office facility in San Jose, California that was acquired through the Apache
acquisition. 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, 2013 are $8.4
million, of which $0.9 million will be paid in 2014.
The Company has entered into various other noncancellable operating leases for office space.
Office space lease expense totaled $14.1 million, $13.7 million and $12.8 million for the years ended December 31, 2013, 2012
and 2011, respectively. Future minimum lease payments under noncancellable operating leases for office space in effect at
December 31, 2013 are $11.7 million in 2014, $10.8 million in 2015, $8.7 million in 2016, $7.2 million in 2017 and $6.6
million in 2018.
Sale-Leaseback Arrangement
The lease agreement terms for the new Canonsburg headquarters facility provide that the Company is responsible for paying
the cost of certain tenant improvements that exceed an allowance to be paid by the landlord. There is no cap to the Company's
obligation in excess of the landlord allowance, and the improvements do not meet the definition of "normal tenant
improvements" as defined in the accounting guidance. As a result, the Company is considered the owner of the building during
the construction period and the lease is subject to sale-leaseback treatment.
As of December 31, 2013, the Company has recorded an $18.1 million construction-in-progress asset and a corresponding
liability for construction debt funded by the lessor on its consolidated balance sheet. Upon completion and delivery of the
building, the Company will determine whether the lease meets the criteria for capital treatment under the accounting guidance,
or whether it has continuing involvement in the lease. If it is determined the lease fails to meet the capitalization criteria, and
the Company does not have continuing involvement in the lease, the construction-in-progress asset and liability will be
removed from the consolidated balance sheet. The sale-leaseback treatment of the lease during the construction period does not
have any impact on the Company's results of operations or cash flows.
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 $10.3 million, $9.3 million and $8.4 million for the years ended
December 31, 2013, 2012 and 2011, respectively.
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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
Property and equipment by geographic area is as follows:
(in thousands)
United States
India
United Kingdom
Germany
France
Japan
Canada
Other European
Other international
Total property and equipment
Year Ended December 31,
2013
$ 292,323
2012
2011
$ 265,436
$ 215,924
108,064
122,437
112,171
93,525
14,163
201,614
151,571
82,008
12,384
177,069
138,684
72,301
12,069
166,551
112,433
$ 861,260
$ 798,018
$ 691,449
December 31,
2013
2012
$
45,116
$
36,716
3,226
3,016
2,328
2,275
1,383
618
1,476
1,100
3,392
3,532
2,087
2,378
1,253
753
1,173
969
$
60,538
$
52,253
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 $3.3 million,
$4.0 million and $5.0 million related to unconditional purchase obligations that existed as of the beginning of each year for the
years ended December 31, 2013, 2012 and 2011, respectively. Future expenditures under these obligations in effect as of
December 31, 2013 are $2.9 million in 2014, $0.8 million in 2015 and $0.2 million in 2016.
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.
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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, 2013. 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.
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 27, 2014
By:
/s/ JAMES E. CASHMAN III
James E. Cashman III
President and Chief Executive Officer
Date: February 27, 2014
By:
/s/ MARIA T. SHIELDS
Maria T. Shields
Chief Financial Officer,
Vice President, Finance and Administration
79
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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 27, 2014
/s/ MARIA T. SHIELDS
Maria T. Shields
Chief Financial Officer, Vice President, Finance and
Administration; (Principal Financial Officer and
Accounting Officer)
February 27, 2014
/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/ BRADFORD C. MORLEY
Bradford C. Morley
/s/ BARBARA V. SCHERER
Barbara V. Scherer
/s/ MICHAEL C. THURK
Michael C. Thurk
/s/ PATRICK J. ZILVITIS
Patrick J. Zilvitis
Chairman of the Board of Directors
February 27, 2014
Director
February 27, 2014
Director
February 27, 2014
Director
February 27, 2014
Director
February 27, 2014
Director
February 27, 2014
Director
February 27, 2014
Director
February 27, 2014
80
Table of Contents
ANSYS, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
SCHEDULE II
(in thousands)
Description
Year ended December 31, 2013
Allowance for doubtful accounts
Year ended December 31, 2012
Allowance for doubtful accounts
Year ended December 31, 2011
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
$
$
$
4,800
4,101
4,503
$
$
$
1,465
938
404
$
$
$
565
239
806
$
$
$
5,700
4,800
4,101
81
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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). *
82
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
10.31
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).
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 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. 1996 Stock Option and Grant Plan (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q,
filed May 2, 2013, and incorporated herein by reference).*
Form of 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 May 2, 2013, 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 10.3 to the Company's Quarterly
Report on Form 10-Q, filed May 2, 2013, and incorporated herein by reference).*
83
Table of Contents
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
14.1
21.1
23.1
24.1
31.1
31.2
32.1
32.2
Form of Non-Qualified Option Transfer Acknowledgment under the Fourth 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, filed
May 2, 2013, and incorporated herein by reference).*
Form of Indemnification Agreement between ANSYS, Inc. and Non-Employee Directors (filed as Exhibit 10.1
to the Company's Current Report on Form 8-K, filed March 20, 2013, 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).
Form of Restricted Stock Unit Agreement under the Fourth Amended and Restated ANSYS, Inc. 1996 Stock
Option and Grant Plan.*
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 the Signatures page of the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2013 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.
84
EXHIBIT 10.39
RESTRICTED STOCK UNIT AGREEMENT
UNDER THE FOURTH AMENDED AND RESTATED ANSYS, INC.
1996 STOCK OPTION AND GRANT PLAN
Name of Grantee:
Number of Restricted Stock Units Granted:
Grant Date:
______________
______________
______________
Pursuant to the Fourth Amended and Restated ANSYS, Inc. 1996 Stock Option and Grant Plan (the “Plan”) as
amended through the date hereof, ANSYS, Inc. (the “Company”) hereby grants the number of Restricted Stock Units listed
above (the “Award”) to the Grantee named above. Each “Restricted Stock Unit” shall relate to one share of Common Stock par
value $.01 per share (the “Stock”) of the Company, subject to the restrictions and conditions set forth in this Restricted Stock
Unit Agreement (the “Agreement”) and in the Plan.
1.
Restrictions on Transfer of Award. The Award shall not be sold, transferred, pledged, assigned or otherwise
encumbered or disposed of by the Grantee, until shares of Stock have been issued pursuant to Section 3 hereof.
2.
Vesting of Restricted Stock Units.
(a)
The Restricted Stock Units shall become vested pursuant to the following schedule (each, a “Vesting
Date”), so long as the Grantee continues to be employed by the Company on each such date;
Incremental Number of Restricted Stock Units Vested
Vesting Date
__________ (25%)
__________ (25%)
__________ (25%)
__________ (25%)
__________
__________
__________
__________
(b)
Notwithstanding anything herein to the contrary, in the event that this Award is assumed in the sole
discretion of the parties to a Transaction (as defined in Section 3 of the Plan) or is continued by the Company and thereafter
remains in effect following such Transaction, then this Award shall be deemed vested in full upon the date on which the
Grantee’s employment with the Company and its subsidiaries or successor entities terminates if (i) such termination occurs
within 18 months of such Transaction and (ii) such termination is by either the Company without Cause (as defined below), or
by the Grantee if such termination by the Grantee is preceded during such 18-month period by any material adverse
modification of the duties, principal employment location or compensation of the Grantee without his or her consent, subject,
however, to the following sentence. In addition and notwithstanding anything herein to the contrary, in the event that the
Grantee is not offered employment by the Company and its subsidiaries or any successor entities following a Transaction on
substantially the same or better terms (including, without limitation, duties and compensation) than those in effect immediately
prior to such Transaction, then this Award shall be deemed vested in full upon the date on which the Grantee’s employment
with the Company and its subsidiaries terminates. For this purpose, “Cause” shall have the meaning given such term in the
employment, severance or similar agreement between the Company and the Grantee and, in the absence of any such agreement,
shall mean a determination by the Company that the Grantee shall be dismissed as a result of (i) any material breach by the
Grantee of any agreement between the Grantee and the Company; (ii) the conviction of, indictment for or plea of nolo
contendere by the Grantee to a felony or a crime involving moral turpitude; or (iii) any material misconduct or willful and
deliberate non-performance (other than by reason of disability) by the Grantee of the Grantee’s duties to the Company.
3.
Issuance of Shares of Stock.
(a)
Subject to the terms of the Plan and this Agreement, each Restricted Stock Unit entitles the Grantee
to receive one share of Stock as soon as reasonably practicable following the Vesting Date.
(b)
As soon as reasonably practicable following each Vesting Date, but in no event later than 60 days
after the end of the year in which such Vesting Date occurs, the Company shall direct its transfer agent to issue to the Grantee
the number of shares of Stock equal to the incremental number of Restricted Stock Units that became vested on such Vesting
Date in satisfaction of the Award via the Company’s dedicated on-line broker.
(c)
Shares of Stock shall be issued and delivered to the Grantee in accordance with Section 3(b) upon
compliance to the satisfaction of the Committee with all requirements under applicable laws or regulations in connection with
such issuance and with the requirements hereof and of the Plan. The determination of the Committee as to such compliance
shall be final and binding on the Grantee.
Until such time as shares of Stock are issued to the Grantee pursuant to Section 3(b), the Grantee
shall have no rights as a stockholder with respect to any shares of Stock underlying the Restricted Stock Units, including but
not limited to any voting rights.
(d)
4.
Termination of Employment. Except as provided in Section 2(b) hereof, if the Grantee’s employment by the
Company or its subsidiaries is terminated for any reason or under any circumstances, this Award shall no longer vest with
respect to any unvested Restricted Stock Units.
5.
Effect of Certain Transactions. Subject to Section 2(b) hereof, in the case of a Transaction (as defined in
Section 3 of the Plan), the unvested portion of this Award shall terminate on the effective date of such Transaction, unless
provision is made in such Transaction in the sole discretion of the parties thereto for the assumption or continuation of the
unvested Award or the substitution for the unvested Award of new restricted stock units of the successor person or entity or a
parent or subsidiary thereof, with appropriate adjustment as to the number and kind of shares, as provided in the Plan.
6.
Incorporation of Plan. Notwithstanding anything herein to the contrary, this Award shall be subject to and
governed by all the terms and conditions of the Plan, including the powers of the Committee set forth in Section 2(b) of the
Plan. Capitalized terms used herein shall have the meaning specified in the Plan, unless a different meaning is specified herein.
7.
Transferability. This Award is personal to the Grantee, is non-assignable and is not transferable by Grantee in
any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. The Stock to be issued
upon the vesting of this Award to the Grantee shall be issued, during the Grantee’s lifetime, only to the Grantee.
8.
Tax Withholding. Any issuance of shares of Stock to a Grantee pursuant to this Award shall be subject to
applicable tax withholding requirements. The Grantee shall, not later than the date as of which the transfer of shares of Stock
pursuant to this Award becomes a taxable event for Federal income tax or other applicable withholding tax purposes, pay to the
Company or make arrangements satisfactory to the Committee for payment of any Federal, state, local, non U.S., or other taxes
required by law to be withheld on account of such taxable event. The Company shall have the authority to cause the required
minimum tax withholding amount to be satisfied, in whole or in part, by withholding from shares of Stock to be issued to the
Grantee a number of shares of Stock with an aggregate Fair Market Value that would satisfy such minimum withholding
obligation.
9.
No Obligation to Continue Employment. Neither the Company nor any Subsidiary is obligated by or as a
result of the Plan or this Award to continue the Grantee in employment and neither the Plan nor this Award shall interfere in any
way with the right of the Company or any Subsidiary to terminate the employment of the Grantee at any time, in accordance
with applicable law.
10.
Non-Competition, Non-Solicitation. As additional consideration for this Award to the Grantee, the Grantee
hereby agrees that, if at any time during and for a period of one year after the termination of his or her employment with the
Company or any Subsidiary no matter what the cause of that termination, he or she engages for any reason, directly or
indirectly, whether as owner, part-owner, shareholder, member, partner, director, officer, trustee, employee, agent or consultant,
or in any other capacity, on behalf of himself or herself or any firm, corporation or other business organization other than the
Company and its subsidiaries in any one or more of the following activities:
(a)
the development, marketing, solicitation, or selling of any product or service that is competitive with
the products or services of the Company, or products or services that the Company has under development or that are subject to
active planning at any time during Grantee’s employment;
secrets which was acquired by the Grantee as an employee of the Company and its subsidiaries; or
(b)
the use of any of the Company’s confidential or proprietary information, copyrights, patents or trade
(c)
any activity for the purpose of inducing, encouraging, or arranging for the employment or
engagement by anyone other than the Company and its subsidiaries of any employee, officer, director, agent, consultant, or
sales representative of the Company and its subsidiaries or attempt to engage any of them in a manner which would deprive the
Company and its subsidiaries of their services or place them in a conflict of interest with the Company and its subsidiaries; then
(i) this Award shall terminate effective on the date on which he or she first engages in such activity, unless terminated sooner by
operation of any other term or condition of this Award or the Plan, and (ii) all shares of Stock issued to the Grantee pursuant to
this Award shall become immediately due and payable by Grantee to the Company and if such shares of Stock have been sold
by the Grantee, an amount equal to the proceeds from such sale shall become immediately due and payable by the Grantee to
the Company. Grantee acknowledges and agrees that the activities set forth in this Section 10(a)-(c) are adverse to the
Company’s interests, and that it would be inequitable for Grantee to benefit from this Award should Grantee engage in any such
activities during or within one year after termination of his or her employment with the Company.
The Grantee may be released from his or her obligations as stated above only if the Committee (or its duly appointed
agent) determines in its sole discretion that such action is in the best interests of the Company and its subsidiaries.
11.
Section 409A of the Code. This Agreement shall be interpreted in such a manner that the Award shall be
exempt from the requirements of Section 409A of the Code as a “short-term deferral” as described in Section 409A of the Code.
12.
Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award
and supersedes all prior agreements and discussions between the parties concerning such subject matter.
13.
Data Privacy. The Grantee hereby explicitly and unambiguously consents to the collection, use and
transfer, in electronic or other form, of the Grantee’s personal data as described in this Agreement and any other Award
grant materials by and among, as applicable, the company employing the Grantee (the “Employer”), the Company and any
other Subsidiary for the exclusive purpose of implementing, administering and managing the Grantee’s participation in the
Plan.
The Grantee understands that the Company and the Employer may hold certain personal information about the
Grantee, including, but not limited to, the Grantee’s name, home address and telephone number, date of birth, social
insurance number or other identification number, salary, nationality, job title, any shares of Stock or directorships held in
the Company, details of all awards or any other entitlement to shares of Stock awarded, canceled, exercised, vested, unvested
or outstanding in the Grantee’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the
Plan.
The Grantee understands that Data will be transferred to the stock plan service provider selected by the Company,
which is assisting the Company with the implementation, administration and management of the Plan. The Grantee
understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipient’s country
(e.g., the United States) may have different data privacy laws and protections than the Grantee’s country. The Grantee
understands that he or she may request a list with the names and addresses of any potential recipients of the Data by
contacting his or her local human resources representative. The Grantee authorizes the Company, the stock plan service
provider and any other possible recipients which may assist the Company (presently or in the future) with implementing,
administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for
the sole purposes of implementing, administering and managing the Grantee’s participation in the Plan. The Grantee
understands that Data will be held only as long as is necessary to implement, administer and manage the Grantee’s
participation in the Plan. The Grantee understands that he or she may, at any time, view Data, request additional
information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the
consents herein, in any case without cost, by contacting in writing his or her local human resources representative.
Further, the Grantee understands that he or she is providing the consents herein on a purely voluntary basis. If the Grantee
does not consent, or if the Grantee later seeks to revoke his or her consent, his or her employment status or service and
career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing consent is
that the Company would not be able to grant the Grantee the Award or other equity awards or administer or maintain such
awards. Therefore, the Grantee understands that refusing or withdrawing his or her consent may affect the Grantee’s
ability to participate in the Plan. For more information on the consequences of the Grantee’s refusal to consent or
withdrawal of consent, the Grantee understands that he or she may contact his or her local human resources representative.
14.
Nature of Grant. In accepting the Award, the Grantee acknowledges, understands and agrees that:
(a)
the Plan is established voluntarily by the Company, it is discretionary in nature and it may be
modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
(b)
the grant of the Award is voluntary and occasional and does not create any contractual or other right
to receive future grants;
(c)
all decisions with respect to future Awards or other grants, if any, will be at the sole discretion of the
Company;
(d)
employment contract with the Company;
the Award and the Grantee’s participation in the Plan shall not be interpreted as forming an
(e)
(f)
rights or compensation;
the Grantee is voluntarily participating in the Plan;
the Award and any shares of Stock acquired under the Plan are not intended to replace any pension
(g)
the Award and any shares of Stock acquired under the Plan, and the income and value of same, are
not part of normal or expected compensation for any purpose, including, without limitation, calculating any severance,
resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement
benefits or payments or welfare benefits or similar payments;
(h)
the future value of the shares of Stock underlying the Award is unknown, indeterminable, and cannot
be predicted with certainty;
(i)
no claim or entitlement to compensation or damages shall arise from forfeiture of the Award
resulting from the termination of the Grantee’s employment relationship (for any reason whatsoever, whether or not later found
to be invalid or in breach of employment laws in the jurisdiction where the Grantee is employed or the terms of the Grantee’s
employment agreement, if any);
(j)
unless otherwise provided in the Plan or by the Company in its discretion, the Award and the
benefits evidenced by this Agreement do not create any entitlement to have the Award or any such benefits transferred to, or
assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction
affecting the Company’s Stock; and
(k)
neither the Employer, the Company nor any other Subsidiary shall be liable for any foreign exchange
rate fluctuation between the Grantee’s local currency and the United States Dollar that may affect the value of the Award or of
any amounts due to the Grantee pursuant to settlement of the Award or the subsequent sale of any shares of Stock acquired
upon settlement.
15.
No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the
Company making any recommendations regarding the Grantee’s participation in the Plan, or the Grantee’s acquisition or sale of
the underlying shares of Stock. The Grantee is hereby advised to consult with his or her own personal tax, legal and financial
advisors regarding his or her participation in the Plan before taking any action related to the Plan.
16.
Language. If the Grantee has received this Agreement, or any other document related to the Award and/or the
Plan translated into a language other than English and if the meaning of the translated version is different than the English
version, the English version will control.
17.
Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and
shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, at such other address as
one party may subsequently furnish to the other party in writing.
18.
Amendment. Pursuant to Section 18 of the Plan, the Committee may at any time amend or cancel any
unvested portion of this Award, but no such action may be taken that adversely affects the Grantee’s rights under hereunder
without the Grantee’s consent.
19.
Severability. If any provision(s) hereof shall be determined to be illegal or unenforceable, such determination
shall in no manner affect the legality or enforceability of any other provision hereof.
20.
Counterparts. For the convenience of the parties and to facilitate execution, this Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same
document.
ANSYS, INC.
By: ________________________
Title:
The foregoing Award is hereby accepted and the terms and conditions of this Agreement are hereby agreed to by the
undersigned. Electronic acceptance of this Award pursuant to the Company’s instructions to the Grantee (including through an
online acceptance process) is acceptable.
Dated: _______________
____________________________
Grantee's Signature
Grantee's name and address:
____________________________
____________________________
____________________________
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
ANSYS Switzerland GmbH
India
India
Israel
Russia
Switzerland
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 27, 2014, 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, 2013.
EXHIBIT 23.1
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
February 27, 2014
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 27, 2014
/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 27, 2014
/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, 2013
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 27, 2014
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, 2013
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 27, 2014
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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
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