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ANSYS Completes Fourth Quarter and Full Year 2005 With Record Revenue and Earnings

Feb 16, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- ANSYS, Inc. (Nasdaq: ANSS), a global innovator of simulation software and technologies designed to optimize product development processes, today announced a new Company record for fourth quarter and year-end operating results. In a separate release, ANSYS announced that is has signed a definitive agreement to acquire Fluent, Inc. ANSYS' fourth quarter and 2005 fiscal year GAAP results include:

- Total revenue of $43.7 million, as compared to $38.9 million in the
       fourth quarter of 2004; total revenue of $158.0 million in 2005 as
       compared to $134.5 million in 2004;
     - Net income of $13.3 million, as compared to $12.3 million in the fourth
       quarter of 2004; net income of $43.9 million in 2005 as compared to
       $34.6 million in 2004;
     - An operating profit margin of 40.6% as compared to 38.2% for the fourth
       quarter of 2004; an operating profit margin of 37.2% in 2005 as
       compared to 34.2% in 2004;
     - Diluted earnings per share of $0.39, as compared to $0.36 for the
       fourth quarter of 2004; diluted earnings per share of $1.30 in 2005 as
       compared to $1.05 in 2004;
     - Cash flows from operations of $20.7 million for the fourth quarter of
       2005 and $67.8 million in 2005; and
     - Cash and short-term investment balances totaling $194.2 million as of
       December 31, 2005.

Excluding acquisition-related amortization, ANSYS' fourth quarter and 2005 adjusted (non-GAAP) results include:

- An adjusted operating profit margin of 42.8% as compared to 40.6% for
       the fourth quarter of 2004; an adjusted operating profit margin of
       39.9% in 2005 as compared to 36.9% in 2004; and
     - Adjusted diluted earnings per share of $0.41 as compared to $0.35 for
       the fourth quarter of 2004 (excluding the one-time tax benefit); and
       adjusted diluted earnings per share of $1.38 in 2005 as compared to
       $1.09 in 2004(excluding the one-time tax benefit).

"Our focus and execution in the fourth quarter capped off a milestone year for ANSYS," commented ANSYS President and CEO, Jim Cashman. "This past year was a period of significant growth for ANSYS in terms of continued advancement and expansion of technologies, as well as very solid financial performance. We completed fiscal 2005 with record results and continued strong momentum as ANSYS' value proposition gained further acceptance with our diverse, global customer base. The Company's overall performance in 2005 provides further validation that our business is operationally sound, financially strong and strategically on track."

Cashman further commented, "We have grown our business substantially over the past few years and plan to continue to invest in the future of the Company. Over the course of 2006, we will strive to strengthen our leadership presence in the engineering simulation arena by providing our customers with the world's most advanced simulation capabilities. I firmly believe that our proposed acquisition of Fluent, a global provider of CAE simulation software, which we announced this morning, is a further demonstration of our commitment to being the leader in driving innovative engineering simulation solutions. This acquisition marks another important milestone in our long-term strategy."

In closing, Cashman added, "We are very excited about our future prospects and look forward to the many challenges ahead at ANSYS. We remain committed to maintain our usual diligence and focus on our singular long-term vision of providing increasingly powerful simulation technology and making it more accessible to a broader range of users. We believe our unique balance of technology leadership, global and diversified presence, solid business model and commitment to our vision positions us as a company for continued growth."

The adjusted results highlighted above, and the adjusted estimates for 2006 discussed below, represent non-GAAP (Generally Accepted Accounting Principles) financial measures. A reconciliation of these measures to the appropriate GAAP measures, for the three months and twelve months ended December 31, is included in the condensed financial information included in this release.

Adjustments to Reported GAAP Financial Results

- Acquisition-Related Amortization:

As previously disclosed, the Company completed its acquisitions of Century Dynamics, Inc. and the assets of Harvard Thermal, Inc. in 2005. In previous years, the Company also acquired other businesses. These acquisitions have all been accounted for as purchases, resulting in the recording of a significant amount of identifiable intangible assets.

ANSYS is providing, and has historically provided, its current quarter GAAP results as well as financial results that have been adjusted for the impact of acquisition-related amortization. The Company believes that these non-GAAP measures supplement its consolidated GAAP financial statements as they provide a consistent basis for comparison between reporting periods that are not influenced by certain non-cash items and are, therefore, useful to investors in helping them to better understand the Company's operating results. In certain instances, such as when intangibles are acquired through business acquisitions or become fully amortized, amortization expense associated with acquired intangibles also makes period-to-period comparisons difficult because amortization expense may appear in one period but not in the comparable period. Management uses these non-GAAP financial measures internally to evaluate the Company's business performance; however, these measures are not intended to supersede or replace the GAAP results.

Business Highlights - Advances in Global Innovative Engineering Simulation Strategy

- February 2006 - Announced a definitive agreement to acquire Fluent,
       Inc., a global provider of computer-aided engineering simulation
       software, in a stock and cash transaction valued at
       approximately $565 million based on the $44.11 pr share closing price
       of ANSYS common stock on February 15, 2006.  Under the terms of the
       agreement, ANSYS will issue six million shares of its common stock and
       pay approximately $300 million of net cash to acquire Fluent, subject
       to certain adjustments at closing. After closing, ANSYS expects the
       planned acquisition to be immediately accretive to earnings, excluding
       acquisition-related costs, amortization of intangibles, the impact of
       deferred revenue purchase accounting treatment and expensing of stock
       options. The Company will use a combination of existing cash and
       proceeds from approximately $200 million of committed bank financing to
       fund the transaction.

     - October 2005 - Acquired substantially all of the assets of Harvard
       Thermal, Inc., a leader in thermal analysis software tools. The
       acquisition expands the Company's product offerings and allows it to
       deliver a more complete and comprehensive solution to its customers.

    Management's Financial Outlook

The Company has provided its 2006 revenue and earnings per share guidance below. The earnings per share guidance is provided on both a GAAP basis and an adjusted basis. Adjusted earnings per share excludes acquisition-related amortization and the effects of stock-based compensation.

As required by FASB Statement 123(R) and recent guidance issued by the Securities and Exchange Commission, effective January 1, 2006, the Company will record expenses and tax benefits related to stock based compensation. As a result, the GAAP estimates for earnings per share provided below reflect the anticipated impact of stock based compensation. The Company issues both nonqualified and incentive stock options; however, incentive stock options comprise a significant portion of outstanding stock options. The tax benefits associated with incentive stock options are unpredictable, as they are predicated upon an award recipient triggering an event that disqualifies the award and which then results in a tax deduction to the Company. GAAP 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 benefit 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 and, therefore, the overall estimated impact of stock based compensation on GAAP earnings per share may differ materially from the estimated amounts included in the guidance below.

First Quarter 2006 Guidance

The Company currently expects the following for the quarter ending March 31, 2006:

- Revenue of approximately $41 - $42 million
     - GAAP earnings per share of $0.33 - $0.36
     - Adjusted (non-GAAP) earnings per share of $0.35 - $0.36

    Fiscal Year 2006 Guidance

The Company currently expects the following for the fiscal year ending December 31, 2006:

- Revenue in the range of $178 - $180 million
     - GAAP earnings per share of $1.38 - $1.53
     - Adjusted (non-GAAP) earnings per share of $1.51 - $1.53

The above guidance excludes the impact of the acquisition of Fluent, Inc. announced earlier today. The Company intends to provide updated financial guidance after the closing of the transaction.

Adjusted diluted earnings per share is a supplemental non-GAAP financial measure and should not be considered as a substitute for net income per diluted share determined in accordance with GAAP.

ANSYS will hold a conference call at 9:00 a.m. Eastern Time on February 16, 2006 to discuss today's announcements. To participate in the live conference call, dial 800-811-8824 or 913-981-4903 and the passcode is "ANSYS." The call will be recorded and a replay will be available approximately two hours after the call ends. The replay will be available for one week by dialing 888-203-1112 or 719-457-0820 and the passcode is "ANSYS" or "26797". The archived webcast can be accessed, along with other financial information, on ANSYS' website at http://www.ansys.com/corporate/investors.asp.

About ANSYS, Inc.

ANSYS, Inc., founded in 1970, develops and globally markets engineering simulation software and technologies widely used by engineers and designers across a broad spectrum of industries. 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 and its global network of channel partners provide sales, support and training for customers. Headquartered in Canonsburg, Pennsylvania U.S.A. with more than 25 strategic sales locations throughout the world, ANSYS, Inc. and its subsidiaries employ approximately 600 people and distribute ANSYS products through a network of channel partners in over 40 countries. Visit http://www.ansys.com for more information.

Certain statements contained in the press release regarding matters that are not historical facts, including statements regarding our projections for revenue growth and earnings per share (both basic and adjusted to exclude acquisition-related amortization and stock option expense) for 2006, statements regarding the impact of the pending acquisition, statements regarding the focus of our energy and resources and statements regarding our expectation that our proposed acquisition, if completed, will be immediately accretive are "forward-looking" statements (as defined in the Private Securities Litigation Reform Act of 1995). Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. All forward-looking statements in this press release are subject to risks and uncertainties. These include the risk that the acquisition of Fluent may not be consummated, the risk that the business of ANSYS and Fluent may not be combined successfully or such combination may take longer or cost more to accomplish than expected, and the risk that operating costs, customer loans and business disruption following the acquisition of Fluent may be greater than expected. Additional risks include the risk of a general economic downturn in one or more of ANSYS' primary geographic markets, the risk that the assumptions underlying ANSYS' anticipated revenues and expenditures will change or prove inaccurate, the risk that ANSYS has overestimated its ability to maintain growth and profitability and control costs, uncertainties regarding the demand for ANSYS' products and services in future periods, the risk that ANSYS has overestimated the strength of the demand among its customers for its products, risks of problems arising from customer contract cancellations, uncertainties regarding customer acceptance of new products, the risk that ANSYS' operating results will be adversely affected by possible delays in developing, completing, or shipping new or enhanced products, risks that enhancements to the Company's products may not produce anticipated sales, uncertainties regarding fluctuations in quarterly results, including uncertainties regarding the timing of orders from significant customers, and other factors that are detailed from time to time in reports filed by ANSYS, Inc. with the Securities and Exchange Commission, including ANSYS, Inc.'s 2004 Annual Report and Form 10-K. We undertake no obligation to publicly update or revise any forward- looking statements, whether changes occur as a result of new information or future events, after the date they were made.

ANSYS, ANSYS Workbench, CFX, AUTODYN, and any and all ANSYS, Inc. product and service names are registered trademarks or trademarks of ANSYS, Inc. or its subsidiaries located in the United States or other countries. ICEM CFD is a trademark licensed by ANSYS, Inc. All other trademarks or registered trademarks are the property of their respective owners.

Reconciliation of Non-GAAP Measures

This earnings release contains non-GAAP financial measures. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States. Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of the adjusted (non- GAAP) financial measures to the most directly comparable GAAP financial measures.

Adjusted operating profit margin and adjusted diluted earnings per share are discussed in this earnings release because management uses this information in evaluating the results of the continuing operations of the business and believes that this information provides the users of the financial statements a valuable insight into the operating results. Additionally, management believes that it is in the best interest of its investors to provide financial information that will facilitate comparison of both historical and future results and allows greater transparency to supplemental information used by management in its financial and operational decision making. Management encourages investors to review the reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures that are provided within the financial information attached to this news release.

ANSYS, INC. AND SUBSIDIARIES
                      Consolidated Statements of Income
                    (in thousands, except per share data)
                                 (Unaudited)

                             Three months ended       Twelve months ended
                          December 31, December 31, December 31, December 31,
                             2005         2004         2005         2004
    Revenue:
      Software licenses   $ 24,433     $ 22,064     $ 85,680      $71,326
      Maintenance and
       service              19,288       16,823       72,356       63,213

         Total revenue      43,721       38,887      158,036      134,539

    Cost of sales:
      Software licenses      1,545        1,162        5,292        4,840
      Amortization of software
       and acquired technology 911          763        3,576        3,030
      Maintenance and
       service               3,695        3,788       15,171       13,437
         Total cost of sales 6,151        5,713       24,039       21,307

    Gross profit            37,570       33,174      133,997      113,232

    Operating expenses:
      Selling and marketing  6,952        7,141       25,955       24,984
      Research and
       development           8,202        6,840       30,688       26,281
      Amortization             175          292        1,184        1,149
      General and
       administrative        4,479        4,032       17,330       14,840
         Total operating
          expenses          19,808       18,305       75,157       67,254

    Operating income        17,762       14,869       58,840       45,978

    Other income             1,471        1,132        4,271        1,923

    Income before income
     tax provision          19,233       16,001       63,111       47,901

    Income tax provision     5,962        3,750       19,208       13,334

    Net income             $13,271      $12,251     $ 43,903      $34,567


    Earnings per share - basic:
      Basic earnings per
       share                 $0.41        $0.39        $1.38        $1.12
      Weighted average
       shares - basic       31,985       31,315       31,749       30,955

    Earnings per share -
     diluted:
      Diluted earnings per
       share                 $0.39        $0.36        $1.30        $1.05
      Weighted average
       shares - diluted     34,054       33,587       33,692       32,978



                         ANSYS, INC. AND SUBSIDIARIES
                     Reconciliation of Non-GAAP Measures
                 For the three months ended December 31, 2005
                    (in thousands, except per share data)
                                 (Unaudited)

                                  As Reported    Adjustments     Adjusted
                                                                  Results
    Revenue:
      Software licenses             $24,433          -            $24,433
      Maintenance and service        19,288          -             19,288

         Total revenue               43,721          -             43,721

    Cost of sales:
      Software licenses               1,545          -              1,545
      Amortization of software and
       acquired technology              911            (788)(a)       123

      Maintenance and service         3,695          -              3,695
         Total cost of sales          6,151            (788)        5,363

    Gross profit                     37,570             788        38,358

    Operating expenses:
      Selling and marketing           6,952          -              6,952
      Research and development        8,202          -              8,202
      Amortization                      175            (175)(a)      -
      General and administrative      4,479          -              4,479
         Total operating expenses    19,808            (175)       19,633

    Operating income                 17,762             963        18,725

    Other income                      1,471          -              1,471

    Income before income
     tax provision                   19,233             963        20,196

    Income tax provision              5,962             338(b)      6,300

    Net income                      $13,271            $625       $13,896


    Earnings per share - basic:
      Basic earnings per share        $0.41                         $0.43
      Weighted average
       shares - basic                31,985                        31,985

    Earnings per share -
     diluted:
      Diluted earnings per share      $0.39                         $0.41
      Weighted average
       shares - diluted              34,054                        34,054


     (a) Amount represents amortization expense associated with intangible
         assets acquired in business acquisitions, including amounts primarily
         related to acquired software, customer list and non-compete
         agreements.
     (b) Amount represents the income tax impact of the amortization expense
         adjustments referred to in (a) above.



                         ANSYS, INC. AND SUBSIDIARIES
                     Reconciliation of Non-GAAP Measures
                 For the three months ended December 31, 2004
                    (in thousands, except per share data)
                                 (Unaudited)

                                  As Reported    Adjustments     Adjusted
                                                                  Results
    Revenue:
      Software licenses             $22,064          -            $22,064
      Maintenance and service        16,823          -             16,823

         Total revenue               38,887          -             38,887

    Cost of sales:
      Software licenses               1,162          -              1,162
      Amortization of software and
       acquired technology              763            (635)(a)       128
      Maintenance and service         3,788          -              3,788
         Total cost of sales          5,713            (635)        5,078

    Gross profit                     33,174             635        33,809

    Operating expenses:
      Selling and marketing           7,141          -              7,141
      Research and development        6,840          -              6,840
      Amortization                      292            (292)(a)      -
      General and administrative      4,032          -              4,032
         Total operating expenses    18,305            (292)       18,013

    Operating income                 14,869             927        15,796

    Other income                      1,132          -              1,132

    Income before income
     tax provision                   16,001             927        16,928

    Income tax provision              3,750           1,375(b)      5,125

    Net income                      $12,251           $(448)      $11,803


    Earnings per share - basic:
      Basic earnings per share        $0.39                         $0.38
      Weighted average
       shares - basic                31,315                        31,315

    Earnings per share - diluted:
      Diluted earnings per share      $0.36                         $0.35
      Weighted average
       shares - diluted              33,587                        33,587


     (a) Amount represents amortization expense associated with intangible
         assets acquired in business acquisitions, including amounts primarily
         related to acquired software, customer list and non-compete
         agreements.
     (b) Amount represents the income tax impact of the amortization expense
         adjustments referred to in (a) above, as well as the exclusion of a
         one-time tax benefit ($1,050) related to the resolution of
         outstanding governmental income tax audits.



                         ANSYS, INC. AND SUBSIDIARIES
                     Reconciliation of Non-GAAP Measures
                For the twelve months ended December 31, 2005
                    (in thousands, except per share data)
                                 (Unaudited)

                                  As Reported    Adjustments     Adjusted
                                                                  Results
    Revenue:
      Software licenses             $85,680          -            $85,680
      Maintenance and service        72,356          -             72,356

         Total revenue              158,036          -            158,036

    Cost of sales:
      Software licenses               5,292          -              5,292
      Amortization of software and
       acquired technology            3,576          (3,046)(a)       530
      Maintenance and service        15,171          -             15,171
         Total cost of sales         24,039          (3,046)       20,993

    Gross profit                    133,997           3,046       137,043

    Operating expenses:
      Selling and marketing          25,955          -             25,955
      Research and development       30,688          -             30,688
      Amortization                    1,184          (1,184)(a)      -
      General and administrative     17,330          -             17,330
         Total operating expenses    75,157          (1,184)       73,973

    Operating income                 58,840           4,230        63,070

    Other income                      4,271          -              4,271

    Income before income
     tax provision                   63,111           4,230        67,341

    Income tax provision             19,208           1,481(b)     20,689

    Net income                      $43,903          $2,749       $46,652


    Earnings per share - basic:
      Basic earnings per share        $1.38                         $1.47
      Weighted average
       shares - basic                31,749                        31,749

    Earnings per share - diluted:
      Diluted earnings per share      $1.30                         $1.38
      Weighted average
       shares - diluted              33,692                        33,692


     (a) Amount represents amortization expense associated with intangible
         assets acquired in business acquisitions, including amounts primarily
         related to acquired software, customer list and non-compete
         agreements.
     (b) Amount represents the income tax impact of the amortization expense
         adjustments referred to in (a) above.



                         ANSYS, INC. AND SUBSIDIARIES
                     Reconciliation of Non-GAAP Measures
                For the twelve months ended December 31, 2004
                    (in thousands, except per share data)
                                 (Unaudited)

                                  As Reported    Adjustments     Adjusted
                                                                  Results
    Revenue:
      Software licenses             $71,326          -            $71,326
      Maintenance and service        63,213          -             63,213

         Total revenue              134,539          -            134,539

    Cost of sales:
      Software licenses               4,840          -              4,840
      Amortization of software and
       acquired technology            3,030          (2,464)(a)       566
      Maintenance and service        13,437          -             13,437
         Total cost of sales         21,307          (2,464)       18,843

    Gross profit                    113,232           2,464       115,696

    Operating expenses:
      Selling and marketing          24,984          -             24,984
      Research and development       26,281          -             26,281
      Amortization                    1,149          (1,149)(a)      -
      General and administrative     14,840          -             14,840
         Total operating expenses    67,254          (1,149)       66,105

    Operating income                 45,978           3,613        49,591

    Other income                      1,923          -              1,923

    Income before income
     tax provision                   47,901           3,613        51,514

    Income tax provision             13,334           2,315(b)     15,649

    Net income                      $34,567          $1,298       $35,865


    Earnings per share - basic:
      Basic earnings per share       $ 1.12                         $1.16
      Weighted average
       shares - basic                30,955                        30,955

    Earnings per share - diluted:
      Diluted earnings per share     $ 1.05                         $1.09
      Weighted average
       shares - diluted              32,978                        32,978


     (a) Amount represents amortization expense associated with intangible
         assets acquired in business acquisitions, including amounts primarily
         related to acquired software, customer list and non-compete
         agreements.
     (b) Amount represents the income tax impact of the amortization expense
         adjustments referred to in (a) above, as well as the exclusion of a
         one-time tax benefit ($1,050) related to the resolution of
         outstanding governmental income tax audits.



                         ANSYS, INC. AND SUBSIDIARIES

                    Condensed Consolidated Balance Sheets
                                (in thousands)
                                 (Unaudited)

                                                 December 31,    December 31,
                                                    2005            2004
    ASSETS:

    Cash & short-term investments                   $194,232       $138,446
    Accounts receivable, net                          19,134         18,792
    Other assets                                      92,143         82,408

       Total assets                                 $305,509       $239,646


    LIABILITIES & STOCKHOLDERS' EQUITY:

    Deferred revenue                                 $49,894        $43,906
    Other liabilities                                 30,638         20,271
    Stockholders' equity                             224,977        175,469

       Total liabilities & stockholders' equity     $305,509       $239,646



                         ANSYS, INC. AND SUBSIDIARIES
                  Reconciliation of Forward-Looking Guidance
                        Quarter Ending March 31, 2006

                                           Earnings Per Share Range
                                                   - Diluted

    U.S. GAAP expectation                         $0.33 - $0.36
    Adjustment to exclude acquisition-related
     amortization                                 $0.01 - $0.02
    Adjustment to exclude stock-based
     compensation                                 $0.01 - ($0.02)

    Adjusted expectation                          $0.35 - $0.36



                         ANSYS, INC. AND SUBSIDIARIES
                  Reconciliation of Forward-Looking Guidance
                        Year Ending December 31, 2006

                                           Earnings Per Share Range
                                                   - Diluted

    U.S. GAAP expectation                         $1.38 - $1.53
    Adjustment to exclude acquisition-related
     amortization                                 $0.07 - $0.08
    Adjustment to exclude stock-based
     compensation                                 $0.06 - ($0.08)

    Adjusted expectation                          $1.51 - $1.53

SOURCE ANSYS, Inc.

Lisa O'Connor of ANSYS, Inc., +1-724-514-1782, or lisa.oconnor@ansys.com
http://www.prnewswire.com
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