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1. Organization
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.
In connection with its August 1, 2011 acquisition of Apache Design, Inc. ("Apache"), the Company has reviewed the accounting guidance issued for disclosures about segments of an enterprise. As defined by the accounting guidance, the Company operates as 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. As a result, it is impracticable for the Company to provide accurate historical or current reporting among its various product lines.
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2. Summary of Significant Accounting Policies
ACCOUNTING PRINCIPLES: The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States.
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the amounts of revenue and expenses during the reported periods. Significant estimates included in these consolidated financial statements include allowances for doubtful accounts receivable, income tax accruals, uncertain tax positions and tax valuation reserves, fair value of stock-based compensation, contract revenue, useful lives for depreciation and amortization, loss contingencies, valuation of goodwill and indefinite lived intangible assets, contingent consideration and deferred compensation. Actual results could differ from these estimates. Changes in estimates are recorded in the results of operations in the period that the changes occur.
REVENUE RECOGNITION: Revenue is derived principally from the licensing of computer software products and from related maintenance contracts. Revenue from perpetual licenses is classified as license revenue and is recognized upon delivery of the licensed product and the utility that enables the customer to access authorization keys, provided that acceptance has occurred and a signed contractual obligation has been received, the price is fixed and determinable, and collectibility of the receivable is probable. The Company determines the fair value of post-contract customer support ("PCS") sold together with perpetual licenses based on the rate charged for PCS when sold separately. Revenue from PCS contracts is classified as maintenance and service revenue and is recognized ratably over the term of the contract.
Revenue for software lease licenses is classified as license revenue and is recognized over the period of the lease contract. Typically, the Company's software leases include PCS which, due to the short term (principally one year or less) of the Company's software lease licenses, cannot be separated from lease revenue for accounting purposes. As a result, both the lease license and PCS are recognized ratably over the lease period. Due to the short-term nature of the software lease licenses and the frequency with which the Company provides major product upgrades (typically every 12–18 months), the Company does not believe that a significant portion of the fee paid under the arrangement is attributable to the PCS component of the arrangement and, as a result, includes the revenue for the entire arrangement within software license revenue in the consolidated statements of income.
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.
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:
| December 31, | ||||||||||||||||
| 2011 | 2010 | |||||||||||||||
|
(in thousands, except percentages) |
Amount | % of Total | Amount | % of Total | ||||||||||||
|
Cash accounts |
$ | 289,298 | 61.3 | $ | 170,765 | 36.1 | ||||||||||
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Money market mutual funds |
181,198 | 38.4 | 273,926 | 58.0 | ||||||||||||
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Time deposits |
1,332 | 0.3 | 27,788 | 5.9 | ||||||||||||
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Total |
$ | 471,828 | $ | 472,479 | ||||||||||||
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The money market mutual fund balances reflected above are held in various funds of a single issuer. The time deposits balance at December 31, 2010 was primarily invested in pooled funds which held a mix of bank time deposits with varying durations of up to three months.
SHORT-TERM INVESTMENTS: Short-term investments consist primarily of deposits held by certain foreign subsidiaries of the Company with original maturities of three months to one year. The Company considers investments backed by government agencies or financial institutions with maturities of less than one year to be highly liquid and classifies such investments as short-term investments. Short-term investments are recorded at fair value. The Company uses the specific identification method to determine the realized gain or loss upon the sale of such securities.
The Company is averse to principal loss and seeks to preserve invested funds by limiting default risk, market risk and reinvestment risk by placing its investments with high-quality credit issuers.
PROPERTY AND EQUIPMENT: Property and equipment is stated at cost. Depreciation is computed on the straight-line method over the estimated useful lives of the various classes of assets, which range from one to 40 years. Repairs and maintenance are charged to expense as incurred. Gains or losses from the sale or retirement of property and equipment are included in operating income.
RESEARCH AND DEVELOPMENT COSTS: Research and development costs, other than certain capitalized software development costs, are expensed as incurred.
CAPITALIZED SOFTWARE: Internally developed computer software costs and costs of product enhancements are capitalized subsequent to the determination of technological feasibility; such capitalization continues until the product becomes available for commercial release. Judgment is required in determining when technological feasibility of a product is established. The Company has determined that technological feasibility is reached after all high-risk development issues have been resolved through coding and testing. Generally, the time between the establishment of technological feasibility and commercial release of software is minimal, resulting in insignificant capitalization of internally developed software costs. Amortization of capitalized software costs, both for internally developed as well as for purchased software products, is computed on a product-by-product basis over the estimated economic life of the product, which is generally three years. Amortization is the greater of the amount computed using: (i) the ratio of the current year's gross revenue to the total current and anticipated future gross revenue for that product or (ii) the straight-line method over the estimated life of the product. Amortization expense related to capitalized and acquired software costs, including the related trademarks, was $33.7 million, $32.8 million and $36.0 million for the years ended December 31, 2011, 2010 and 2009, respectively.
The Company periodically reviews the carrying value of capitalized software. Impairments are recognized in the results of operations when the expected future undiscounted operating cash flow derived from the capitalized costs of internally developed software is less than the carrying value. No impairment charges have been required to date.
GOODWILL AND OTHER INTANGIBLE ASSETS: Goodwill represents the excess of the consideration transferred over the fair value of net identifiable assets acquired. Intangible assets consist of trademarks, customer lists, contract backlog, and acquired software and technology.
The Company evaluates, at least annually, the realizability of the carrying value of goodwill and indefinite lived intangible assets by comparing the carrying value of the asset (or, in the case of goodwill, the Company's reporting units) to its estimated fair value. The Company performs its annual goodwill and indefinite lived intangible assets impairment test on January 1 of each year unless there is an indicator that would require a test during the year. No impairment charges have been required to date.
The Company periodically reviews the carrying value of other intangible assets and will recognize impairments when events or circumstances indicate that such assets may be impaired. No impairment charges have been required to date.
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:
| Year Ended December 31, | ||||||||||||
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(as a % of revenue, except customer data) |
2011 | 2010 | 2009 | |||||||||
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Revenue from channel partners |
26 | % | 27 | % | 26 | % | ||||||
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1st largest channel partner |
4 | % | 4 | % | 5 | % | ||||||
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2nd largest channel partner |
3 | % | 3 | % | 3 | % | ||||||
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Direct sale customers exceeding 5% of revenue |
0 | 0 | 0 | |||||||||
In addition to the concentration of credit risk with respect to trade receivables, the Company's cash and cash equivalents are also exposed to concentration of credit risk. The Company maintains certain cash and cash equivalent accounts that are currently insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000 per depositor or the Securities Investor Protection Corporation ("SIPC") up to $500,000 per customer. As of December 31, 2011, the Company had cash and cash equivalent balances of $297.7 million held in the U.S. which were uninsured by the FDIC or SIPC, and $153.4 million of uninsured cash and cash equivalent balances held outside of the U.S. The Company held cash and cash equivalent balances with one U.S. financial institution as of December 31, 2011 in the amount of $227.5 million.
ALLOWANCE FOR DOUBTFUL ACCOUNTS: The Company makes judgments as to its ability to collect outstanding receivables and provides allowances for a portion of receivables when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding invoices from both value and delinquency perspectives. For those invoices not specifically reviewed, provisions are provided at differing rates based upon the age of the receivable and the geographic area of origin. In determining these percentages, the Company considers its historical collection experience and current economic trends in the customer's industry and geographic region. The Company recorded provisions for doubtful accounts of $400,000, $1.8 million and $1.6 million for the years ended December 31, 2011, 2010 and 2009, respectively.
INCOME TAXES: The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period of the enactment date.
The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In the event the Company determines that it will be able to realize deferred income tax assets in the future in excess of their net recorded amount, an adjustment to the valuation allowance would be recorded that would reduce the provision for income taxes.
Tax benefits related to uncertain tax positions taken or expected to be taken on a tax return are recorded when such benefits meet a more likely than not threshold. Otherwise, these tax benefits are recorded when a tax position has been effectively settled, which means that the statute of limitation has expired or the appropriate taxing authority has completed their examination even though the statute of limitations remains open. The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of income. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheets.
FOREIGN CURRENCIES: Certain of the Company's sales and intercompany transactions are denominated in foreign currencies. These transactions are translated to the functional currency at the exchange rate on the transaction date. Accounts receivable and intercompany balances in foreign currencies at year end are translated at the effective exchange rate on the balance sheet date. Gains and losses resulting from foreign exchange transactions are included in other income. The Company recorded net foreign exchange losses of $430,000, $400,000 and $1.4 million for the years ended December 31, 2011, 2010 and 2009, 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 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:
| Year Ended December 31, | ||||||||||||
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(in thousands, except per share data) |
2011 | 2010 | 2009 | |||||||||
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Net income |
$ | 180,675 | $ | 153,132 | $ | 116,391 | ||||||
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Weighted average shares outstanding—basic |
92,120 | 90,684 | 88,486 | |||||||||
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Dilutive effect of stock plans |
2,261 | 2,525 | 3,299 | |||||||||
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Weighted average shares outstanding—diluted |
94,381 | 93,209 | 91,785 | |||||||||
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Basic earnings per share |
$ | 1.96 | $ | 1.69 | $ | 1.32 | ||||||
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Diluted earnings per share |
$ | 1.91 | $ | 1.64 | $ | 1.27 | ||||||
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Anti-dilutive options |
1,421 | 1,867 | 2,612 | |||||||||
STOCK-BASED COMPENSATION: The Company accounts for stock-based compensation in accordance with share-based payment accounting guidance. The guidance requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost is recognized over the period during which an employee is required to provide service in exchange for the award, typically the vesting period.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The Company accounts for certain assets and liabilities at fair value in accordance with the accounting guidance applicable to fair value measurements and disclosures. The carrying values of cash, cash equivalents, accounts receivable, accounts payable, accrued expenses, other accrued liabilities and short-term obligations are deemed to be reasonable estimates of their fair values because of their short-term nature. The fair values of investments are based on quoted market prices for those or similar investments. The carrying value of long-term debt is considered a reasonable estimate of fair value due to the variable interest rate underlying the Company's credit facility.
DERIVATIVE FINANCIAL INSTRUMENTS: As of December 31, 2009 and 2008 and through its maturity on June 30, 2010, the Company held a derivative financial instrument to manage interest rate risk. The Company accounted for this instrument as a cash flow hedge in accordance with derivative instruments and hedging activities accounting guidance, which requires that every derivative instrument be recorded on the balance sheet as either an asset or liability measured at its fair value as of the reporting date. This guidance also requires that changes in the Company's derivative fair value be recognized in earnings unless specific hedge accounting and documentation criteria are met. The Company recorded the effective portion of its derivative financial instrument in accumulated other comprehensive income on the consolidated balance sheets. Any ineffective portion or excluded portion of the designated cash flow hedge was recognized in earnings. The Company's cash flow hedge did not have an ineffective or excluded portion. The Company utilized the hypothetical derivative method to ensure the hedge was effective in offsetting variability in interest expense associated with its credit facility. The Company used the dollar offset method for calculating ineffectiveness by comparing the cumulative fair value of the swap to the cumulative fair value of the hypothetical derivative.
NEW ACCOUNTING GUIDANCE:
Fair Value Measurements: In May 2011, new accounting guidance was issued to provide a consistent definition of fair value and to ensure that the fair value measurement and disclosure requirements are similar between generally accepted accounting principles in the United States and International Financial Reporting Standards. The guidance changes certain fair value measurement principles and enhances the disclosure requirements, particularly for Level 3 fair value measurements. This guidance is effective for the Company beginning January 1, 2012. Management is in the process of evaluating the impact of adopting this guidance on the Company's consolidated financial statements.
Presentation of Comprehensive Income: In June 2011, new accounting guidance was issued regarding the presentation of comprehensive income in consolidated financial statements. This guidance requires that all non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The updated guidance eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. This guidance is effective for the Company beginning January 1, 2012. Management is in the process of evaluating the impact of adopting this guidance on the Company's consolidated financial statements.
Testing Goodwill for Impairment: In September 2011, new accounting guidance was issued regarding the requirement to test goodwill for impairment on at least an annual basis. Existing guidance requires that this test be performed by comparing the fair value of a reporting unit with its carrying amount, including goodwill (step one). If the fair value of a reporting unit is less than its carrying amount, then the second step of the test must be performed to measure the amount of the impairment loss, if any. Under the new guidance, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test. This guidance is effective for the Company beginning January 1, 2012. Management is in the process of evaluating the impact of adopting this guidance on the Company's consolidated financial statements.
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3. Acquisitions
On August 1, 2011, the Company completed its acquisition of Apache Design, Inc., 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 option awards 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 agreement also includes $13.0 million of performance equity awards for key members of management and employees, earned annually over a three-fiscal-year period beginning January 1, 2012. These awards will be accounted for outside of the business combination. The Company funded the transaction entirely with existing cash balances.
Apache's software enables engineers to design power-efficient devices while satisfying ever-increasing performance requirements. Engineers use Apache's products to design and simulate efficient, low-power integrated circuits for high-performance electronic products found in devices such as tablets, smartphones, LCD televisions, laptops and high end computer servers. The complementary combination is expected to accelerate development and delivery of new and innovative products to the marketplace while lowering design and engineering costs for customers.
The operating results of Apache have been included in the Company's consolidated financial statements since the date of acquisition, August 1, 2011. The acquired business contributed revenues of $14.5 million and a net loss of $4.2 million to the Company during the period from August 1, 2011 to December 31, 2011. During the year ended December 31, 2011, the Company incurred $2.1 million in acquisition-related costs. These costs are included in selling, general and administrative expenses in the Company's consolidated statement of income for the year ended December 31, 2011.
The merger agreement includes a contingent consideration arrangement that requires additional payments totaling $12.0 million to be paid by the Company in equal installments to the Apache stockholders and holders of vested Apache options on each of the first three anniversaries of the closing of the acquisition. To receive these payments, a key member of Apache's management must remain an employee of ANSYS on each of the first three anniversaries of the acquisition closing date. Management estimated that it was probable that all three payments would be made, and recorded the fair value of the contingent payments as a liability on the date of acquisition. The portion of contingent payments attributable to the key member of Apache management was determined to be compensation, and is accounted for outside of the business combination. The portion of the contingent payments attributable to other shareholders was determined to be contingent purchase price consideration and was estimated to be $9.5 million based on the net present value of the expected payments. Refer to Note 8 for a description of the valuation technique and inputs used to estimate the fair value of the contingent consideration.
Under the merger agreement, holders of partially-vested Apache options at the date of acquisition received options to purchase ANSYS shares of common stock based on an agreed-upon conversion ratio ("the Replacement Awards"). The value of the Replacement Awards attributable to pre-combination service was estimated to be $3.2 million at the acquisition date, and was included in the consideration transferred. The value of the Replacement Awards attributable to post-combination service will be recognized as stock-based compensation in earnings during the post-acquisition period.
In valuing deferred revenue on the Apache balance sheet as of the acquisition date, the Company applied the fair value provisions applicable to the accounting for business combinations. Although this acquisition accounting requirement had no impact on the Company's business or cash flow, the Company's reported revenue under accounting principles generally accepted in the United States, primarily for the first 12 months post-acquisition, will be less than what would otherwise have been reported by Apache absent the acquisition. Acquired deferred revenue of $10.1 million was recorded on the opening balance sheet. This amount was approximately $13.6 million lower than the historical carrying value. The impact on reported revenue for the year ended December 31, 2011 was $9.6 million, primarily in lease license revenue. The expected impact on reported revenue for the year ending December 31, 2012 is $3.4 million.
The assets and liabilities of Apache have been recorded based upon management's estimates of their fair market values as of the acquisition date. The following tables summarize the preliminary 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 |
$ | 301,306 | ||
|
Contingent consideration |
9,501 | |||
|
ANSYS replacement stock options |
3,170 | |||
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Total consideration transferred at fair value |
$ | 313,977 | ||
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Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
|
(in thousands) |
||||
|
Cash and short-term investments |
$ | 31,948 | ||
|
Accounts receivable and other tangible assets |
6,011 | |||
|
Developed software (7-year life) |
82,500 | |||
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Customer relationships (15-year life) |
36,100 | |||
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Contract backlog (3-year life) |
13,500 | |||
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Platform trade names (indefinite-lives) |
21,900 | |||
|
Apache trade name (6-year life) |
2,100 | |||
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Accounts payable and other liabilities |
(16,646 | ) | ||
|
Deferred revenue |
(10,100 | ) | ||
|
Net deferred tax liabilities |
(44,283 | ) | ||
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Total identifiable net assets |
$ | 123,030 | ||
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Goodwill |
$ | 190,947 | ||
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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.The fair values of the assets acquired and liabilities assumed that are listed above are based on preliminary calculations and the estimates and assumptions for these items are subject to change as additional information is obtained during the measurement period (up to one year from the acquisition date). During the measurement period since the Apache acquisition date, the Company retrospectively increased the values of identifiable intangible assets by $2.3 million, and reduced the values of net deferred tax liabilities and goodwill by $1.9 million and $4.3 million, respectively. These adjustments were based on refinements to assumptions used in the preliminary valuation of intangible assets and new information obtained in the calculation of the net deferred tax liabilities.
The following unaudited pro forma information presents the 2010 and 2011 results of operations of the Company as if the acquisition had occurred on January 1, 2010. The unaudited pro forma results are not necessarily indicative of results that would have occurred had the acquisition been in effect for the periods presented, nor are they necessarily indicative of future results. The 2010 pro forma results are based on the year ended December 31, 2010 for ANSYS, as reported, combined with the year ended December 31, 2010 results of Apache. The 2011 pro forma results are based on ANSYS's stand-alone results for the year ended December 31, 2011 combined with Apache's results for the year ended December 31, 2011. The unaudited pro forma financial information for all periods presented includes the business combination accounting effects on amortization expense from acquired intangible assets, lost interest income on the cash paid for the acquisition and the related tax effects. The unaudited pro forma financial information excludes contingent payments, transaction costs, IPO-related costs incurred by Apache prior to the acquisition, expenses related to performance awards issued as part of the acquisition and the income statement effects of the acquisition accounting adjustment to deferred revenue. No pro forma adjustments were made to stock-based compensation expense previously recorded by Apache.
| Year Ended December 31, | ||||||||
|
(in thousands, except per share data) |
2011 | 2010 | ||||||
| (Unaudited) | (Unaudited) | |||||||
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Total revenue |
$ | 730,632 | $ | 624,283 | ||||
|
Net income |
$ | 181,718 | $ | 144,605 | ||||
|
Earnings per share: |
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|
Basic |
$ | 1.97 | $ | 1.59 | ||||
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Diluted |
$ | 1.93 | $ | 1.55 | ||||
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4. Other Current Assets
The Company reports accounts receivable, related to the portion of annual lease licenses and software maintenance that has not yet been recognized as revenue, as a component of other receivables and current assets. These amounts totaled $112.8 million and $89.9 million as of December 31, 2011 and 2010, 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 $36.0 million and $32.9 million as of December 31, 2011 and 2010, respectively.
|
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5. Property and Equipment
Property and equipment consists of the following:
| December 31, | ||||||||||||
|
(dollars in thousands) |
Estimated Useful Lives | 2011 | 2010 | |||||||||
|
Equipment |
1-10 years | $ | 55,221 | $ | 41,998 | |||||||
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Computer software |
1-5 years | 26,709 | 25,896 | |||||||||
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Buildings |
10-40 years | 10,469 | 9,921 | |||||||||
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Leasehold improvements |
1-10 years | 7,394 | 6,566 | |||||||||
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Furniture |
1-13 years | 5,007 | 4,577 | |||||||||
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Land |
1,749 | 1,368 | ||||||||||
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| 106,549 | 90,326 | |||||||||||
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Less: Accumulated depreciation and amortization |
(60,911 | ) | (53,405 | ) | ||||||||
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| $ | 45,638 | $ | 36,921 | |||||||||
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Depreciation and amortization expense related to property and equipment, including the amounts acquired through capital lease commitments, was $13.3 million, $10.9 million and $10.6 million for the years ended December 31, 2011, 2010 and 2009, respectively.
|
|||
6. Goodwill and Other Intangible Assets
Goodwill represents the excess of the fair value of the consideration transferred over the value of net tangible and identifiable intangible assets of acquired businesses. Identifiable intangible assets acquired in business combinations are recorded based upon their fair values on the date of acquisition.
During the first quarter of 2011, the Company completed the annual impairment test for goodwill and intangible assets with indefinite lives and determined that these assets had not been impaired as of the test date, January 1, 2011. The Company tested the goodwill and identifiable intangible assets utilizing estimated cash flow methodologies and market-based information. No events occurred or circumstances changed during the year ended December 31, 2011 that would indicate that the fair values of the Company's reporting units are below their carrying amounts.
Identifiable intangible assets with finite lives are amortized on either a straight-line basis over their estimated useful lives or under the proportional cash flow method and are reviewed for impairment whenever events or circumstances indicate that the carrying amounts may not be recoverable.
As of December 31, 2011 and 2010, the Company's intangible assets have estimated useful lives and are classified as follows:
| December 31, 2011 | December 31, 2010 | |||||||||||||||
|
(in thousands) |
Gross Carrying Amount |
Accumulated Amortization |
Gross Carrying Amount |
Accumulated Amortization |
||||||||||||
|
Amortized intangible assets: |
||||||||||||||||
|
Developed software and core technologies (7–10 years) |
$ | 287,392 | $ | (144,836 | ) | $ | 205,137 | $ | (120,633 | ) | ||||||
|
Customer lists and contract backlog (3–15 years) |
223,037 | (76,630 | ) | 172,845 | (58,967 | ) | ||||||||||
|
Trademarks (6–10 years) |
102,580 | (30,380 | ) | 100,994 | (21,499 | ) | ||||||||||
|
Non-compete agreements |
0 | 0 | 575 | (489 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total |
$ | 613,009 | $ | (251,846 | ) | $ | 479,551 | $ | (201,588 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Unamortized intangible assets: |
||||||||||||||||
|
Trademarks |
$ | 22,257 | $ | 357 | ||||||||||||
|
|
|
|
|
|||||||||||||
The significant increase in the intangible assets reflected above was due to the August 1, 2011 acquisition of Apache. Amortization expense for intangible assets reflected above was $51.7 million, $48.7 million and $52.0 million for the years ended December 31, 2011, 2010 and 2009, respectively.
As of December 31, 2011, estimated future amortization expense for the intangible assets reflected above is as follows:
|
(in thousands) |
||||
|
Fiscal 2012 |
$ | 66,884 | ||
|
Fiscal 2013 |
58,481 | |||
|
Fiscal 2014 |
51,889 | |||
|
Fiscal 2015 |
47,866 | |||
|
Fiscal 2016 |
40,280 | |||
|
Thereafter |
95,763 | |||
|
|
|
|||
|
Total intangible assets subject to amortization |
361,163 | |||
|
Indefinite-lived trademarks |
22,257 | |||
|
|
|
|||
|
Other intangible assets, net |
$ | 383,420 | ||
|
|
|
|||
The changes in goodwill during the years ended December 31, 2011 and 2010 are as follows:
| Year Ended December 31, | ||||||||
|
(in thousands) |
2011 | 2010 | ||||||
|
Beginning balance |
$ | 1,035,083 | $ | 1,038,824 | ||||
|
Acquisition of Apache |
190,947 | 0 | ||||||
|
Currency translation and other |
(655 | ) | (3,741 | ) | ||||
|
|
|
|
|
|||||
|
Ending balance |
$ | 1,225,375 | $ | 1,035,083 | ||||
|
|
|
|
|
|||||
|
|||
7. Long-Term Debt
Borrowings consist of the following:
| December 31, | ||||||||
|
(in thousands) |
2011 | 2010 | ||||||
|
Term loan payable in quarterly installments with a final maturity of July 31, 2013 |
$ | 127,557 | $ | 159,446 | ||||
|
Capitalized lease obligations |
15 | 79 | ||||||
|
|
|
|
|
|||||
|
Total |
127,572 | 159,525 | ||||||
|
Less current portion |
(74,423 | ) | (31,962 | ) | ||||
|
|
|
|
|
|||||
|
Long-term debt and capital lease obligations, net of current portion |
$ | 53,149 | $ | 127,563 | ||||
|
|
|
|
|
|||||
On July 31, 2008, ANSYS borrowed $355.0 million from a syndicate of banks. The interest rate on the indebtedness provides for tiered pricing with the initial rate at the prime rate + 0.50%, or the LIBOR rate + 1.50%, with step downs permitted after the initial six months under the credit agreement down to a flat prime rate or the LIBOR rate + 0.75%. Such tiered pricing is determined by the Company's consolidated leverage ratio. The Company's consolidated leverage ratio has been reduced to the lowest pricing tier in the debt agreement. During the year ended December 31, 2011, the Company made the required quarterly principal payments of $31.9 million in the aggregate.
The Company entered into an interest rate swap agreement in order to hedge a portion of each of the first eight forecasted quarterly variable rate interest payments on the Company's term loan. The interest rate swap agreement terminated on June 30, 2010.
For the year ended December 31, 2011, the Company recorded interest expense related to the term loan at a weighted average interest rate of 1.05%. For the year ended December 31, 2010, the Company recorded interest expense related to the term loan at a weighted average interest rate of 1.53%. If the Company did not enter into the interest rate swap agreement, the weighted average interest rate would have been 1.08%. For the year ended December 31, 2009, the Company recorded interest expense related to the term loan at a weighted average interest rate of 3.41%. If the Company did not enter into the interest rate swap agreement, the weighted average interest rate would have been 1.88%. The interest expense on the term loan and amortization related to debt financing costs were as follows:
| Year Ended December 31, | ||||||||||||||||||||||||
| 2011 | 2010 | 2009 | ||||||||||||||||||||||
|
(in thousands) |
Interest Expense |
Amortization | Interest Expense |
Amortization | Interest Expense |
Amortization | ||||||||||||||||||
|
July 31, 2008 term loan (interest expense includes $0 loss, $864 loss and $3,959 loss, respectively, on interest rate swap) |
$ | 1,605 | $ | 953 | $ | 2,960 | $ | 1,107 | $ | 8,824 | $ | 1,229 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
The interest rate on the outstanding term loan balance of $127.6 million is set for the quarter ending March 31, 2012 at 1.33%, which is based on LIBOR + 0.75%. The required future principal payments on the Company's term loan as of December 31, 2011 are scheduled as follows:
|
(in thousands) |
||||
|
March 31, 2012 |
$ | 10,630 | ||
|
June 30, 2012 |
10,630 | |||
|
September 30, 2012 |
26,574 | |||
|
December 31, 2012 |
26,574 | |||
|
March 31, 2013 |
26,574 | |||
|
July 31, 2013 (maturity) |
26,575 | |||
|
|
|
|||
|
Term loan balance payable as of December 31, 2011 |
$ | 127,557 | ||
|
|
|
|||
The credit agreement includes covenants related to the consolidated leverage ratio and the consolidated fixed charge coverage ratio, as well as certain restrictions on additional investments and indebtedness. As of December 31, 2011, the Company is in compliance with all financial covenants as stated in the credit agreement.
|
|||
8. Fair Value Measurement
The valuation hierarchy for disclosure of assets and liabilities reported at fair value prioritizes the inputs for such valuations into three broad levels:
| • |
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; |
| • |
Level 2: quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; or |
| • |
Level 3: unobservable inputs based on the Company's own assumptions used to measure assets and liabilities at fair value. |
A financial asset's or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The following tables provide the assets and liabilities carried at fair value and measured on a recurring basis:
| Fair Value Measurements at Reporting Date Using: | ||||||||||||||||
|
(in thousands) |
December 31, 2011 |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||
|
Assets |
||||||||||||||||
|
Cash equivalents |
$ | 182,530 | $ | 181,198 | $ | 1,332 | $ | 0 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Short-term investments |
$ | 576 | $ | 0 | $ | 576 | $ | 0 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Liabilities |
||||||||||||||||
|
Deferred compensation |
$ | (2,073 | ) | $ | 0 | $ | 0 | $ | (2,073 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Contingent consideration |
$ | (9,571 | ) | $ | 0 | $ | 0 | $ | (9,571 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Fair Value Measurements at Reporting Date Using: | ||||||||||||||||
|
(in thousands) |
December 31, 2010 |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||
|
Assets |
||||||||||||||||
|
Cash equivalents |
$ | 301,714 | $ | 273,926 | $ | 27,788 | $ | 0 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Short-term investments |
$ | 455 | $ | 0 | $ | 455 | $ | 0 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The cash equivalents in the preceding tables represent money market mutual funds and time deposits.
The short-term investments in the preceding tables represent deposits held by certain foreign subsidiaries of the Company. The deposits have fixed interest rates with maturity dates ranging from three months to one year. There were no unrealized gains or losses associated with these deposits for the years ended December 31, 2011 and 2010.
During 2011, the Company entered into three foreign currency futures contracts with a third-party U.S. financial institution, all of which were settled as of December 31, 2011. The purpose of these contracts was to mitigate the Company's exposure to foreign exchange risk arising from intercompany receivables from a Japanese subsidiary. The foreign exchange futures were measured at fair value each reporting period, with gains or losses recognized in earnings.
On August 1, 2011, the Company completed its acquisition of Apache, a leading simulation software provider for advanced, low-power solutions in the electronics industry. The merger agreement includes a contingent consideration arrangement that requires additional payments totaling $12.0 million to be paid by the Company in equal installments to the Apache stockholders and holders of vested Apache options on each of the first three anniversaries of the closing of the acquisition. To receive these payments, a key member of Apache's management must remain an employee of ANSYS on each of the first three anniversaries of the acquisition closing date. Management estimated that it was probable that all three payments would be made, and recorded the fair value of the contingent payments as a liability on the date of acquisition. The portion of contingent payments attributable to the key member of Apache management was determined to be deferred compensation, and is accounted for outside of the business combination. A liability of $2.1 million for deferred compensation was recorded as of December 31, 2011 based on the net present value of the expected payments. The portion of the contingent payments attributable to other shareholders was determined to be contingent purchase price consideration and was estimated to be $9.6 million based on the net present value of the expected payments as of December 31, 2011. The net present value calculations for the deferred compensation and contingent consideration included a significant unobservable input in the assumption that all three payments will be made, and therefore the liabilities were classified as Level 3 in the fair value hierarchy.
The following table presents the changes during the year ended December 31, 2011 in the Company's Level 3 liabilities for contingent consideration and deferred compensation that are measured at fair value on a recurring basis:
| Fair Value Measurement Using Significant Unobservable Inputs |
||||||||
|
(in thousands) |
Contingent Consideration |
Deferred Compensation |
||||||
|
Beginning balance—January 1, 2011 |
$ | 0 | $ | 0 | ||||
|
Issuances |
9,501 | 2,057 | ||||||
|
Interest expense included in earnings |
70 | 16 | ||||||
|
|
|
|
|
|||||
|
Ending balance—December 31, 2011 |
$ | 9,571 | $ | 2,073 | ||||
|
|
|
|
|
|||||
The Company had no transfers of amounts in or out of Level 1 or Level 2 fair value measurements during the year ended December 31, 2011.
The pre-tax (loss) gain on the Company's interest rate swap agreement is categorized in the table below:
| Year Ended | ||||||||||||
|
(in thousands) |
Loss Recognized in Accumulated Other Comprehensive Income (Effective Portion) |
Loss Reclassified from Accumulated Other Comprehensive Income into Income Statement (Effective Portion) |
Gain /(Loss) Recognized in Income Statement (Ineffective Portion) |
|||||||||
|
Cash Flow Hedge |
||||||||||||
|
Interest rate swap agreement |
||||||||||||
|
December 31, 2011 |
$ | 0 | $ | 0 | $ | 0 | ||||||
|
|
|
|
|
|
|
|||||||
|
December 31, 2010 |
$ | (11 | ) | $ | (864 | ) | $ | 0 | ||||
|
|
|
|
|
|
|
|||||||
|
December 31, 2009 |
$ | (783 | ) | $ | (3,959 | ) | $ | 0 | ||||
|
|
|
|
|
|
|
|||||||
The carrying values of cash, accounts receivable, accounts payable, accrued expenses, other accrued liabilities and short-term obligations approximate their fair values because of their short-term nature. The carrying value of long-term debt approximates its fair value due to the variable interest rate underlying the Company's credit facility.
|
|||
9. Income Taxes
Income before income taxes includes the following components:
| Year Ended December 31, | ||||||||||||
|
(in thousands) |
2011 | 2010 | 2009 | |||||||||
|
Domestic |
$ | 205,966 | $ | 162,921 | $ | 128,173 | ||||||
|
Foreign |
58,892 | 53,473 | 45,356 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total |
$ | 264,858 | $ | 216,394 | $ | 173,529 | ||||||
|
|
|
|
|
|
|
|||||||
The provision for income taxes is composed of the following:
| Year Ended December 31, | ||||||||||||
|
(in thousands) |
2011 | 2010 | 2009 | |||||||||
|
Current: |
||||||||||||
|
Federal |
$ | 57,423 | $ | 62,350 | $ | 57,077 | ||||||
|
State |
5,770 | 5,589 | 6,379 | |||||||||
|
Foreign |
24,011 | 21,964 | 21,720 | |||||||||
|
Deferred: |
||||||||||||
|
Federal |
(11,768 | ) | (15,173 | ) | (18,287 | ) | ||||||
|
State |
(1,314 | ) | (2,102 | ) | (2,277 | ) | ||||||
|
Foreign |
10,061 | (9,366 | ) | (7,474 | ) | |||||||
|
|
|
|
|
|
|
|||||||
|
Total |
$ | 84,183 | $ | 63,262 | $ | 57,138 | ||||||
|
|
|
|
|
|
|
|||||||
The reconciliation of the U.S. federal statutory tax rate to the consolidated effective tax rate is as follows:
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Federal statutory tax rate |
35.0 | % | 35.0 | % | 35.0 | % | ||||||
|
Changes in tax rates |
2.2 | 0 | 0 | |||||||||
|
State income taxes, net of federal benefit |
1.1 | 0.7 | 1.3 | |||||||||
|
Stock-based compensation |
1.0 | 1.4 | 1.3 | |||||||||
|
Uncertain tax positions |
0.2 | (0.8 | ) | (1.0 | ) | |||||||
|
Benefit from restructuring activities |
(3.5 | ) | (1.3 | ) | 0 | |||||||
|
Domestic production activity benefit |
(2.9 | ) | (2.8 | ) | (2.4 | ) | ||||||
|
Foreign rate differential |
(1.1 | ) | (0.7 | ) | (0.9 | ) | ||||||
|
Research and experimentation credits |
(0.9 | ) | (0.7 | ) | (1.2 | ) | ||||||
|
Adjustments of prior year taxes |
(0.3 | ) | (1.1 | ) | 0 | |||||||
|
Other |
1.0 | (0.5 | ) | 0.8 | ||||||||
|
|
|
|
|
|
|
|||||||
| 31.8 | % | 29.2 | % | 32.9 | % | |||||||
|
|
|
|
|
|
|
|||||||
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 approximately $137.7 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. It is not practicable to estimate the amount of deferred tax liability related to investments in these subsidiaries.
The Company's tax expense in the year ended December 31, 2011 was unfavorably impacted by reductions to the Japanese corporate tax rate, beginning with the 2013 tax year. This legislation, enacted on November 30, 2011, resulted in an additional $4.8 million in deferred tax expense due to the reduction in the value of certain net deferred tax assets of the Company's Japanese subsidiaries. The effect of this adjustment increased the 2011 effective tax rate from 30.0% to 31.8%.
The components of deferred tax assets and liabilities are as follows:
| December 31, | ||||||||
|
(in thousands) |
2011 | 2010 | ||||||
|
Deferred tax assets: |
||||||||
|
Net operating loss carryforwards |
$ | 18,624 | $ | 12,402 | ||||
|
Employee benefits |
16,697 | 14,788 | ||||||
|
Stock-based compensation |
11,888 | 8,916 | ||||||
|
Foreign tax credits |
7,219 | 4,398 | ||||||
|
Other accruals not currently deductible |
6,090 | 8,386 | ||||||
|
Research and development credits |
4,542 | 1,429 | ||||||
|
Uncertain tax positions |
3,145 | 3,084 | ||||||
|
Deferred revenue |
3,096 | 5,089 | ||||||
|
Allowance for doubtful accounts |
1,259 | 1,587 | ||||||
|
Investments |
0 | 229 | ||||||
|
Other |
1,241 | 588 | ||||||
|
Valuation allowance |
(8 | ) | (977 | ) | ||||
|
|
|
|
|
|||||
| 73,793 | 59,919 | |||||||
|
Deferred tax liabilities: |
||||||||
|
Other intangible assets |
(141,949 | ) | (108,071 | ) | ||||
|
Property and equipment |
(6,529 | ) | (3,430 | ) | ||||
|
Unremitted foreign earnings |
(140 | ) | (171 | ) | ||||
|
|
|
|
|
|||||
| (148,618 | ) | (111,672 | ) | |||||
|
|
|
|
|
|||||
|
Net deferred tax liabilities |
$ | (74,825 | ) | $ | (51,753 | ) | ||
|
|
|
|
|
|||||
As of December 31, 2011, the Company had federal net operating loss carryforwards of $3.2 million. These losses expire in 2028, and are subject to limitations on their utilization. The Company had state net operating loss carryforwards of $9.5 million, which expire between 2016 and 2030, of which $7.4 million are subject to limitations on their utilization. The Company had total foreign net operating loss carryforwards of $48.3 million, which are subject to limitations on their utilization. Approximately $6.6 million of these foreign net operating losses are not currently subject to expiration dates. The remainder, approximately $41.7 million, expires between 2019 and 2026. The Company had tax credit carryforwards of $12.8 million, of which $8.0 million are subject to limitations on their utilization. Approximately $1.3 million of these tax credit carryforwards are not currently subject to expiration dates. The remainder, approximately $11.5 million, expires in various years between 2012 and 2031.
The following is a reconciliation of the total amounts of unrecognized tax benefits:
| Year Ended December 31, | ||||||||||||
|
(in thousands) |
2011 | 2010 | 2009 | |||||||||
|
Unrecognized tax benefit as of January 1 |
$ | 19,993 | $ | 10,041 | $ | 12,416 | ||||||
|
Apache unrecognized tax benefit—acquired August 1, 2011 |
5,813 | 0 | 0 | |||||||||
|
Gross increases—tax positions in prior period |
6,814 | 177 | 427 | |||||||||
|
Gross decreases—tax positions in prior period |
(2,697 | ) | (2,415 | ) | (3,259 | ) | ||||||
|
Gross increases—tax positions in current period |
2,297 | 13,001 | 1,562 | |||||||||
|
Reductions due to a lapse of the applicable statute of limitations |
(190 | ) | (674 | ) | (887 | ) | ||||||
|
Changes due to currency fluctuation |
(448 | ) | (84 | ) | 65 | |||||||
|
Settlements |
0 | (53 | ) | (283 | ) | |||||||
|
|
|
|
|
|
|
|||||||
|
Unrecognized tax benefit as of December 31 |
$ | 31,582 | $ | 19,993 | $ | 10,041 | ||||||
|
|
|
|
|
|
|
|||||||
The Company does not expect any uncertain tax positions to be resolved within the next twelve months. Of the total unrecognized tax benefit as of December 31, 2011, $5.8 million would not affect the effective tax rate, if recognized.
The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. As of December 31, 2011, the Company accrued a liability for penalties of $2.2 million and interest of $2.6 million. As of December 31, 2010, the Company accrued a liability for penalties of $455,000 and interest of $2.0 million. The increase was primarily the result of accrued penalties and interest on the Apache opening balance sheet of $2.1 million and $546,000, respectively.
The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. The Company's 2007 through 2010 tax years are open to examination by the Internal Revenue Service. The 2007 federal return of a former U.S. subsidiary is currently under examination. The Company also has various foreign and state tax filings subject to examination for various years.
|
|||
10. Pension and Profit-Sharing Plans
The Company has a 401(k)/profit-sharing plan for all qualifying full-time domestic employees that permit participants to make contributions by salary reduction pursuant to Section 401(k) of the Internal Revenue Code. The Company makes matching contributions on behalf of each eligible participant in an amount equal to 100% of the first 3% and an additional 25% of the next 5%, for a maximum total of 4.25% of the employee's compensation. The Company may make a discretionary contribution based on the participant's eligible compensation, provided the employee is employed at the end of the year and has worked at least 1,000 hours. The qualifying domestic employees of the Company's Apache subsidiary, which was acquired on August 1, 2011, also participate in a 401(k) plan. There is no matching employer contribution associated with this plan. The Company also maintains various defined contribution pension arrangements for its international employees.
Expenses related to the Company's retirement programs were $5.3 million in 2011, $3.9 million in 2010 and $3.4 million in 2009.
|
|||
11. 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.
|
|||
12. Stock Option and Grant Plan
The Company has one stock option and grant plan—the Fourth Amended and Restated 1996 Stock Option and Grant Plan ("Stock Plan"). The Stock Plan, as amended, authorizes the grant of up to 30,400,000 shares of the Company's common stock in the form of: (i) incentive stock options ("ISOs"), (ii) nonqualified stock options or (iii) the issuance or sale of common stock with or without vesting or other restrictions. Additionally, the Stock Plan permits (a) the grant of common stock upon the attainment of specified performance goals, (b) the grant of the right to receive cash dividends with the holders of the common stock as if the recipient held a specified number of shares of the common stock, (c) the grant of deferred stock awards, (d) the grant of stock appreciation rights and (e) the grant of cash-based awards.
The Stock Plan provides that: (i) the exercise price of an ISO must be no less than the fair value of the stock at the date of grant and (ii) the exercise price of an ISO held by an optionee who possesses more than 10% of the total combined voting power of all classes of stock must be no less than 110% of the fair market value of the stock at the time of grant. The Compensation Committee of the Board of Directors has the authority to set expiration dates no later than ten years from the date of grant (or five years for an optionee who meets the 10% criteria), payment terms and other provisions for each grant. The majority of options granted have a four year vesting period. Shares associated with unexercised options or reacquired shares of common stock 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, with the exception of the Chairman's units which are issued in the period earned. As of December 31, 2011, 66,704 deferred stock units have been earned with the underlying shares remaining unissued until the service termination of the respective Director owners. Of this amount, 21,684 units were earned during the year ended December 31, 2011. In addition, in the second quarter of 2011, 13,631 deferred stock units were issued as a result of the termination of service of a Director, for which 2,031 units were earned during the 2011 calendar year.
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, as it was at December 31, 2011, the Company will issue new shares.
Information regarding stock option transactions is summarized below:
| Year Ended December 31, | ||||||||||||||||||||||||
| 2011 | 2010 | 2009 | ||||||||||||||||||||||
|
(options in thousands) |
Options | Weighted Average Exercise Price |
Options | Weighted Average Exercise Price |
Options | Weighted Average Exercise Price |
||||||||||||||||||
|
Outstanding, beginning of year |
7,319 | $ | 29.92 | 8,110 | $ | 22.94 | 9,216 | $ | 16.91 | |||||||||||||||
|
Granted |
1,104 | $ | 58.50 | 1,204 | $ | 48.35 | 1,317 | $ | 37.13 | |||||||||||||||
|
Issued pursuant to Apache acquisition |
418 | $ | 18.66 | 0 | $ | 0.00 | 0 | $ | 0.00 | |||||||||||||||
|
Exercised |
(1,179 | ) | $ | 19.33 | (1,924 | ) | $ | 11.92 | (2,299 | ) | $ | 6.68 | ||||||||||||
|
Forfeited |
(117 | ) | $ | 33.27 | (71 | ) | $ | 32.40 | (124 | ) | $ | 27.08 | ||||||||||||
|
Outstanding, end of year |
7,545 | $ | 35.10 | 7,319 | $ | 29.92 | 8,110 | $ | 22.94 | |||||||||||||||
|
Vested and Exercisable, end of year |
4,251 | $ | 27.98 | 4,214 | $ | 23.11 | 4,914 | $ | 16.74 | |||||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Weighted Average Remaining Contractual Term (in years) |
||||||||||||
|
Outstanding |
6.66 | 6.54 | 6.16 | |||||||||
|
Vested and Exercisable |
5.20 | 5.16 | 4.72 | |||||||||
|
Aggregate Intrinsic Value (in thousands) |
||||||||||||
|
Outstanding |
$ | 168,837 | $ | 162,099 | $ | 166,531 | ||||||
|
Vested and Exercisable |
$ | 124,550 | $ | 122,022 | $ | 131,334 | ||||||
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, 2011, 2010 and 2009 is as follows:
| Year Ended December 31, | ||||||||||||
|
(in thousands, except per share amounts) |
2011 | 2010 | 2009 | |||||||||
|
Cost of sales: |
||||||||||||
|
Software licenses |
$ | 556 | $ | 135 | $ | 83 | ||||||
|
Maintenance and service |
1,897 | 1,541 | 1,069 | |||||||||
|
Operating expenses: |
||||||||||||
|
Selling, general and administrative |
12,501 | 11,755 | 8,296 | |||||||||
|
Research and development |
8,134 | 5,588 | 3,764 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Stock-based compensation expense before taxes |
23,088 | 19,019 | 13,212 | |||||||||
|
Related income tax benefits |
(5,552 | ) | (4,254 | ) | (2,687 | ) | ||||||
|
|
|
|
|
|
|
|||||||
|
Stock-based compensation expense, net of taxes |
$ | 17,536 | $ | 14,765 | $ | 10,525 | ||||||
|
|
|
|
|
|
|
|||||||
|
Net impact on earnings per share: |
||||||||||||
|
Basic earnings per share |
$ | (0.19 | ) | $ | (0.16 | ) | $ | (0.12 | ) | |||
|
Diluted earnings per share |
$ | (0.19 | ) | $ | (0.16 | ) | $ | (0.11 | ) | |||
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 2011, 2010 and 2009.
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:
| Year Ended December 31, | ||||||
| 2011 | 2010 | 2009 | ||||
|
Risk-free interest rate |
0.91% to 2.11% | 1.27% to 2.34% | 1.86% to 2.69% | |||
|
Expected dividend yield |
0% | 0% | 0% | |||
|
Expected volatility |
39% | 39% | 41% | |||
|
Expected term |
5.8 years | 6.1 years | 6.1 years | |||
|
Weighted average fair value per share |
$25.84 | $19.41 | $15.81 | |||
As stock-based compensation expense recognized in the consolidated statements of income is based on awards ultimately expected to vest, it must be reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The effect of pre-vesting forfeitures on the Company's recorded expense has historically been negligible due to the relatively low turnover of stock option holders.
The Company's determination of fair value of share-based payment awards on the date of grant using an option pricing model is affected by the Company's stock price as well as assumptions regarding a number of variables. The total estimated grant date fair values of stock options that vested during the years ended December 31, 2011, 2010 and 2009 were $20.2 million, $16.7 million and $12.4 million, respectively. At December 31, 2011, total unrecognized estimated compensation cost related to unvested stock options granted prior to that date was $58.8 million, which is expected to be recognized over a weighted average period of 2.0 years. The total intrinsic values of stock options exercised during the years ended December 31, 2011, 2010 and 2009 were $42.6 million, $88.0 million and $82.9 million, respectively. At December 31, 2011, 3.3 million unvested options with an aggregate intrinsic value of $44.3 million are expected to vest and have a weighted average exercise price of $44.28 and a weighted average remaining contractual term of 8.5 years. The Company recorded cash received from the exercise of stock options of $22.8 million and related tax benefits of $12.4 million (including an excess tax benefit of $10.0 million) for the year ended December 31, 2011.
Information regarding stock options outstanding as of December 31, 2011 is summarized below:
|
(options in thousands) |
Options Outstanding | Options Exercisable | ||||||||||||||||||
| Range of Exercise Prices | Options | Weighted Average Remaining Contractual Life (years) |
Weighted Average Exercise Price |
Options | Weighted Average Exercise Price |
|||||||||||||||
|
$ 2.98 - $20.09 |
1,521 | 3.47 | $ | 13.18 | 1,230 | $ | 12.64 | |||||||||||||
|
$ 22.95 - $28.40 |
1,810 | 6.23 | $ | 25.93 | 1,321 | $ | 26.07 | |||||||||||||
|
$ 20.97 - $40.89 |
1,896 | 6.64 | $ | 39.38 | 1,377 | $ | 38.86 | |||||||||||||
|
$ 41.33 - $48.97 |
1,208 | 8.52 | $ | 48.22 | 321 | $ | 47.84 | |||||||||||||
|
$ 51.52 - $61.97 |
1,110 | 9.73 | $ | 58.46 | 2 | $ | 52.07 | |||||||||||||
Under the terms of the ANSYS, Inc. Long-Term Incentive Plan, in the first quarter of 2011 and 2010, the Company granted 92,500 and 80,500 performance-based restricted stock units, respectively. Vesting of the full award or a portion thereof is based on the Company's performance as measured by total shareholder return relative to the median percentage appreciation of the NASDAQ Composite Index over a specified measurement period, subject to each participant's continued employment with the Company through the conclusion of the measurement period. The measurement period for the restricted stock units granted pursuant to the Long-Term Incentive Plan is a three-year period beginning January 1 of the year of the grant. Each restricted stock unit relates to one share of the Company's common stock. The value of each restricted stock unit granted in 2011 was estimated on the grant date to be $32.05 and the value of each restricted stock unit granted in 2010 was estimated on the grant date to be $25.00. The estimate of the grant date value of the restricted stock units was made using a Monte Carlo lattice pricing model. Share-based compensation expense based on the fair value of the award will be recorded from the grant date through the conclusion of the three-year measurement period. Total compensation expense associated with the awards is $5.0 million, of which $1.6 million and $590,000 was recorded in the years ended December 31, 2011 and 2010, respectively, and $1.8 million and $1.0 million will be recorded in the years ending December 31, 2012 and 2013, respectively.
|
Assumption used in Monte Carlo lattice pricing model |
Restricted Stock Unit Valuation Assumptions December 31, 2011 and 2010 | |
|
Risk-free interest rate |
1.35% | |
|
Expected dividend yield |
0% | |
|
Expected volatility—ANSYS Stock Price |
40% | |
|
Expected volatility—NASDAQ Composite Index |
25% | |
|
Expected term |
2.9 years | |
|
Correlation factor |
0.7 |
|
|||
13. Stock Repurchase Program
In October 2001, the Company announced that its Board of Directors had amended its common stock repurchase program to acquire up to an additional four million shares, or 16 million shares in total, under a program that was initially announced in February 2000. Under this program, the Company repurchased 247,443 shares at an average price per share of $51.34 during the year ended December 31, 2011. The Company repurchased 0 and 2,069,763 shares under this program during 2010 and 2009, respectively. As of December 31, 2011, 1.1 million shares remained authorized for repurchase under the program.
|
|||
14. Employee Stock Purchase Plan
The Company's 1996 Employee Stock Purchase Plan (the "Purchase Plan") was adopted by the Board of Directors on April 19, 1996 and was subsequently approved by the Company's stockholders. The stockholders approved an amendment to the Purchase Plan on May 6, 2004 to increase the number of shares available for offerings to 1.6 million shares. The Purchase Plan was amended and restated in 2007. The Purchase Plan is administered by the Compensation Committee. Offerings under the Purchase Plan commence on each February 1 and August 1, and have a duration of six months. An employee who owns or is deemed to own shares of stock representing in excess of 5% of the combined voting power of all classes of stock of the Company may not participate in the Purchase Plan.
During each offering, an eligible employee may purchase shares under the Purchase Plan by authorizing payroll deductions of up to 10% of his or her cash compensation during the offering period. The maximum number of shares that may be purchased by any participating employee during any offering period is limited to 3,840 shares (as adjusted by the Compensation Committee from time to time). Unless the employee has previously withdrawn from the offering, his accumulated payroll deductions will be used to purchase common stock on the last business day of the period at a price equal to 90% of the fair market value of the common stock on the first or last day of the offering period, whichever is lower. Under applicable tax rules, an employee may purchase no more than $25,000 worth of common stock in any calendar year. At December 31, 2011, 1,184,082 shares of common stock had been issued under the Purchase Plan, of which 1,134,377 were issued as of December 31, 2010. The total compensation expense recorded under the Purchase Plan during the years ended December 31, 2011, 2010 and 2009 was $650,000, $500,000 and $410,000, respectively.
|
|||
15. Leases
In January 1996, the Company entered into a lease agreement with an unrelated third party for a new corporate office facility, in Canonsburg, Pennsylvania, which the Company occupied in February 1997. In May 2004, the Company entered into the first amendment to this lease agreement, effective January 1, 2004. The lease was extended from an original period of ten years, with an option for five additional years, to a period of 18 years from the inception date, with an option for five additional years. The Company incurred lease rental expense related to this facility of $1.3 million in each of the years ended December 31, 2011, 2010 and 2009. The future minimum lease payments are $1.4 million per annum from January 1, 2012 through December 31, 2014. The future minimum lease payments from January 1, 2015 through December 31, 2019 will be determined based on prevailing market rental rates at the time of the extension, if elected. The amended lease also provided for the lessor to reimburse the Company for up to $550,000 in building refurbishments completed through March 31, 2006. These amounts have been recorded as a reduction of lease expense over the remaining term of the lease.
As part of the acquisition of Apache on August 1, 2011, the Company acquired certain leased office property, including executive offices, which comprise a 52,000 square foot office facility in San Jose, California. In March 2011, Apache entered into the second amendment to its existing lease agreement, effective March 14, 2011. The lease term was extended to October 31, 2015. Total required minimum payments under the operating lease will be $910,000 in 2012, $980,000 in 2013, $1.3 million in 2014 and $1.1 million in 2015.
In August 2009, the Company extended the executive office space lease agreement in Pittsburgh, Pennsylvania for a period of approximately three years and ten months, commencing February 15, 2011 and expiring December 31, 2014. Total required minimum payments under the operating lease will be $570,000 per annum from January 1, 2012 through December 31, 2014.
The Company has also entered into various noncancellable operating leases for equipment and office space, including the locations referenced above. Office space lease expense totaled $12.8 million, $11.5 million and $12.4 million for the years ended December 31, 2011, 2010 and 2009, respectively. Future minimum lease payments under noncancellable operating leases for office space in effect at December 31, 2011 are $12.0 million in 2012, $8.4 million in 2013, $7.5 million in 2014, $4.2 million in 2015 and $1.6 million in 2016.
|
|||
16. 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 $8.4 million, $6.8 million and $6.9 million for the years ended December 31, 2011, 2010 and 2009, respectively.
|
|||
17. 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:
| Year Ended December 31, | ||||||||||||
|
(in thousands) |
2011 | 2010 | 2009 | |||||||||
|
United States |
$ | 215,924 | $ | 188,649 | $ | 172,275 | ||||||
|
Japan |
112,171 | 95,498 | 75,207 | |||||||||
|
Germany |
72,301 | 60,399 | 55,652 | |||||||||
|
Canada |
12,069 | 9,875 | 8,068 | |||||||||
|
Other European |
166,551 | 138,157 | 134,869 | |||||||||
|
Other international |
112,433 | 87,658 | 70,814 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total revenue |
$ | 691,449 | $ | 580,236 | $ | 516,885 | ||||||
|
|
|
|
|
|
|
|||||||
Property and equipment by geographic area is as follows:
| December 31, | ||||||||
|
(in thousands) |
2011 | 2010 | ||||||
|
United States |
$ | 30,917 | $ | 25,156 | ||||
|
India |
3,092 | 2,846 | ||||||
|
United Kingdom |
3,077 | 2,316 | ||||||
|
France |
2,388 | 1,139 | ||||||
|
Germany |
1,843 | 1,709 | ||||||
|
Japan |
1,447 | 1,493 | ||||||
|
Canada |
938 | 1,014 | ||||||
|
Other European |
957 | 820 | ||||||
|
Other international |
979 | 428 | ||||||
|
|
|
|
|
|||||
|
Total property and equipment |
$ | 45,638 | $ | 36,921 | ||||
|
|
|
|
| |||||
|
|||
18. 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 $5.0 million, $2.9 million, and $3.4 million related to unconditional purchase obligations that existed as of the beginning of each year for the years ended December 31, 2011, 2010 and 2009, respectively. Future expenditures under these obligations in effect at December 31, 2011 are $4.0 million in 2012, $1.6 million in 2013 and $176,000 in 2014.
|
|||
19. 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.
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, 2011. 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.
|
|||
20. Restructuring Charges: Workforce Reduction Activities
On May 7, 2009, the Company announced actions it had taken or would be taking as part of an ongoing effort to manage expenses and cost structure. These actions included a reduction of approximately 6% of the Company's global workforce. During the year ended December 31, 2009, the planned restructuring activities were completed and the Company recorded related restructuring charges of approximately $3.7 million.
|
|||
21. Subsidiary Merger Activities
To improve the effectiveness of the Company's operations in Japan, the Company completed the merger of its Japan subsidiaries during the third quarter of 2010. For tax purposes in Japan, this transaction resulted in a step-up in the tax basis of certain assets and liabilities of the merged subsidiary to fair value as of the date of the merger and gave rise to a taxable gain in Japan, resulting in a liability of approximately $77.3 million which was paid during the fourth quarter of 2010. The unamortized portion of the corresponding prepaid tax, which is deductible over the succeeding five-year period in Japan for the stepped-up tax basis of the assets and liabilities, is included on the consolidated balance sheets as of December 31, 2011 and 2010.
For U.S. tax purposes, this taxable gain in Japan gave rise to a foreign tax credit that reduced the current U.S. tax on foreign income. The Company's U.S. tax payments were reduced by approximately $22.2 million in 2010 as a result of this credit. The Company recently filed an amended tax return in order to request a refund of approximately $26.3 million for a portion of this foreign tax credit which can be carried back to reduce the tax obligation of previous years. The remaining portion of this foreign tax credit (approximately $0.2 million) will be used to reduce the amount of taxes to be paid in future periods. Recognition of this foreign tax credit will be recognized as a reduction to the Company's U.S. taxes over the same five-year period that the prepaid tax in Japan is recognized.
|
|||
ANSYS, INC.
Valuation and Qualifying Accounts
|
(in thousands) Description |
Balance at Beginning of Year |
Additions– Charges to Costs and Expenses |
Deductions– Returns and Write-Offs |
Balance at End of Year |
||||||||||||
|
Year ended December 31, 2011 |
$ | 4,503 | $ | 404 | $ | 806 | $ | 4,101 | ||||||||
|
Year ended December 31, 2010 |
$ | 4,418 | $ | 1,757 | $ | 1,672 | $ | 4,503 | ||||||||
|
Year ended December 31, 2009 |
$ | 4,422 | $ | 1,610 | $ | 1,614 | $ | 4,418 | ||||||||
|
|||
ACCOUNTING PRINCIPLES: The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States.
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the amounts of revenue and expenses during the reported periods. Significant estimates included in these consolidated financial statements include allowances for doubtful accounts receivable, income tax accruals, uncertain tax positions and tax valuation reserves, fair value of stock-based compensation, contract revenue, useful lives for depreciation and amortization, loss contingencies, valuation of goodwill and indefinite lived intangible assets, contingent consideration and deferred compensation. Actual results could differ from these estimates. Changes in estimates are recorded in the results of operations in the period that the changes occur.
REVENUE RECOGNITION: Revenue is derived principally from the licensing of computer software products and from related maintenance contracts. Revenue from perpetual licenses is classified as license revenue and is recognized upon delivery of the licensed product and the utility that enables the customer to access authorization keys, provided that acceptance has occurred and a signed contractual obligation has been received, the price is fixed and determinable, and collectibility of the receivable is probable. The Company determines the fair value of post-contract customer support ("PCS") sold together with perpetual licenses based on the rate charged for PCS when sold separately. Revenue from PCS contracts is classified as maintenance and service revenue and is recognized ratably over the term of the contract.
Revenue for software lease licenses is classified as license revenue and is recognized over the period of the lease contract. Typically, the Company's software leases include PCS which, due to the short term (principally one year or less) of the Company's software lease licenses, cannot be separated from lease revenue for accounting purposes. As a result, both the lease license and PCS are recognized ratably over the lease period. Due to the short-term nature of the software lease licenses and the frequency with which the Company provides major product upgrades (typically every 12–18 months), the Company does not believe that a significant portion of the fee paid under the arrangement is attributable to the PCS component of the arrangement and, as a result, includes the revenue for the entire arrangement within software license revenue in the consolidated statements of income.
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.
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:
| December 31, | ||||||||||||||||
| 2011 | 2010 | |||||||||||||||
|
(in thousands, except percentages) |
Amount | % of Total | Amount | % of Total | ||||||||||||
|
Cash accounts |
$ | 289,298 | 61.3 | $ | 170,765 | 36.1 | ||||||||||
|
Money market mutual funds |
181,198 | 38.4 | 273,926 | 58.0 | ||||||||||||
|
Time deposits |
1,332 | 0.3 | 27,788 | 5.9 | ||||||||||||
|
|
|
|
|
|||||||||||||
|
Total |
$ | 471,828 | $ | 472,479 | ||||||||||||
|
|
|
|
|
|||||||||||||
The money market mutual fund balances reflected above are held in various funds of a single issuer. The time deposits balance at December 31, 2010 was primarily invested in pooled funds which held a mix of bank time deposits with varying durations of up to three months.
SHORT-TERM INVESTMENTS: Short-term investments consist primarily of deposits held by certain foreign subsidiaries of the Company with original maturities of three months to one year. The Company considers investments backed by government agencies or financial institutions with maturities of less than one year to be highly liquid and classifies such investments as short-term investments. Short-term investments are recorded at fair value. The Company uses the specific identification method to determine the realized gain or loss upon the sale of such securities.
The Company is averse to principal loss and seeks to preserve invested funds by limiting default risk, market risk and reinvestment risk by placing its investments with high-quality credit issuers.
PROPERTY AND EQUIPMENT: Property and equipment is stated at cost. Depreciation is computed on the straight-line method over the estimated useful lives of the various classes of assets, which range from one to 40 years. Repairs and maintenance are charged to expense as incurred. Gains or losses from the sale or retirement of property and equipment are included in operating income.
RESEARCH AND DEVELOPMENT COSTS: Research and development costs, other than certain capitalized software development costs, are expensed as incurred.
CAPITALIZED SOFTWARE: Internally developed computer software costs and costs of product enhancements are capitalized subsequent to the determination of technological feasibility; such capitalization continues until the product becomes available for commercial release. Judgment is required in determining when technological feasibility of a product is established. The Company has determined that technological feasibility is reached after all high-risk development issues have been resolved through coding and testing. Generally, the time between the establishment of technological feasibility and commercial release of software is minimal, resulting in insignificant capitalization of internally developed software costs. Amortization of capitalized software costs, both for internally developed as well as for purchased software products, is computed on a product-by-product basis over the estimated economic life of the product, which is generally three years. Amortization is the greater of the amount computed using: (i) the ratio of the current year's gross revenue to the total current and anticipated future gross revenue for that product or (ii) the straight-line method over the estimated life of the product. Amortization expense related to capitalized and acquired software costs, including the related trademarks, was $33.7 million, $32.8 million and $36.0 million for the years ended December 31, 2011, 2010 and 2009, respectively.
The Company periodically reviews the carrying value of capitalized software. Impairments are recognized in the results of operations when the expected future undiscounted operating cash flow derived from the capitalized costs of internally developed software is less than the carrying value. No impairment charges have been required to date.
GOODWILL AND OTHER INTANGIBLE ASSETS: Goodwill represents the excess of the consideration transferred over the fair value of net identifiable assets acquired. Intangible assets consist of trademarks, customer lists, contract backlog, and acquired software and technology.
The Company evaluates, at least annually, the realizability of the carrying value of goodwill and indefinite lived intangible assets by comparing the carrying value of the asset (or, in the case of goodwill, the Company's reporting units) to its estimated fair value. The Company performs its annual goodwill and indefinite lived intangible assets impairment test on January 1 of each year unless there is an indicator that would require a test during the year. No impairment charges have been required to date.
The Company periodically reviews the carrying value of other intangible assets and will recognize impairments when events or circumstances indicate that such assets may be impaired. No impairment charges have been required to date.
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:
| Year Ended December 31, | ||||||||||||
|
(as a % of revenue, except customer data) |
2011 | 2010 | 2009 | |||||||||
|
Revenue from channel partners |
26 | % | 27 | % | 26 | % | ||||||
|
1st largest channel partner |
4 | % | 4 | % | 5 | % | ||||||
|
2nd largest channel partner |
3 | % | 3 | % | 3 | % | ||||||
|
Direct sale customers exceeding 5% of revenue |
0 | 0 | 0 | |||||||||
In addition to the concentration of credit risk with respect to trade receivables, the Company's cash and cash equivalents are also exposed to concentration of credit risk. The Company maintains certain cash and cash equivalent accounts that are currently insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000 per depositor or the Securities Investor Protection Corporation ("SIPC") up to $500,000 per customer. As of December 31, 2011, the Company had cash and cash equivalent balances of $297.7 million held in the U.S. which were uninsured by the FDIC or SIPC, and $153.4 million of uninsured cash and cash equivalent balances held outside of the U.S. The Company held cash and cash equivalent balances with one U.S. financial institution as of December 31, 2011 in the amount of $227.5 million.
ALLOWANCE FOR DOUBTFUL ACCOUNTS: The Company makes judgments as to its ability to collect outstanding receivables and provides allowances for a portion of receivables when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding invoices from both value and delinquency perspectives. For those invoices not specifically reviewed, provisions are provided at differing rates based upon the age of the receivable and the geographic area of origin. In determining these percentages, the Company considers its historical collection experience and current economic trends in the customer's industry and geographic region. The Company recorded provisions for doubtful accounts of $400,000, $1.8 million and $1.6 million for the years ended December 31, 2011, 2010 and 2009, respectively.
INCOME TAXES: The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period of the enactment date.
The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In the event the Company determines that it will be able to realize deferred income tax assets in the future in excess of their net recorded amount, an adjustment to the valuation allowance would be recorded that would reduce the provision for income taxes.
Tax benefits related to uncertain tax positions taken or expected to be taken on a tax return are recorded when such benefits meet a more likely than not threshold. Otherwise, these tax benefits are recorded when a tax position has been effectively settled, which means that the statute of limitation has expired or the appropriate taxing authority has completed their examination even though the statute of limitations remains open. The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of income. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheets.
FOREIGN CURRENCIES: Certain of the Company's sales and intercompany transactions are denominated in foreign currencies. These transactions are translated to the functional currency at the exchange rate on the transaction date. Accounts receivable and intercompany balances in foreign currencies at year end are translated at the effective exchange rate on the balance sheet date. Gains and losses resulting from foreign exchange transactions are included in other income. The Company recorded net foreign exchange losses of $430,000, $400,000 and $1.4 million for the years ended December 31, 2011, 2010 and 2009, 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 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:
| Year Ended December 31, | ||||||||||||
|
(in thousands, except per share data) |
2011 | 2010 | 2009 | |||||||||
|
Net income |
$ | 180,675 | $ | 153,132 | $ | 116,391 | ||||||
|
|
|
|
|
|
|
|||||||
|
Weighted average shares outstanding—basic |
92,120 | 90,684 | 88,486 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Dilutive effect of stock plans |
2,261 | 2,525 | 3,299 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Weighted average shares outstanding—diluted |
94,381 | 93,209 | 91,785 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Basic earnings per share |
$ | 1.96 | $ | 1.69 | $ | 1.32 | ||||||
|
Diluted earnings per share |
$ | 1.91 | $ | 1.64 | $ | 1.27 | ||||||
|
Anti-dilutive options |
1,421 | 1,867 | 2,612 | |||||||||
STOCK-BASED COMPENSATION: The Company accounts for stock-based compensation in accordance with share-based payment accounting guidance. The guidance requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost is recognized over the period during which an employee is required to provide service in exchange for the award, typically the vesting period.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The Company accounts for certain assets and liabilities at fair value in accordance with the accounting guidance applicable to fair value measurements and disclosures. The carrying values of cash, cash equivalents, accounts receivable, accounts payable, accrued expenses, other accrued liabilities and short-term obligations are deemed to be reasonable estimates of their fair values because of their short-term nature. The fair values of investments are based on quoted market prices for those or similar investments. The carrying value of long-term debt is considered a reasonable estimate of fair value due to the variable interest rate underlying the Company's credit facility.
DERIVATIVE FINANCIAL INSTRUMENTS: As of December 31, 2009 and 2008 and through its maturity on June 30, 2010, the Company held a derivative financial instrument to manage interest rate risk. The Company accounted for this instrument as a cash flow hedge in accordance with derivative instruments and hedging activities accounting guidance, which requires that every derivative instrument be recorded on the balance sheet as either an asset or liability measured at its fair value as of the reporting date. This guidance also requires that changes in the Company's derivative fair value be recognized in earnings unless specific hedge accounting and documentation criteria are met. The Company recorded the effective portion of its derivative financial instrument in accumulated other comprehensive income on the consolidated balance sheets. Any ineffective portion or excluded portion of the designated cash flow hedge was recognized in earnings. The Company's cash flow hedge did not have an ineffective or excluded portion. The Company utilized the hypothetical derivative method to ensure the hedge was effective in offsetting variability in interest expense associated with its credit facility. The Company used the dollar offset method for calculating ineffectiveness by comparing the cumulative fair value of the swap to the cumulative fair value of the hypothetical derivative.
|
|||
| December 31, | ||||||||||||||||
| 2011 | 2010 | |||||||||||||||
|
(in thousands, except percentages) |
Amount | % of Total | Amount | % of Total | ||||||||||||
|
Cash accounts |
$ | 289,298 | 61.3 | $ | 170,765 | 36.1 | ||||||||||
|
Money market mutual funds |
181,198 | 38.4 | 273,926 | 58.0 | ||||||||||||
|
Time deposits |
1,332 | 0.3 | 27,788 | 5.9 | ||||||||||||
|
|
|
|
|
|||||||||||||
|
Total |
$ | 471,828 | $ | 472,479 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Year Ended December 31, | ||||||||||||
|
(as a % of revenue, except customer data) |
2011 | 2010 | 2009 | |||||||||
|
Revenue from channel partners |
26 | % | 27 | % | 26 | % | ||||||
|
1st largest channel partner |
4 | % | 4 | % | 5 | % | ||||||
|
2nd largest channel partner |
3 | % | 3 | % | 3 | % | ||||||
|
Direct sale customers exceeding 5% of revenue |
0 | 0 | 0 | |||||||||
| Year Ended December 31, | ||||||||||||
|
(in thousands, except per share data) |
2011 | 2010 | 2009 | |||||||||
|
Net income |
$ | 180,675 | $ | 153,132 | $ | 116,391 | ||||||
|
|
|
|
|
|
|
|||||||
|
Weighted average shares outstanding—basic |
92,120 | 90,684 | 88,486 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Dilutive effect of stock plans |
2,261 | 2,525 | 3,299 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Weighted average shares outstanding—diluted |
94,381 | 93,209 | 91,785 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Basic earnings per share |
$ | 1.96 | $ | 1.69 | $ | 1.32 | ||||||
|
Diluted earnings per share |
$ | 1.91 | $ | 1.64 | $ | 1.27 | ||||||
|
Anti-dilutive options |
1,421 | 1,867 | 2,612 | |||||||||
|
|||
|
(in thousands) |
||||
|
Cash |
$ | 301,306 | ||
|
Contingent consideration |
9,501 | |||
|
ANSYS replacement stock options |
3,170 | |||
|
|
|
|||
|
Total consideration transferred at fair value |
$ | 313,977 | ||
|
|
|
|||
|
(in thousands) |
||||
|
Cash and short-term investments |
$ | 31,948 | ||
|
Accounts receivable and other tangible assets |
6,011 | |||
|
Developed software (7-year life) |
82,500 | |||
|
Customer relationships (15-year life) |
36,100 | |||
|
Contract backlog (3-year life) |
13,500 | |||
|
Platform trade names (indefinite-lives) |
21,900 | |||
|
Apache trade name (6-year life) |
2,100 | |||
|
Accounts payable and other liabilities |
(16,646 | ) | ||
|
Deferred revenue |
(10,100 | ) | ||
|
Net deferred tax liabilities |
(44,283 | ) | ||
|
|
|
|||
|
Total identifiable net assets |
$ | 123,030 | ||
|
|
|
|||
|
Goodwill |
$ | 190,947 | ||
|
|
|
|||
| Year Ended December 31, | ||||||||
|
(in thousands, except per share data) |
2011 | 2010 | ||||||
| (Unaudited) | (Unaudited) | |||||||
|
Total revenue |
$ | 730,632 | $ | 624,283 | ||||
|
Net income |
$ | 181,718 | $ | 144,605 | ||||
|
Earnings per share: |
||||||||
|
Basic |
$ | 1.97 | $ | 1.59 | ||||
|
|
|
|
|
|||||
|
Diluted |
$ | 1.93 | $ | 1.55 | ||||
|
|
|
|
| |||||
|
|||
| December 31, | ||||||||||||
|
(dollars in thousands) |
Estimated Useful Lives | 2011 | 2010 | |||||||||
|
Equipment |
1-10 years | $ | 55,221 | $ | 41,998 | |||||||
|
Computer software |
1-5 years | 26,709 | 25,896 | |||||||||
|
Buildings |
10-40 years | 10,469 | 9,921 | |||||||||
|
Leasehold improvements |
1-10 years | 7,394 | 6,566 | |||||||||
|
Furniture |
1-13 years | 5,007 | 4,577 | |||||||||
|
Land |
1,749 | 1,368 | ||||||||||
|
|
|
|
|
|||||||||
| 106,549 | 90,326 | |||||||||||
|
Less: Accumulated depreciation and amortization |
(60,911 | ) | (53,405 | ) | ||||||||
|
|
|
|
|
|||||||||
| $ | 45,638 | $ | 36,921 | |||||||||
|
|
|
|
|
|||||||||
|
|||
| December 31, 2011 | December 31, 2010 | |||||||||||||||
|
(in thousands) |
Gross Carrying Amount |
Accumulated Amortization |
Gross Carrying Amount |
Accumulated Amortization |
||||||||||||
|
Amortized intangible assets: |
||||||||||||||||
|
Developed software and core technologies (7–10 years) |
$ | 287,392 | $ | (144,836 | ) | $ | 205,137 | $ | (120,633 | ) | ||||||
|
Customer lists and contract backlog (3–15 years) |
223,037 | (76,630 | ) | 172,845 | (58,967 | ) | ||||||||||
|
Trademarks (6–10 years) |
102,580 | (30,380 | ) | 100,994 | (21,499 | ) | ||||||||||
|
Non-compete agreements |
0 | 0 | 575 | (489 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total |
$ | 613,009 | $ | (251,846 | ) | $ | 479,551 | $ | (201,588 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Unamortized intangible assets: |
||||||||||||||||
|
Trademarks |
$ | 22,257 | $ | 357 | ||||||||||||
|
|
|
|
|
|||||||||||||
|
(in thousands) |
||||
|
Fiscal 2012 |
$ | 66,884 | ||
|
Fiscal 2013 |
58,481 | |||
|
Fiscal 2014 |
51,889 | |||
|
Fiscal 2015 |
47,866 | |||
|
Fiscal 2016 |
40,280 | |||
|
Thereafter |
95,763 | |||
|
|
|
|||
|
Total intangible assets subject to amortization |
361,163 | |||
|
Indefinite-lived trademarks |
22,257 | |||
|
|
|
|||
|
Other intangible assets, net |
$ | 383,420 | ||
|
|
|
|||
| Year Ended December 31, | ||||||||
|
(in thousands) |
2011 | 2010 | ||||||
|
Beginning balance |
$ | 1,035,083 | $ | 1,038,824 | ||||
|
Acquisition of Apache |
190,947 | 0 | ||||||
|
Currency translation and other |
(655 | ) | (3,741 | ) | ||||
|
|
|
|
|
|||||
|
Ending balance |
$ | 1,225,375 | $ | 1,035,083 | ||||
|
|
|
|
|
|||||
|
|||
| December 31, | ||||||||
|
(in thousands) |
2011 | 2010 | ||||||
|
Term loan payable in quarterly installments with a final maturity of July 31, 2013 |
$ | 127,557 | $ | 159,446 | ||||
|
Capitalized lease obligations |
15 | 79 | ||||||
|
|
|
|
|
|||||
|
Total |
127,572 | 159,525 | ||||||
|
Less current portion |
(74,423 | ) | (31,962 | ) | ||||
|
|
|
|
|
|||||
|
Long-term debt and capital lease obligations, net of current portion |
$ | 53,149 | $ | 127,563 | ||||
|
|
|
|
|
|||||
| Year Ended December 31, | ||||||||||||||||||||||||
| 2011 | 2010 | 2009 | ||||||||||||||||||||||
|
(in thousands) |
Interest Expense |
Amortization | Interest Expense |
Amortization | Interest Expense |
Amortization | ||||||||||||||||||
|
July 31, 2008 term loan (interest expense includes $0 loss, $864 loss and $3,959 loss, respectively, on interest rate swap) |
$ | 1,605 | $ | 953 | $ | 2,960 | $ | 1,107 | $ | 8,824 | $ | 1,229 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
(in thousands) |
||||
|
March 31, 2012 |
$ | 10,630 | ||
|
June 30, 2012 |
10,630 | |||
|
September 30, 2012 |
26,574 | |||
|
December 31, 2012 |
26,574 | |||
|
March 31, 2013 |
26,574 | |||
|
July 31, 2013 (maturity) |
26,575 | |||
|
|
|
|||
|
Term loan balance payable as of December 31, 2011 |
$ | 127,557 | ||
|
|
|
|||
|
|||
| Fair Value Measurements at Reporting Date Using: | ||||||||||||||||
|
(in thousands) |
December 31, 2011 |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||
|
Assets |
||||||||||||||||
|
Cash equivalents |
$ | 182,530 | $ | 181,198 | $ | 1,332 | $ | 0 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Short-term investments |
$ | 576 | $ | 0 | $ | 576 | $ | 0 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Liabilities |
||||||||||||||||
|
Deferred compensation |
$ | (2,073 | ) | $ | 0 | $ | 0 | $ | (2,073 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Contingent consideration |
$ | (9,571 | ) | $ | 0 | $ | 0 | $ | (9,571 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Fair Value Measurements at Reporting Date Using: | ||||||||||||||||
|
(in thousands) |
December 31, 2010 |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||
|
Assets |
||||||||||||||||
|
Cash equivalents |
$ | 301,714 | $ | 273,926 | $ | 27,788 | $ | 0 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Short-term investments |
$ | 455 | $ | 0 | $ | 455 | $ | 0 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Fair Value Measurement Using Significant Unobservable Inputs |
||||||||
|
(in thousands) |
Contingent Consideration |
Deferred Compensation |
||||||
|
Beginning balance—January 1, 2011 |
$ | 0 | $ | 0 | ||||
|
Issuances |
9,501 | 2,057 | ||||||
|
Interest expense included in earnings |
70 | 16 | ||||||
|
|
|
|
|
|||||
|
Ending balance—December 31, 2011 |
$ | 9,571 | $ | 2,073 | ||||
|
|
|
|
|
|||||
| Year Ended | ||||||||||||
|
(in thousands) |
Loss Recognized in Accumulated Other Comprehensive Income (Effective Portion) |
Loss Reclassified from Accumulated Other Comprehensive Income into Income Statement (Effective Portion) |
Gain /(Loss) Recognized in Income Statement (Ineffective Portion) |
|||||||||
|
Cash Flow Hedge |
||||||||||||
|
Interest rate swap agreement |
||||||||||||
|
December 31, 2011 |
$ | 0 | $ | 0 | $ | 0 | ||||||
|
|
|
|
|
|
|
|||||||
|
December 31, 2010 |
$ | (11 | ) | $ | (864 | ) | $ | 0 | ||||
|
|
|
|
|
|
|
|||||||
|
December 31, 2009 |
$ | (783 | ) | $ | (3,959 | ) | $ | 0 | ||||
|
|
|
|
|
|
|
|||||||
|
|||
| Year Ended December 31, | ||||||||||||
|
(in thousands) |
2011 | 2010 | 2009 | |||||||||
|
Domestic |
$ | 205,966 | $ | 162,921 | $ | 128,173 | ||||||
|
Foreign |
58,892 | 53,473 | 45,356 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total |
$ | 264,858 | $ | 216,394 | $ | 173,529 | ||||||
|
|
|
|
|
|
|
|||||||
| Year Ended December 31, | ||||||||||||
|
(in thousands) |
2011 | 2010 | 2009 | |||||||||
|
Current: |
||||||||||||
|
Federal |
$ | 57,423 | $ | 62,350 | $ | 57,077 | ||||||
|
State |
5,770 | 5,589 | 6,379 | |||||||||
|
Foreign |
24,011 | 21,964 | 21,720 | |||||||||
|
Deferred: |
||||||||||||
|
Federal |
(11,768 | ) | (15,173 | ) | (18,287 | ) | ||||||
|
State |
(1,314 | ) | (2,102 | ) | (2,277 | ) | ||||||
|
Foreign |
10,061 | (9,366 | ) | (7,474 | ) | |||||||
|
|
|
|
|
|
|
|||||||
|
Total |
$ | 84, | ||||||||||