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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549
 FORM 10-K
 (Mark one) þ
    
    Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934for the fiscal year ended
April 30, 2005 oro
    
    Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934for the transition period from  to
 Commission file number 000-27874 ANSOFT CORPORATION  Delaware
    
    72-1001909(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)225 West Station Square,
Suite 200 Pittsburgh, Pennsylvania
    
    15219-1119(Address of principal
executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (412) 261-3200 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common stock, par value $.01 per share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). Yes þ No o As of October 31, 2004, the aggregate market value of voting common stock held by non-affiliates of
the registrant, based upon the last reported sale price for the registrants common stock on the
NASDAQ National Market on such date, as reported in The Wall Street
Journal, was $124,201,249. The number of shares of the registrants common stock outstanding as of the close of business on
June 2, 2005 was 12,042,571. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the definitive Proxy Statement of Ansoft Corporation (the Company) to be
furnished in connection with the solicitation of proxies by the Companys Board of Directors for
use at the 2005 Annual Meeting of Stockholders (the Proxy Statement) are incorporated by
reference into Part III of this Annual Report on Form 10-K to the extent provided herein. The
incorporation by reference herein of portions of the Proxy Statement shall not be deemed to
specifically incorporate by reference the information referred to in Items 306(c) and 306(d) and
402(a)(8) and (9) of Regulation S-K.




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TABLE OF CONTENTS  
 Item of Form 10-K
    
    
    
    PagePart I1.
    
    Business
    
    
    32.
    
    Properties
    
    
    103.
    
    Legal Proceedings
    
    
    104.
    
    Submission of Matters to a Vote of Security Holders
    
    
    10Part II5.
    
    Market for Registrants Common Equity and Related Stockholders Matters and
Issuer Purchases of Equity Securities
    
    
    116.
    
    Selected Consolidated Financial Data
    
    
    127.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    137A.
    
    Quantitative and Qualitative Disclosure about Market Risk
    
    
    198.
    
    Financial Statements and Financial Statement Schedule
    
    
    209.
    
    Changes and Disagreements with Accountants on Accounting and
Financial Disclosures
    
    
    389A.
    
    Controls and Procedures
    
    
    389B.
    
    Other Information
    
    
    39Part III10.
    
    Directors and Executive Officers of the Registrant
    
    
    4011.
    
    Executive Compensation
    
    
    4012.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    4013.
    
    Certain Relationships and Related Transactions
    
    
    4014.
    
    Principle Accounting Fees and Service
    
    
    40Part IV15.
    
    Exhibits and Financial Statement Schedules
    
    
    41Exhibit Index
    
    
    42Signatures
    
    
    43Exhibit 31.1Exhibit 31.2Exhibit 32.1
  2




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PART I From time to time Ansoft Corporation (Ansoft or the Company) has made and may continue to make
written or oral forward-looking statements including those in this Annual Report on Form 10-K.
These forward-looking statements represent the Companys present expectations or beliefs concerning
future events. The Company cautions that such statements are qualified by important factors that
could cause actual results to differ materially from those in the forward-looking statements
including those factors identified in Risk Factors under Item 1. Business. The following
discussion and analysis also should be read in conjunction with Item 6. Selected Consolidated
Financial Data and our Consolidated Financial Statements and Notes thereto included elsewhere in
this report. Results actually achieved may differ materially from expected results included in
these statements. 
 ITEM 1. BUSINESS Overview Ansoft is a leading developer of high-performance electronic design automation (EDA) software.
Ansoft products are used by electrical engineers worldwide to design of state-of-the-art technology
products, such as cellular phones, internet networking, satellite communications systems,
integrated circuits and circuit boards, and electronic sensors and motors. Engineers use our
software to maximize product performance, eliminate physical prototypes, and to reduce
time-to-market. Industry Background Engineers use EDA software to automate manual, time-consuming and error-prone design processes,
resulting in dramatic increases in productivity and efficiency. EDA software can be used in each of
the three phases of the electronic design process: Logic Design and Synthesis, which provides an
outline of the systems overall architecture; Functional Design and Analysis, which encompasses the
specification of desired functionality, functional design, simulation and analysis; and Physical
Design and Verification, which involves the creation of physical layout (i.e., placement and
routing) and verification that the design meets required specifications. Modern electronic and communication systems operate at GHz frequencies and transmit/receive data at
Gb/s speeds. As the operating performance gets ever higher, component level details for the passive
interconnects as well as transistor level detail for the active circuits must be modeled
accurately. Furthermore, the integration of ever greater functionality on a single chip,
system-on-chip, or system-in-package combined with continuing miniaturization leads to dramatic
increases in the complexity of electronic components and circuits. This dual requirement of
greater accuracy/detail and greater complexity/problem-size drives the demand for a new class of
EDA tools to simulate the real life behavior of high-performance electronic and communication
devices. While traditional EDA tools have become more sophisticated, the process for designing and
manufacturing wireless and electronic components and systems is often iterative, time-consuming and
inaccurate. Designs are generated, devices and systems are developed, prototypes are built,
performance is measured and assessed and designs are then refined to meet the original performance
specifications. This entire process is typically repeated a number of times, lengthening the design
process, increasing costs and resulting in lost market opportunities. The Ansoft Solution We offer electromagnetic and circuit simulation technologies that meet the dual demands of
accuracy/detail and complexity/size. Ansoft simulation technologies are based on fundamental
research breakthroughs in modeling electromagnetic and circuit details at very high operating
device performance and are especially tailored to meet the exacting demands of Gigahertz and
Gigabit designs. Customers use our products to define the architecture of their device, create
specifications for functional blocks, design the circuits and components, evaluate component level
interactions, and optimize circuit or system performance under actual operating conditions.
Ansofts software products may be used as an independent design platform or integrated with
complementary EDA tools within a customers existing design environment. 3




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Ansoft Strategy Ansofts objective is to become the leading worldwide supplier of high performance EDA software.
Using our proprietary electromagnetic and circuit simulation technologies as a primary competitive
advantage, we pursue our objective through the following strategies: leveraging our technology
leadership to solve emerging design challenges at the cutting-edge of device performance;
capitalizing on the growing need for simulation technologies to provide GHz/Gigabit accurate
analysis and validation of high-performance electronics; and expanding our broad range of product
applications to address emerging customer design requirements. Products Ansoft provides several products that address our customers component and system level design
needs. Customers encounter different combinations of challenges in their designs and often purchase
multiple products. The products are listed below and organized by their market application. Ansoft High Performance Electronics Software HFSSis Ansofts flagship 3D electromagnetic field simulation software for high frequency,
radio frequency (RF) and wireless design. Ansoft HFSS brings the power of the finite element
method (FEM) to the engineers desktop by leveraging advanced techniques such as automatic
adaptive mesh generation and refinement, tangential vector finite elements, and Adaptive Lanczos
Pade Sweep (ALPS). HFSS automatically computes multiple adaptive solutions until a user-defined
convergence criterion is met. Nexxim®is Ansofts advanced circuit simulator that addresses the increasingly complex,
nonlinear and full-wave circuit behavior of RFCMOS, GaAs/SiGe RF ICs, Gigabit communication
backplane design. Nexxim® guarantees consistency of results across time and frequency domains by
using the same circuit netlist and library models for transient and harmonic balance analyses. SIwaveprovides advanced analysis of printed circuit boards (PCBs), components, and packages,
SIwave generates both frequency- and time-domain results, allowing engineers to model not only
individual components, but also entire PCBs and package structures. Q3D Extractoris a physics-based EDA tool for the electromagnetic-field simulation of
two-dimensional (2D) and arbitrary three-dimensional (3D) structures. Q3D Extractor provides
engineers with RLGC parameters and SPICE models which are used extensively to analyze high-speed
electronic designs. Ansoft Designer®provides a design environment to dynamically link electromagnetic analysis with
circuit and system-level simulation. The key to this integration is a unique capability called
Solver-on-Demand that orchestrates the use of multiple solvers  while still giving the users
complete control. Users can perform System/Circuit/EM co-simulation in Ansoft Designer and
optimize product performance under actual operating conditions. Turbo Package Analyzer (TPA)is a software tool that automates the analysis of all complex
semiconductor packages. TPA can analyze flip-chip, chip-scale package, and multiple-die
system-in-package designs common in the networking and broadband communications markets. AnsoftLinksprovides bidirectional links for streamlining data import/export between Ansofts
products and popular electronic design automation (EDA) packages from companies such as
Cadence®, Synopsys®, Zuken®, and Mentor®. MCAD links include IGES and STEP formats common to
ProEngineer, Catia and Unigraphics. Full-Wave Spiceprovides high-bandwidth SPICE models at the touch of a button. This capability
enables engineers to design electronic and communication components while taking
Gigahertz-frequency effects into account. Optimetricsis a smart parametric analysis and optimization module that allows users to perform
parametric analysis, optimization, sensitivity analysis, and other design studies from an easy
to use interface. 4




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Ansofts Electromechanical (EM) Software Maxwell 3D®and 2D are comprehensive, easy-to-use software tools for design problems requiring
an accurate, two-dimensional or three-dimensional representation of the electric or magnetic
field behavior. Maxwell includes AC/DC magnetic, electrostatic, and transient electromagnetic
fields; thermal analysis; parametric modeling; and optimization. Additionally, Maxwell® produces
highly accurate equivalent circuits for inclusion within Ansofts SIMPLORERand other circuit
tools. SIMPLORERis a multi domain simulation package for the design of complex power electronic and
drive systems. SIMPLORERis based on a unique simulator coupling technology and supports fast
and easy model generation using three modeling languages  electrical circuits, block diagrams
and state machines. Simulation results may be displayed with oscilloscopes or digital displays
using Active Elements Technology. RMxprthelps electric-machine manufacturers capitalize on this growing opportunity by allowing
designers to make sizing decisions and to estimate performance during the initial stage of the
design process. RMxprt is an ideal tool for calculating critical design parameters, such as
torque vs. speed, power loss, flux in the air gap, and efficiency. AnsoftLinksprovides bidirectional links for streamlining data import/export between Ansofts
products and popular MCAD formats include IGES and STEP which common to ProEngineer, Catia and
Unigraphics. Optimetricsis a smart parametric analysis and optimization module that allows users to perform
parametric analysis, optimization, sensitivity analysis, and other design studies from an easy
to use interface. Research and Development Ansoft has a team of research engineers focused on the mathematical and physical underpinnings of
the Companys simulation algorithms. Dr. Zoltan Cendes, a founder of the Company, serves as the
technical leader of the group. By virtue of over 20 years of research and development by Dr. Cendes
prior to the Companys inception in 1984, and by its internal research and development staff
thereafter, Ansoft has pioneered the following technologies: automatic and adaptive convergence to
solutions, asymptotic waveform evaluation for spectral domain solutions, transfinite elements, edge
elements and tangential vector finite elements and fast multipole acceleration algorithms. We continually seek to design and develop new technologies, products and interfaces based on our
core electromagnetic expertise. This effort includes releasing improved versions of our products on
a regular basis as well as developing new products. Ansoft assigns an interdisciplinary team of
personnel from research and development, software development, documentation, quality assurance,
customer support and marketing to each product development project. Ansoft develops cooperative
relationships with major customers with respect to beta-testing its new products or enhancements
and implementing suggestions for new product features. The Company also maintains cooperative
relationships with the major hardware vendors on which the Companys products operate. As of April 30, 2005, Ansofts research and development group consisted of 109 employees. During
fiscal 2005, 2004 and 2003, total research and development expenses were $16.9 million, $15.7
million and $18.6 million, respectively. In July 2000, Ansoft announced its formation of Altra Broadband to pursue the development of
intellectual property and products for broadband wireless and optical communications. In spite of
certain technical successes, profitable deployment of intellectual property developed by Altra
Broadbands Irvine Technology Center in this telecom environment was deemed unlikely in the near
term. As such, the Company closed the Irvine Technology Center during fiscal 2003, resulting in a
restructuring charge of $532,000 that is included in Research and development expense. Sales and Marketing Ansoft markets and sells its products worldwide through its direct sales force. The Company hires
application engineers with significant industry experience who can analyze the needs of its
customers and gain technical insight into the development of future products and enhancements to
existing products. The Companys application engineers work with the direct sales force to provide
on-site support during critical stages of the users benchmark, evaluation and implementation
processes. The Company generates sales leads through customer referrals, advertising in trade 5




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publications and on the internet. In addition, the Company participates in industry trade shows and
organizes seminars to promote and expand the adoption of its products. In North America, the Company maintains sales and support offices in Arizona, California, Florida,
Illinois, Ottawa, Massachusetts, Michigan, New Jersey, Texas, Wisconsin, and Pennsylvania. In
Asia-Pacific, the Company maintains sales and support offices in Japan, Korea, Singapore, Taiwan,
and China. In Europe, the Company maintains sales and support offices in England, Germany, France,
Italy and Denmark. As of April 30, 2005, the Company had a direct sales force of 42
representatives, supported by 110 employees in application engineering, marketing and sales
administration. Customers The Company has significant breadth in its installed base with over 1,000 customers in the
communications, semiconductor, automotive/industrial, computer, consumer electronics and
defense/aerospace industries. No single customer in the Companys installed base accounted for more
than 10% of total revenue within any of the past three fiscal years, and the loss of any one
customer or small group of customers would not have a material adverse effect on the Company. Customer Service and Support Ansoft offers customers annual maintenance contracts that may generally be purchased for 15% of the
list price of the respective software product. Customer support services include on-line and
telephone support for design engineers and on-site and in-house training on all products. Customers
with maintenance agreements receive product enhancement releases, typically identified by a
subsequent whole number version of the same product name (e.g., HFSS V9). Product upgrades that
add significant new functionality are typically separately identified as an add-on module and have
a stand-alone list price (e.g., Optimetrics) and are not covered by the annual maintenance
agreement. We offer a variety of training programs for customers ranging from introductory level courses to
advanced training for an additional fee. Competition The electronic design automation software market in which Ansoft competes is intensely competitive
and subject to rapid change. Within our high performance electronics software products, Ansoft
competes directly with certain software offerings from Agilent Corporation, in-house analysis tools
or test and measurement methodologies and certain smaller privately-held companies. Our
electromechanical software products face competition from certain product offerings from Synopsys,
Mentor Graphics, Ansys, and certain smaller privately-held companies. In addition, the EDA industry
has become increasingly concentrated in recent years as a result of acquisitions, and further
concentration within the EDA industry could result in increased competition for Ansoft. Increased
competition could result in price reductions, reduced margins or loss of market share, any of which
could seriously harm Ansofts business, operating results or financial condition. Ansoft may be
unable to compete successfully against current and future competitors, and competitive pressures
faced by Ansoft could seriously harm Ansofts business, operating results and financial condition. We believe that the principal competitive factors in our market include:  -
    High performance (problem complexity) and accuracy;-
    Short run time;-
    Ease of use;-
    Depth and breadth of product features;-
    High quality user support;-
    Interoperability; and-
    Price. Proprietary Rights Ansoft is heavily dependent on its proprietary software technology. The Company relies on a
combination of non-competition and confidentiality agreements with its employees, license
agreements, copyrights, trademarks and trade secret laws to establish and protect proprietary
rights to its technology. Ansoft does not hold any patents. All Ansoft 6




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software is shipped with a security lock which limits software access to authorized users. In
addition, the Company does not license or release its source code. Effective copyright and trade
secret protection of the Companys proprietary technology may be unavailable or limited in certain
foreign countries. Seasonal Effects Traditionally, sales in the first quarter will decrease from the fourth quarter of the prior fiscal
year. Traditionally, revenues will sequentially increase over the next three quarters of the
fiscal year. The fourth quarter is typically the highest revenue quarter for the fiscal year. Employees As of April 30, 2005, Ansoft had a total of 287 employees, including 109 in research and
development, 152 in sales, marketing, and customer support services and 26 in administration. None
of the Companys employees is represented by a collective bargaining agreement, nor has the Company
experienced any work stoppage. The Company considers its relations with its employees to be good.
Many of the companys employees are highly skilled, and there is no assurance that the Company will
be able to attract and retain sufficient technical personnel in the future. Other Information Ansoft maintains investor relations pages on its internet website at http://www.ansoft.com. On
these pages, Ansoft makes available its annual, quarterly and other current reports filed or
furnished with the SEC as soon as practicable. These reports may be reviewed or downloaded free of
charge. Alternatively, if you would like a paper copy of any such SEC report (without exhibits) or
document, write to John Arnold, Ansoft Corporation, 225 West Station Square Drive, Suite 200,
Pittsburgh, PA 15219, and a copy of such requested document will be provided to you, free of
charge. Risk Factors Our Future Operating Results Are Uncertain.
Ansoft has incurred net losses in two of the past five fiscal years. There can be no assurance that
Ansofts revenue and net income will grow or be sustained in future periods or that Ansoft will be
profitable in any future period. Future operating results will depend on many factors, including
the degree and the rate of growth of the markets in which Ansoft competes and the accompanying
demand for Ansofts products, the level of product and price competition, the ability of Ansoft to
develop and market new products and to control costs, the ability of Ansoft to expand its direct
sales force and the ability of Ansoft to attract and retain key personnel. Our Quarterly Operating Results Are Difficult To Predict.
We are unable to accurately forecast our future revenues primarily because of the emerging nature
of the market in which we compete. Our revenues and operating results generally depend on the size,
timing and structure of licenses. These factors have historically been, and are likely to continue
to be, difficult to forecast. In addition, our current and future expense levels are based largely
on our operating plans and estimates of future revenues and are, to an extent, fixed. We may be
unable to adjust spending sufficiently or quickly enough to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall in revenues in relation to our planned
expenditures would seriously harm our business, financial condition and results of operations. Such
shortfalls in our revenue or operating results from levels expected by public market analysts and
investors could seriously harm the trading price of our common stock. Additionally, we may not
learn of such revenue shortfalls, earnings shortfalls or other failure to meet market expectations
until late in a fiscal quarter, which could result in an even more immediate and serious harm to
the trading price of our common stock. Our quarterly operating results have varied, and it is anticipated that our quarterly
operating results will vary, substantially from period to period depending on various factors, many
of which are outside our control. Due to the foregoing factors, we cannot predict with any
significant degree of certainty our quarterly revenue and operating results. Further, we believe
that period-to-period comparisons of our operating results are not necessarily a meaningful
indication of future performance. Our Stock Price Is Extremely Volatile.
The trading price of our common stock has fluctuated significantly in the past, and the trading
price of our common stock is likely to be highly volatile and could be subject to wide fluctuations
in price in response to such factors as: 7




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-
    Actual or anticipated fluctuations in our operating results;-
    Announcements of technological innovations and new products by us or our competitors;-
    New contractual relationships with strategic partners by us or our competitors;-
    Proposed acquisitions by us or our competitors; and-
    Financial results that fail to meet public market analyst expectations of performance. In addition, the stock market in general, the NASDAQ National Market and the market for technology
companies in particular has experienced extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of such companies. These broad market
and industry factors may seriously harm the market price of our common stock in future periods. Businesses Or Assets We Acquire May Not Perform As Projected.
We have acquired a number of technologies, assets and companies in recent years, including the
Agilent Technologies HFSS product line within the past five years. As part of our efforts to
increase revenue and expand our product and services offerings we may acquire additional companies
in the future. In addition to direct costs, acquisitions pose a number of risks, including
potential dilution of earnings per share, delays and other problems of integrating the acquired
products and employees into our business, the failure to realize expected synergies or cost
savings, the failure of acquired products to achieve projected sales, the drain on management time
for acquisition-related activities, possible adverse effects on customer buying patterns due to
uncertainties resulting from an acquisition, and assumption of unknown liabilities. The foregoing
factors could seriously harm our business, financial condition and results of operations. We May Lose Competitive Advantages If Our Proprietary Rights Are Inadequately Protected.
Ansofts success depends, in part, upon its proprietary technology. We rely on a combination of
trade secrets, copyrights, trademarks and contractual commitments to protect our proprietary rights
in our software products. We generally enter into confidentiality or license agreements with our
employees, distributors and customers, and limit access to and distribution of our software,
documentation and other proprietary information. Despite these precautions, a third party may still
copy or otherwise obtain and use our products or technology without authorization, or develop
similar technology independently. In addition, effective patent, copyright and trade secret
protection may be unavailable or limited in certain foreign countries. It is possible that we may
fail to adequately protect our proprietary rights. This would seriously harm Ansofts business,
operating results and financial condition. We May Be Unable To Attract And Retain The Key Management And Technical Personnel That We Need To
Succeed.
Ansofts future operating results depend in large part upon the continued services of its key
technical and management personnel. Ansoft does not have employment contracts with any executive
officer. Ansofts future success will also depend in large part on its ability to continue to
attract and retain highly skilled technical, marketing and management personnel. The competition
for such personnel, as well as for qualified EDA engineers, is intense. If Ansoft is unable to
attract, hire and retain qualified personnel in the future, the development of new products and the
management of Ansofts increasingly complex business would be impaired. This could seriously harm
Ansofts business, operating results and financial condition. We Depend On International Sales for a Significant Percentage Of Our Revenue.
International revenue, principally from Asian customers, accounted for approximately 57% of our
total revenue in the years ended April 30, 2005 and 2004. We expect that international license and
service revenue will continue to account for a significant portion of our total revenue for the
foreseeable future. Our international business activities are subject to a variety of potential
risks, including:  -
    The impact of recessionary environments in foreign economies;-
    Longer receivables collection periods and greater difficulty in accounts receivable collection;-
    Difficulties in staffing and managing foreign operations;-
    Political and economic instability;-
    Unexpected changes in regulatory requirements;-
    Reduced protection of intellectual property rights in some countries; and-
    Tariffs and other trade barriers. Currency exchange fluctuations in countries in which we license our products could also seriously
harm our business, financial condition and results of operations. In addition, the laws of certain
countries do not protect our products and 8




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intellectual property rights to the same extent, as do the laws of the United States. Moreover, it
is possible that we may fail to sustain or increase revenue derived from international licensing
and service or that the foregoing factors will seriously harm our future international license and
service revenue, and, consequently, seriously harm our business, financial condition and results of
operations. We Need To Successfully Manage Our Expanding Operations.
Revenues have grown from $8.7 million in fiscal 1996 to $67.7 million in fiscal year 2005, and the
number of employees has grown from 69 in April 1996 to 287 as of April 30, 2005. Ansofts ability
to manage growth effectively will require it to continue to improve its operational and financial
systems, hire and train new employees and add additional space, both domestically and
internationally. Ansoft may not be successful in addressing such risks, and the failure to do so
would seriously harm Ansofts business, financial condition and results of operations. We Depend On The Growth Of The Communications, Semiconductor And Electronics Industries.
Ansoft is dependent upon the communications and semiconductor industry and, more generally, the
electronics industry. These industries are characterized by rapid technological change, short
product life cycles, fluctuations in manufacturing capacity and pricing and gross margin pressures.
Segments of these industries have from time to time experienced significant economic downturns
characterized by decreased product demand, production over-capacity, price erosion, work slowdowns
and layoffs. Any significant downturn could be especially severe on Ansoft. During such downturns,
the number of new integrated circuit design projects often decreases. Because acquisitions of new
licenses from Ansoft are largely dependent upon the commencement of new design projects, any
slowdown in these industries could seriously harm Ansofts business, financial condition and
results of operations. We Are Controlled By Our Principal Stockholders And Management Which May Limit Your Ability To
Influence Stockholder Matters.
Our executive officers, directors who are also principal stockholders own approximately 28% of the
outstanding shares of Ansoft common stock. As a result, they have the ability to effectively
control us and direct our affairs, including the election of directors and approval of significant
corporate transactions. This concentration of ownership also may have the effect of delaying,
deferring or preventing a change in control of our company and may make some transactions more
difficult or impossible without the support of these stockholders. The interests of these
stockholders may conflict with those of other stockholders. Anti-Takeover Provisions in Ansofts Certificate Of Incorporation, Bylaws, And Under Delaware Law
Could Prevent An Acquisition.
We have adopted a number of provisions that could have anti-takeover effects. The Board of
Directors has the authority to issue up to 1,000,000 shares of Preferred Stock without any further
vote or action by Ansofts stockholders. This and other provisions of Ansofts Certificate of
Incorporation, Bylaws and Delaware Law may have the effect of deterring hostile takeovers or
delaying or preventing changes in control or management, including transactions in which the
stockholders of Ansoft might otherwise receive a premium for their shares over then current market
prices. 9




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ITEM 2. PROPERTIES Ansoft occupies approximately 28,000 square feet of space at its headquarters in Pittsburgh,
Pennsylvania under a lease expiring in 2006. The Company also leases sales and support offices in
North America, Europe and Asia. Our current aggregate annual rental expenses for these facilities
is approximately $2.5 million. Ansoft believes that its existing facilities are adequate for its
current needs and that suitable additional space will be available when needed. 
 ITEM 3. LEGAL PROCEEDINGS From time to time, we become involved in various lawsuits, claims and proceedings related to the
conduct of our business. Based on information currently available and advice of counsel, Ansoft
believes that the eventual outcome of all claims against the Company will not, individually or in
the aggregate, have a material adverse effect on Ansofts business, consolidated operating results
or financial condition. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 10




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PART II 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The following table sets forth, for the periods indicated, the range of high and low last reported
sale prices for the common stock as reported on the NASDAQ National Market. High
    
    
    LowFiscal year ended April 30, 20061st Quarter (through June 2, 2005)
    
    $
    25.58
    
    
    $
    22.00Fiscal year ended April 30, 20051st Quarter
    
    $
    15.28
    
    
    $
    12.252nd Quarter
    
    
    16.32
    
    
    
    12.473rd Quarter
    
    
    20.46
    
    
    
    16.364th Quarter
    
    
    28.45
    
    
    
    21.19Fiscal year ended April 30, 20041st Quarter
    
    $
    11.20
    
    
    $
    8.052nd Quarter
    
    
    12.43
    
    
    
    9.523rd Quarter
    
    
    14.90
    
    
    
    10.914th Quarter
    
    
    15.76
    
    
    
    12.85
 The Company has never paid any cash dividends on its common stock. We currently intend to retain
the earnings from operations for use in the business and do not anticipate paying cash dividends
with respect to our common stock in the foreseeable future. The payment of any future dividends
will be determined by the Board of Directors in light of the then current conditions, including but
not limited to the Companys earnings and financial condition. On June 2, 2005, the Company had 237 shareholders of record, of which certain of the record holders
were registered clearing agencies holding common stock on behalf of participants of such clearing
agencies. The following table sets forth, for the period indicated, Equity Compensation Plan Information for
the Company. Equity Compensation Plan Information
As of April 30, 2005 Number ofsecurities to beissued upon
    
    
    Weighted-average
    
    
    Number of securitiesexercise of
    
    
    exercise price of
    
    
    remaining availableoutstanding
    
    
    outstanding
    
    
    for future issuanceoptions, warrants
    
    
    options, warrants
    
    
    under equityPlan Category
    
    and rights
    
    
    and rights
    
    
    compensation plansEquity compensation
plans approved
by security holders
    
    
    2,450,420
    
    
    $
    8.06
    
    
    
    159,100Total
    
    
    2,450,420
    
    
    $
    8.06
    
    
    
    159,100
 In the fourth quarter of fiscal year ended April 30, 2005, we purchased 50,750 shares of Treasury
Stock at an average price of $24.20. For the fiscal year ended April 30, 2005, we purchased
783,966 shares of Treasury Stock at an average price of $16.16. The following table sets forth the
Treasury Stock purchased by month for the quarter ended April 30, 2005. 11




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##### Table of Contents



Total number of
    
    
    Maximumshares
    
    
    number ofrepurchased as
    
    
    shares that mayTotal
    
    
    
    
    
    
    part of publicly
    
    
    yet benumber of
    
    
    Average
    
    
    announced
    
    
    repurchasedshares
    
    
    price paid
    
    
    plans or
    
    
    under the plansPeriod
    
    repurchased
    
    
    per share
    
    
    programs
    
    
    or programs (1)Feb. 1, 2005  Feb. 28, 2005
    
    
    30,000
    
    
    $
    23.05
    
    
    
    2,241,987
    
    
    
    758,013March 1, 2005  March 31, 2005
    
    
    12,500
    
    
    $
    26.28
    
    
    
    2,254,487
    
    
    
    745,513April 1, 2005  April 30, 2005
    
    
    8,250
    
    
    $
    25.24
    
    
    
    2,262,737
    
    
    
    737,263Total
    
    
    50,750
    
    
    $
    24.20
    
 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The selected condensed consolidated financial data should be read in conjunction with Managements
Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated
Financial Statements and related Notes thereto appearing elsewhere herein. Fiscal Year Ended April 30,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(in thousands, except per share data)Consolidated Statement of
Operations DataRevenue:License
    
    $
    39,322
    
    
    $
    32,301
    
    
    $
    27,540
    
    
    $
    36,683
    
    
    $
    29,951Service and other
    
    
    28,348
    
    
    
    22,352
    
    
    
    19,779
    
    
    
    16,752
    
    
    
    13,607Total revenue
    
    
    67,670
    
    
    
    54,653
    
    
    
    47,319
    
    
    
    53,435
    
    
    
    43,558Cost of revenue:License
    
    
    505
    
    
    
    702
    
    
    
    683
    
    
    
    938
    
    
    
    843Service and other
    
    
    1,349
    
    
    
    1,155
    
    
    
    970
    
    
    
    871
    
    
    
    701Total cost of revenue
    
    
    1,854
    
    
    
    1,857
    
    
    
    1,653
    
    
    
    1,809
    
    
    
    1,544Gross profit
    
    
    65,816
    
    
    
    52,796
    
    
    
    45,666
    
    
    
    51,626
    
    
    
    42,014Operating expenses:Sales and marketing
    
    
    31,108
    
    
    
    26,930
    
    
    
    24,611
    
    
    
    24,966
    
    
    
    22,025Research and development
    
    
    16,901
    
    
    
    15,690
    
    
    
    18,588
    
    
    
    17,705
    
    
    
    12,711General and administrative
    
    
    4,861
    
    
    
    4,488
    
    
    
    4,284
    
    
    
    4,555
    
    
    
    3,667Amortization
    
    
    1,552
    
    
    
    3,182
    
    
    
    3,428
    
    
    
    4,129
    
    
    
    1,940Total operating expenses
    
    
    54,422
    
    
    
    50,290
    
    
    
    50,911
    
    
    
    51,355
    
    
    
    40,343Income (loss) from operations
    
    
    11,394
    
    
    
    2,506
    
    
    
    (5,245
    )
    
    
    271
    
    
    
    1,671Other income (expense), net (1)
    
    
    2,206
    
    
    
    904
    
    
    
    1,152
    
    
    
    1,347
    
    
    
    (1,608
    )Income (loss) before income taxes
    
    
    13,600
    
    
    
    3,410
    
    
    
    (4,093
    )
    
    
    1,618
    
    
    
    63Income tax expense (benefit)
    
    
    4,159
    
    
    
    854
    
    
    
    (970
    )
    
    
    404
    
    
    
    908Net income (loss)
    
    $
    9,441
    
    
    $
    2,556
    
    
    $
    (3,123
    )
    
    $
    1,214
    
    
    $
    (845
    )Basic net income (loss) per share
    
    $
    0.81
    
    
    $
    0.22
    
    
    $
    (0.26
    )
    
    $
    0.10
    
    
    $
    (0.07
    )Diluted net income (loss) per share
    
    $
    0.73
    
    
    $
    0.19
    
    
    $
    (0.26
    )
    
    $
    0.09
    
    
    $
    (0.07
    )Weighted average shares
outstanding  basic
    
    
    11,621
    
    
    
    11,672
    
    
    
    11,809
    
    
    
    11,844
    
    
    
    11,690Weighted average shares
outstanding  diluted
    
    
    12,946
    
    
    
    13,248
    
    
    
    11,809
    
    
    
    13,649
    
    
    
    11,690
   1-
    
    Includes net realized gain (loss) on the sale of marketable securities of $732, ($7), $113, $0
and ($507) and other than temporary declines on marketable securities of $27, $0, $78, $117 and
$3,076 for the fiscal years ending April 30, 2005, 2004, 2003, 2002 and 2001, respectively. 12




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##### Table of Contents



April 30,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(in thousands)Consolidated Balance Sheet DataCash and cash equivalents
    
    $
    11,910
    
    
    $
    15,218
    
    
    $
    7,173
    
    
    $
    5,269
    
    
    $
    9,412Working capital
    
    
    7,578
    
    
    
    10,707
    
    
    
    8,965
    
    
    
    7,497
    
    
    
    11,653Total assets
    
    
    73,421
    
    
    
    67,636
    
    
    
    63,154
    
    
    
    68,224
    
    
    
    57,973Long term liabilities
    
    
    1,039
    
    
    
    10,242
    
    
    
    10,000
    
    
    
    10,520
    
    
    
    9,060Total stockholders equity
    
    
    49,285
    
    
    
    41,686
    
    
    
    39,826
    
    
    
    43,647
    
    
    
    41,595
 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Managements Discussion and Analysis of Financial Condition and Results of Operations
contains certain forward-looking statements that involve substantial risks and uncertainties. When
used in this Form 10-K, the words anticipate, plan, believe, estimate, expect and similar
expressions as they relate to Ansoft or its management are intended to identify such
forward-looking statements. Ansofts actual results, performance or achievements could differ
materially from the results expressed in, or implied by, these forward-looking statements. Factors
that could cause or contribute to such differences include (1) the degree and rate of growth of the
markets in which Ansoft competes and the accompanying demand for Ansofts products, (2) the level
of product and price competition, (3) the ability of Ansoft to develop and market new products and
to control costs, (4) the ability to expand its direct sales force, and (5) the ability to attract
and retain key personnel. Anosft does not undertake to publicly update or revise its
forward-looking statements even if experience or future changes make it clear that any projected
results expressed or implied therein will not be realized. Overview Ansoft is a developer of electronic design automation (EDA) software used in designing high
performance technology products and industries. Ansofts software is used by electrical engineers
in the design of state of the art technology products, such as cellular phones, internet
networking, satellite communications systems, computer chips and circuit boards, and electronic
sensors and motors. Engineers use our software to maximize product performance, eliminate physical
prototypes, and reduce time-to-market. Our overall sales increased this past year. We had an increase in revenues of 23.8% for the fiscal
year ended April 30, 2005 as compared to the prior year. The increase in revenues is primarily
attributed to a continued improving global economy. Our business grew in each of our three major
regions and across both product lines. Net income for the fourth quarter was $4.7 million compared to $2.8 million net income during the
third fiscal quarter of 2005. Ansofts products are classified into two categories, high performance electronics and
electromechanical (EM). The following table presents product sales by market application as a
percentage of total sales: 2005
    
    
    2004
    
    
    2003High Performance Electronics
    
    
    81%
    
    
    
    79%
    
    
    
    82%Electromechanical
    
    
    19%
    
    
    
    21%
    
    
    
    18%
 Critical Accounting Policies Ansofts critical accounting policies are as follows:  
    Revenue Recognition  
    Valuation of Accounts Receivable  
    Impairment of Long-Lived Assets  
    Impairment of Marketable Securities Available for Sale  
    Deferred Tax Asset Valuation Allowance 13




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##### Table of Contents



Revenue Recognition Revenue consists of fees for licenses of software products and service and other revenue. Ansoft
recognizes revenue in accordance with SOP 97-2, Software Revenue Recognition, and related
interpretations. Accordingly, revenue is recognized when all of the following criteria are met:
persuasive evidence of an arrangement exists, delivery has occurred, the vendors fee is fixed or
determinable, and collectability is probable. License revenue  Ansoft licenses its software generally on a perpetual basis with no right to
return or exchange the licensed software. License revenue is recognized based on the residual
method. Postcontract customer support (PCS) for an initial three month period is bundled with the
perpetual license fee. Revenue related to the three-month PCS is deferred and recognized ratably
over the three-month term. Ansofts vendor-specific objective evidence of fair value, or VSOE, for
the three-month PCS is based upon the pricing for comparable transactions when the element is sold
separately. Ansofts VSOE for the three-month PCS is based upon one fourth of the customers annual
maintenance contract renewal rates. Service and other revenue consists primarily of PCS revenue. Following the initial three month PCS
period, Ansoft offers customers one-year maintenance contracts generally at 15% of the list price
of the respective software products. Ansoft recognizes all maintenance revenue ratably over the
respective maintenance period. Customers typically renew maintenance agreements annually. Revenue from customer training, support and other services is recognized as the service is
performed. Valuation of Accounts Receivable Management reviews accounts receivable to determine which are doubtful of collection. In making the
determination of the appropriate allowance for doubtful accounts, management considers Ansofts
history of write-offs, relationships with its customers, and the overall credit worthiness of its
customers. The allowance for doubtful accounts as of April 30, 2005 and 2004 was $425,000 and
$903,000 respectively. The decrease in allowance in fiscal 2005 was primarily due to write-offs of
$281,000 and a reduction of the reserve of $197,000 for collections on customer accounts previously
reserved for. We had no significant changes in our collection policies or payment terms during the
fiscal year ended April 30, 2005. Impairment of Long-Lived Assets The Company reviews assets with definite lives for impairment whenever events or changes in
circumstances indicate that the carrying value of the assets may not be recoverable. A
determination of impairment is made based on estimates of future gross undiscounted cash flows. If
such assets are considered to be impaired the amount of the impairment is based on the excess of
the carrying value over the fair value of the assets. Goodwill and purchased intangibles with indefinite lives are reviewed annually for impairment. A
determination of impairment is based on the estimated fair value of the reporting entity. Impairment of Marketable Securities Available for Sale An impairment charge is recorded if a decline in the market value of any available for sale
security below cost is deemed to be other than temporary. The impairment is charged to earnings and
a new cost basis for the security is established. Deferred Tax Asset Valuation Allowance Deferred tax assets are recognized for deductible temporary differences, net operating loss
carryforwards, and credit carryforwards. To the extent that it is more likely than not that some
portion or all of the deferred tax asset will not be realized, a valuation allowance is
established. The company considers projected future taxable income and tax planning strategies in
making this assessment. 14




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##### Table of Contents



The judgments used in applying the above policies are based on managements evaluation of the
relevant facts and circumstances as of the date of the financial statements. Actual results may
differ from those estimates. See also the Risk Factors under Item 1 Business. Results of Operations Fiscal Year Ended
    
    
    Fiscal Year EndedApril 30
    
    
    April 30Percent
    
    
    
    
    
    
    
    
    
    
    Percent(In thousands)
    
    2005
    
    
    2004
    
    
    Change
    
    
    2004
    
    
    2003
    
    
    ChangeRevenue
    
    $
    67,670
    
    
    $
    54,653
    
    
    
    23.8
    %
    
    $
    54,653
    
    
    $
    47,319
    
    
    
    15.5
    %Cost of Revenue
    
    
    1,854
    
    
    
    1,857
    
    
    
    (0.2
    %)
    
    
    1,857
    
    
    
    1,653
    
    
    
    12.3
    %Gross Profit
    
    
    65,816
    
    
    
    52,796
    
    
    
    24.7
    %
    
    
    52,796
    
    
    
    45,666
    
    
    
    15.6
    %Sales and Marketing
    
    
    31,108
    
    
    
    26,930
    
    
    
    15.5
    %
    
    
    26,930
    
    
    
    24,611
    
    
    
    9.4
    %Research and Development
    
    
    16,901
    
    
    
    15,690
    
    
    
    7.7
    %
    
    
    15,690
    
    
    
    18,588
    
    
    
    (15.6
    %)General and Administrative
    
    
    4,861
    
    
    
    4,488
    
    
    
    8.3
    %
    
    
    4,488
    
    
    
    4,284
    
    
    
    4.8
    %Amortization
    
    
    1,552
    
    
    
    3,182
    
    
    
    (51.2
    %)
    
    
    3,182
    
    
    
    3,428
    
    
    
    (7.2
    %)Total Operating Expenses
    
    
    54,422
    
    
    
    50,290
    
    
    
    8.2
    %
    
    
    50,290
    
    
    
    50,911
    
    
    
    (1.2
    %)Income (loss) from operations
    
    
    11,394
    
    
    
    2,506
    
    
    
    354.7
    %
    
    
    2,506
    
    
    
    (5,245
    )
    
    
    Net realized gain (loss) on sale
of securities
    
    
    732
    
    
    
    (7
    )
    
    
    
    
    
    
    (7
    )
    
    
    113
    
    
    
    Other income and interest
expense, net
    
    
    1,474
    
    
    
    911
    
    
    
    61.8
    %
    
    
    911
    
    
    
    1,039
    
    
    
    (12.3
    %)Income (loss) before income taxes
    
    
    13,600
    
    
    
    3,410
    
    
    
    298.8
    %
    
    
    3,410
    
    
    
    (4,093
    )
    
    
    Income tax expense (benefit)
    
    
    4,159
    
    
    
    854
    
    
    
    387.0
    %
    
    
    854
    
    
    
    (970
    )
    
    
    Net income (loss)
    
    $
    9,441
    
    
    $
    2,556
    
    
    
    269.4
    %
    
    $
    2,556
    
    
    $
    (3,123
    )
    
    
    
 Year Ended April 30, 2005 compared with Year Ended April 30, 2004 Revenue.Total revenue for the fiscal year ended April 30, 2005 increased 23.8% to $67.7 million.
License revenue for the fiscal year ended April 30, 2005 increased 21.7% to $39.3 million from
$32.3 million. The increase is attributed to an improving economy, particularly an improvement in
the technology sectors resulting in an increased demand for our software products worldwide.
Growth occurred in both our high performance electronics and EM product lines during the year.
Service and other revenue for the fiscal year ended April 30, 2005 increased 26.8% to $28.3 million
due to the continued growth of the installed base of customers under annual maintenance agreements.
Deferred revenue as of April 30, 2005 increased $6.6 million. International revenue accounted for 57% of the Companys total revenue in both of the years ended
April 30, 2005 and 2004. Revenue in Asia accounted for 39% and 40% and revenue in Europe accounted
for 18% and 17% in the years ended April 30, 2005 and 2004, respectively. Generally, the Company
believes international sales are subject to additional risks associated with international
operations, including currency exchange fluctuations, tariff regulations and requirements for
export. Exchange rates will fluctuate throughout the fiscal year. When comparing the percentage of
international revenues to total revenues for the fiscal year, using current year exchange rates for
the prior year revenues, the international revenue as a percentage of total revenue would be 56% of
total revenue for the fiscal year ended April 30, 2005. Cost of revenue. Cost of revenue consists primarily of software materials, personnel and other
expenses related to providing maintenance, post-contract customer support, licenses and upgrades to
customers. Cost of revenue for the fiscal years ended April 30, 2005 and 2004 was $1.9 million. Sales and marketing expenses. Sales and marketing expenses consist of salaries; commissions paid to
internal sales and marketing personnel, promotional costs and related operating expenses. Sales and
marketing expenses increased 15.5% to $31.1 million in the year ended April 30, 2005, as compared
to $26.9 million in the previous fiscal year. The increase is primarily due to the increased sales
volume. Sales and marketing expenses represented 46% and 49% of total revenue for the fiscal years
ended April 30, 2005 and 2004, respectively. Research and development expenses. Research and development expenses include all costs
associated with the development of new products and enhancements to existing products. Total
research and development expenses 15




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##### Table of Contents



increased 7.7% to $16.9 million in the year ended April 30, 2005, as compared to $15.7 million in
the previous fiscal year. Total research and development expenses increased primarily due to the
addition of personnel to meet software development requirements. Research and development expenses
represented 25% and 29% of total revenue in the years ended April 30, 2005 and 2004, respectively. General and administrative expenses.General and administrative expenses increased 8.3% to $4.9
million in the year ended April 30, 2005, as compared to $4.5 million in the previous fiscal year.
The increase is due primarily to costs associated with complying with Section 404 of the
Sarbanes-Oxley Act. General and administrative expenses represented 7% and 8% of total revenue in
the years ended April 30, 2005 and 2004, respectively. Amortization expense.Amortization expense in the fiscal year ended April 30, 2005 was $1.6
million, as compared to $3.2 million in the previous fiscal year. The decrease is due to various
intangible assets being fully amortized in the prior fiscal year. Net realized gain (loss) on sale of securities. Net realized gain for the fiscal year ended April
30, 2005 was $0.7 million compared to a net realized loss of ($7,000) for the previous fiscal year. Other income and interest expense, net. Other income for the fiscal year ended April 30, 2005 was
$1.5 million, an increase from the $0.9 million reported in the previous fiscal year. The increase
is primarily due to income from marketable securities and foreign currency transaction gains. Income tax expense (benefit).In the fiscal year ended April 30, 2005, the Company recorded tax
expense of $4.2 million compared to $0.9 million for the previous fiscal year. The effective tax
rate of 30.6% has been impacted favorably by approximately 8% as a result of the research and
experimentation credit that is available to the Company. Year Ended April 30, 2004 compared with Year Ended April 30, 2003 Revenue.Total revenue for the year ended April 30, 2004 increased 15% to $54.7 million from $47.3
million in the previous fiscal year. License revenue increased 17% to $32.3 million from $27.5
million. The increase is primarily attributable to increased demand from customers for our high
performance electronics and EM products. The increase in revenues can also be attributed to an
improving economy, particularly an improvement in the technology sectors resulting in an increased
demand for our software products. Service and other revenue increased by 13% to $22.4 million
from $19.8 million due to the continued growth of the installed base of customers. Deferred
revenue as of April 30, 2004 increased $1.1 million. International revenue accounted for 57% and 56% of the Companys total product revenue in the years
ended April 30, 2004 and 2003, respectively. Revenue in Asia accounted for 40% and 41% and
revenue in Europe accounted for 17% and 15% in the years ended April 30, 2004 and 2003. Cost of revenue. of revenue consists primarily of software materials, personnel and other expenses
related to providing maintenance, post-contract customer support, licenses and upgrades to
customers and amortization of acquired technology. Our cost of license revenue increased 3% to
$702,000 from $683,000 in the previous fiscal year. This increase was attributable to the increase
in the number of new license orders from the previous fiscal year. Our cost of service and other
revenue increased 19% to $1.2 million from $970,000 in the previous fiscal year primarily due to
the continued growth in our existing installed customer base. Sales and marketing expenses. Sales and marketing expenses consist of salaries, commissions paid
to sales and marketing personnel, promotional costs and related operating expenses. Sales and
marketing expenses increased 9% to $26.9 million in the year ended April 30, 2004, as compared to
$24.6 million in the previous fiscal year. The increase was due to higher commission expense as a
result of a higher level of sales. Sales and marketing expenses represented 49% and 52% of total
revenue in the years ended April 30, 2004 and 2003, respectively. The decrease in the percentage
is primarily due to an improvement in operating margins as a result of increased overall sales from
the prior year. Research and development expenses. Research and development expenses include all costs associated
with the development of new products and enhancements to existing products. Total research and
development expenses decreased by 16% to $15.7 million in the year ended April 30, 2004, as
compared to $18.6 million in the previous fiscal year. The decrease in research and development
expenses was primarily attributable to the closing of our Altra 16




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##### Table of Contents



Broadband development site in Irvine, California in the third quarter of fiscal year ended April
30, 2003 and the consolidation of some research and development facilities during the fiscal year
ending April 30, 2004. Research and development expenses represented 29% and 39% of total revenue
in the years ended April 30, 2004 and 2003, respectively. General and administrative expenses.General and administrative expenses increased by 5% to $4.5
million in the year ended April 30, 2004, as compared to $4.3 million in the previous fiscal year.
General and administrative expenses represented 8% and 9% of total revenue in the years ended April
30, 2004 and 2003. Amortization expense.Amortization expense in the fiscal year ended April 30, 2004 was $3.2
million, as compared to $3.4 million the previous fiscal year. The decrease was mainly due to
certain intangibles becoming fully amortized in the current fiscal year. Net realized gain (loss) on sale of securities. Net realized loss for the fiscal year ended April
30, 2004 was ($7,000) compared to a net realized gain of $0.1 million for the previous fiscal year. Other income and interest expense, net. Other income and interest expense for the year ended April
30, 2004 was $0.9 million, compared to $1 million reported for the previous fiscal year. The
decrease is due primarily to lower interest rates and investment returns in the current period. Income tax expense (benefit).In the year ended April 30, 2004, the Company recorded a tax expense
of $854,000. The effective tax rate of 25% has been favorably impacted by approximately 14% as a
result of the research and experimentation credit that is available to the Company. Quarterly Results of Operations The following table presents unaudited quarterly results for each quarter of fiscal 2005 and fiscal
2004. The information has been prepared on a basis consistent with the Companys annual
consolidated financial statements and, in the opinion of management, contains all adjustments,
consisting only of normal recurring adjustments, necessary for a fair presentation of the
information for such periods. The Companys quarterly results have been in the past, and may be in
the future, subject to fluctuations due to increased competition, the timing of new product
announcements, changes in pricing policies by the Company or its competitors, market acceptance of
new and enhanced versions of the Companys products and the size and timing of significant license
transactions. The Company believes that results of operations for the interim periods are not
necessarily indicative of the results to be expected for any future period. Traditionally, sales in
the first quarter will decrease from the fourth quarter of the prior fiscal year. Traditionally,
revenues will sequentially increase over the next three quarters of the fiscal year. The fourth
quarter is typically the highest revenue quarter for the fiscal year. Fiscal 2005
    
    
    
    
    
    
    
    
    
    
    Fiscal 2004April 30,
    
    
    Jan. 31,
    
    
    Oct. 31,
    
    
    July 31,
    
    
    April 30,
    
    
    Jan. 31,
    
    
    Oct. 31,
    
    
    July 31,2005
    
    
    2005
    
    
    2004
    
    
    2004
    
    
    2004
    
    
    2004
    
    
    2003
    
    
    2003(in thousands, except per share data)Total revenue
    
    $
    21,666
    
    
    $
    17,380
    
    
    $
    15,946
    
    
    $
    12,678
    
    
    $
    17,761
    
    
    $
    13,982
    
    
    $
    12,258
    
    
    $
    10,651Income (loss) from operations
    
    $
    6,320
    
    
    $
    3,642
    
    
    $
    2,103
    
    
    $
    (671
    )
    
    $
    3,585
    
    
    $
    1,008
    
    
    $
    (237
    )
    
    $
    (1,850
    )Net income (loss)
    
    $
    4,736
    
    
    $
    2,784
    
    
    $
    1,889
    
    
    $
    30
    
    
    $
    2,830
    
    
    $
    941
    
    
    $
    (22
    )
    
    $
    (1,192
    )Basic net income (loss) per share
    
    $
    0.40
    
    
    $
    0.24
    
    
    $
    0.16
    
    
    $
    0.00
    
    
    $
    0.24
    
    
    $
    0.08
    
    
    $
    (0.00
    )
    
    $
    (0.10
    )Diluted net income (loss) per share
    
    $
    0.36
    
    
    $
    0.21
    
    
    $
    0.14
    
    
    $
    0.00
    
    
    $
    0.21
    
    
    $
    0.07
    
    
    $
    (0.00
    )
    
    $
    (0.10
    )Weighted average number of shares
outstanding basic
    
    
    11,866
    
    
    
    11,490
    
    
    
    11,567
    
    
    
    11,664
    
    
    
    11,738
    
    
    
    11,640
    
    
    
    11,637
    
    
    
    11,672 diluted
    
    
    13,064
    
    
    
    13,390
    
    
    
    13,238
    
    
    
    13,314
    
    
    
    13,504
    
    
    
    13,306
    
    
    
    11,637
    
    
    
    11,672
 Liquidity and Capital Resources As of April 30, 2005, Ansoft had $11.9 million in cash and cash equivalents, $28.5 million of
marketable securities and working capital of $7.6 million. Net cash provided by operating
activities in the fiscal year ended April 30, 2005 and 2004 was $16.5 million and $13.8 million,
respectively. Net cash used in investing activities in the fiscal year ended April 30, 2005 and 2004 was $4.8
million and $3.9 million, respectively. Capital expenditures were $0.8 million and $1.3 million in
the fiscal year ended April 30, 2005 and 2004, respectively. Proceeds from the sale of marketable
securities were $17.5 million and $12.7 million in the fiscal year ended April 30, 2005 and 2004,
respectively. Purchases of marketable securities were $21.5 million and 17




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$15.3 million in the fiscal year ended April 30, 2005 and 2004, respectively. The increase in
purchases of marketable securities was due to increased cash resulting from cash flows from
operations. Net cash used in financing activities was $15.4 million and $2.1 million in the fiscal year ended
April 30, 2005 and 2004, respectively. Proceeds from the issuance of common stock were $7.2
million and $3.0 million in the fiscal year ended April 30, 2005 and 2004, respectively. Funds used
for the repurchase of common stock were $12.7 million and $5.1 million in the fiscal year ended
April 30, 2005 and 2004, respectively. The Company continues to purchase common stock under its
share repurchase plan. Ansoft had available a $30.0 million secured line of credit from a domestic financial institution
at an interest rate equal to LIBOR plus 50 basis points or the Banks prime lending rate, at the
Companys option. The line of credit was established in October 2004. As of April 30, 2005, the
outstanding balance was $0. Ansoft believes that the net cash provided by operating activities
will be sufficient to meet its anticipated cash needs for working capital and capital expenditures
for the foreseeable future. Thereafter, if cash generated from operations and existing cash and
marketable securities are insufficient to satisfy the Companys liquidity requirements, Ansoft may
seek additional funds through equity or debt financing. There can be no assurance that additional
financing will be available or that, if available, such financing will be on terms favorable to
Ansoft. A summary of Ansofts significant contractual obligations and commitments as of April 30, 2005 is
as follows (in thousands): ContractualObligations
    
    Total
    
    
    Less than 1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    More than 5 YearsOperating Lease
Obligations
    
    $
    3,785
    
    
    $
    1,756
    
    
    $
    1,603
    
    
    $
    426
    
    
    $
    
 Stock Repurchase Program. The Company has consistently repurchased its common stock in public
market transactions over the past several years. During the fiscal year ended April 30, 2005, the
Company purchased a total of 783,996 shares of common stock at an average price of $16.16. The
Company utilized $12.7 million in cash to affect these common stock purchases. The Company may
choose to continue purchases of its common stock in the future. In October 2004, the Companys Board of Directors increased the authorized share repurchase amount
by 1.0 million shares to 3.0 million. The Company currently has two stock option plans (1988 Plan and 1995 Plan). Under the terms of
both plans, options to purchase common stock are granted at no less than the stocks estimated fair
market value at the date of the grant and may be exercised during the specified future periods as
determined by the Board of Directors. Both plans provide that the options shall expire no more
than ten years after the date of the grant. During the fiscal year 2005, 111,750 shares were
granted at an average exercise price of $14.13. At April 30, 2005 options to purchase 1,532,940
shares of common stock were exercisable at an average exercise price of $7.38. Foreign Currency Fluctuations.Foreign currency exchange rates positively affected revenue by
approximately $2.2 million, $1.8 million and $1.4 million in fiscal 2005, 2004 and 2003,
respectively, primarily due to the strengthening of the Japanese yen and euro in relation to the
U.S. dollar. Effects of Inflation To date, inflation has not had a material impact on the Companys consolidated financial results. Seasonal Effects Traditionally, sales in the first quarter will decrease from the fourth quarter of the prior fiscal
year. Traditionally, revenues will sequentially increase over the next three quarters of the
fiscal year. The fourth quarter is typically the highest revenue quarter for the fiscal year. 18




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Interest Rate Risk. The Companys exposure to market risk for changes in interest rates relates
primarily to its investment portfolio. The Company mitigates its risk by diversifying its
investments among securities and limits
the amount of credit exposure to any one issuer. The Company does not hedge any interest rate
exposures. The portfolio includes only marketable securities with active secondary or resale
markets to ensure portfolio liquidity. Mutual bond funds are subject to variable interest rates. As of April 30, 2005 and 2004, the
Company had mutual bond funds with a carrying value of $11.9 million and $17.4 million,
respectively. The carrying value approximates fair value at April 30, 2005. The average rates of
return for the mutual bond funds at April 30, 2005 and 2004 were 5.63% and 4.91%, respectively. As of April 30, 2004, the Company had variable rate debt of $10 million outstanding with an average
interest rate of 1.90%. Foreign Currency Risk. The majority of our foreign currency transactions are denominated in the
yen or the euro, which are the functional currencies of Japan and Europe, respectively. As a
result of transactions being denominated and settled in such functional currencies, the risks
associated with currency fluctuations are primarily associated with foreign currency translation
adjustments. We do not currently hedge against foreign currency translation risks and do not
currently believe that foreign currency exchange risk is significant to our operations due to the
short term nature of assets and liabilities denominated in foreign currencies. The average foreign exchange rates used to translate the 2005, 2004 and 2003 statements of
operations were as follows: Fiscal year ended
    
    
    Fiscal year ended
    
    
    Fiscal year endedForeign Currency
    
    April 30, 2005
    
    
    April 30, 2004
    
    
    April 30, 2003Yen
    
    
    107.75
    
    
    
    113.50
    
    
    
    122Euro
    
    
    1.24
    
    
    
    1.15
    
    
    
    .99
 19




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ITEM 8. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE INDEX TO FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting Firm
    
    
    21Consolidated Balance Sheets as of April 30, 2005 and 2004
    
    
    22Consolidated Statements of Operations for the fiscal years
ended April 30, 2005, 2004 and 2003
    
    
    23Consolidated Statements of Stockholders Equity and
Comprehensive Income for the fiscal years ended April 30, 2005,
2004 and 2003
    
    
    24Consolidated Statements of Cash Flows for the fiscal years
ended April 30, 2005, 2004 and 2003
    
    
    25Notes to Consolidated Financial Statements
    
    
    26Financial Statement Schedule:Schedule II  Valuation and Qualifying Accounts and Reserves
    
    
    41
 20




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Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders
Ansoft Corporation: We have audited the accompanying consolidated balance sheets of Ansoft Corporation and subsidiaries
as of April 30, 2005 and 2004, and the related consolidated statements of operations, stockholders
equity and comprehensive income and cash flows for each of the years in the three-year period ended
April 30, 2005. In connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the responsibility of the
Companys management. Our responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Ansoft Corporation and subsidiaries as of April 30,
2005 and 2004, and the results of their operations and their cash flows for each of the years in
the three-year period ended April 30, 2005, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein. We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of Ansoft Corporations internal control over financial
reporting as of April 30, 2005, based on the criteria established in Internal Control  Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and
our report dated May 26, 2005, expressed an unqualified opinion on managements assessment of, and
the effective operation of, internal control over financial reporting. /s/KPMG LLP Pittsburgh, Pennsylvania
May 26, 2005 21




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ANSOFT CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except per share amounts)
 April 30,
    
    
    April 30,2005
    
    
    2004AssetsCurrent assetsCash and cash equivalents
    
    $
    11,910
    
    
    $
    15,218Accounts receivable, net of allowance for doubtful accounts
of $425 and $903, respectively
    
    
    17,388
    
    
    
    10,179Deferred income taxes
    
    
    229
    
    
    
    343Prepaid expenses and other assets
    
    
    1,148
    
    
    
    675Total current assets
    
    
    30,675
    
    
    
    26,415Equipment and furniture, net
    
    
    2,811
    
    
    
    3,598Marketable securities
    
    
    28,496
    
    
    
    25,502Other assets
    
    
    146
    
    
    
    383Deferred income taxes
    
    
    6,177
    
    
    
    5,158Goodwill
    
    
    1,239
    
    
    
    1,239Other intangible assets, net
    
    
    3,877
    
    
    
    5,341Total assets
    
    $
    73,421
    
    
    $
    67,636Liabilities and stockholders equityCurrent liabilitiesAccounts payable
    
    $
    231
    
    
    $
    407Accrued payroll
    
    
    2,290
    
    
    
    567Accrued income taxes
    
    
    415
    
    
    
    475Other accrued expenses
    
    
    2,661
    
    
    
    2,566Current portion of deferred revenue
    
    
    17,500
    
    
    
    11,693Total current liabilities
    
    
    23,097
    
    
    
    15,708Long-term liabilitiesLong-term portion of deferred revenue
    
    
    1,039
    
    
    
    242Line of credit
    
    
    
    
    
    
    10,000Total long-term liabilities
    
    
    1,039
    
    
    
    10,242Total liabilities
    
    
    24,136
    
    
    
    25,950Stockholders equityPreferred stock, par value $0.01 per share; 1,000 shares
authorized, no shares outstanding
    
    
    
    
    
    
    Common stock, par value $0.01 per share; 25,000 shares
authorized; issued 13,901 and 12,778 shares,
respectively and outstanding 12,083 and
11,744, respectively
    
    
    140
    
    
    
    129Additional paid-in capital
    
    
    70,410
    
    
    
    58,562Treasury stock, 1,818 and 1,034 shares, respectively
    
    
    (21,762
    )
    
    
    (9,090
    )Accumulated other comprehensive income (loss)
    
    
    (338
    )
    
    
    691Retained earnings (deficit)
    
    
    835
    
    
    
    (8,606
    )Total stockholders equity
    
    
    49,285
    
    
    
    41,686Total liabilities and stockholders equity
    
    $
    73,421
    
    
    $
    67,636
 See accompanying notes to consolidated financial statements. 22




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ANSOFT CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share amounts)
 Fiscal Year Ended April 30,
    
    2005
    
    
    2004
    
    
    2003Revenue:License
    
    $
    39,322
    
    
    $
    32,301
    
    
    $
    27,540Service and other
    
    
    28,348
    
    
    
    22,352
    
    
    
    19,779Total revenue
    
    
    67,670
    
    
    
    54,653
    
    
    
    47,319Cost of revenue:License revenue
    
    
    505
    
    
    
    702
    
    
    
    683Service and other
    
    
    1,349
    
    
    
    1,155
    
    
    
    970Total cost of revenue
    
    
    1,854
    
    
    
    1,857
    
    
    
    1,653Gross profit
    
    
    65,816
    
    
    
    52,796
    
    
    
    45,666Operating Expenses:Sales and marketing
    
    
    31,108
    
    
    
    26,930
    
    
    
    24,611Research and development
    
    
    16,901
    
    
    
    15,690
    
    
    
    18,588General and administrative
    
    
    4,861
    
    
    
    4,488
    
    
    
    4,284Amortization
    
    
    1,552
    
    
    
    3,182
    
    
    
    3,428Total operating expenses
    
    
    54,422
    
    
    
    50,290
    
    
    
    50,911Income (loss) from operations
    
    
    11,394
    
    
    
    2,506
    
    
    
    (5,245
    )Net realized gain (loss) on sale of securities
    
    
    732
    
    
    
    (7
    )
    
    
    113Other income
    
    
    1,574
    
    
    
    1,145
    
    
    
    1,315Interest expense
    
    
    (100
    )
    
    
    (234
    )
    
    
    (276
    )Income (loss) before income taxes
    
    
    13,600
    
    
    
    3,410
    
    
    
    (4,093
    )Income taxes expense (benefit)
    
    
    4,159
    
    
    
    854
    
    
    
    (970
    )Net income (loss)
    
    $
    9,441
    
    
    $
    2,556
    
    
    $
    (3,123
    )Basic net income (loss) per share
    
    $
    0.81
    
    
    $
    0.22
    
    
    $
    (0.26
    )Diluted net income (loss) per share
    
    $
    0.73
    
    
    $
    0.19
    
    
    $
    (0.26
    )Weighted average shares outstanding  basic
    
    
    11,621
    
    
    
    11,672
    
    
    
    11,809Weighted average shares outstanding  diluted
    
    
    12,946
    
    
    
    13,248
    
    
    
    11,809
 See accompanying notes to consolidated financial statements. 23




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ANSOFT CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
 (in thousands)
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    OtherComprehensive
    
    
    Common Stock
    
    
    Paid-in
    
    
    Treasury Stock
    
    
    Comprehensive
    
    
    Accumulatedincome (loss)
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Shares
    
    
    Amount
    
    
    income (loss)
    
    
    DeficitBalance, April 30, 2002
    
    
    
    
    
    
    12,196
    
    
    $
    122
    
    
    $
    54,939
    
    
    
    (263
    )
    
    $
    (1,671
    )
    
    $
    (1,704
    )
    
    $
    (8,039
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (364
    )
    
    
    (2,283
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    
    
    
    
    100
    
    
    
    1
    
    
    
    493
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tax effect of stock option
exercises
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    (3,123
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,123
    )Foreign currency translation
    
    
    394
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    394
    
    
    
    Reclassification adjustment
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78
    
    
    
    Change in unrealized loss on
marketable securities
    
    
    529
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    529
    
    
    
    Comprehensive loss
    
    $
    (2,122
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, April 30, 2003
    
    
    
    
    
    
    12,296
    
    
    $
    123
    
    
    $
    55,522
    
    
    
    (627
    )
    
    $
    (3,954
    )
    
    $
    (703
    )
    
    $
    (11,162
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (407
    )
    
    
    (5,136
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    
    
    
    
    482
    
    
    
    6
    
    
    
    2,363
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tax effect of stock option
exercises
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    677
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    2,556
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,556Foreign currency translation
    
    
    267
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    267
    
    
    
    Reclassification adjustment
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    Change in unrealized loss on
marketable securities
    
    
    1,120
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,120
    
    
    
    Comprehensive income
    
    $
    3,950
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, April 30, 2004
    
    
    
    
    
    
    12,778
    
    
    $
    129
    
    
    $
    58,562
    
    
    
    (1,034
    )
    
    $
    (9,090
    )
    
    $
    691
    
    
    $
    (8,606
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (784
    )
    
    
    (12,672
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    
    
    
    
    1,123
    
    
    
    11
    
    
    
    7,232
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tax effect of stock option
exercises
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,616
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    9,441
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,441Foreign currency translation
    
    
    359
    
    
    
    
    

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    359
    
    
    
    Reclassification adjustment
    
    
    (705
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (705
    )
    
    
    Change in unrealized gain on
marketable securities
    
    
    (683
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (683
    )
    
    
    Comprehensive income
    
    $
    8,412
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, April 30, 2005
    
    
    
    
    
    
    13,901
    
    
    $
    140
    
    
    $
    70,410
    
    
    
    (1,818
    )
    
    $
    (21,762
    )
    
    $
    (338
    )
    
    $
    835
 See accompanying notes to consolidated financial statements. 24




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ANSOFT CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 Fiscal year ended April 30,2005
    
    
    2004
    
    
    2003Cash flows from operating activitiesNet income (loss)
    
    $
    9,441
    
    
    $
    2,556
    
    
    $
    (3,123
    )Adjustments to reconcile net income (loss) to net
cash provided by operating activitiesDepreciation
    
    
    1,608
    
    
    
    1,536
    
    
    
    1,838Amortization
    
    
    1,879
    
    
    
    3,322
    
    
    
    3,724Deferred taxes
    
    
    (905
    )
    
    
    (282
    )
    
    
    (408
    )Impairment charge to equipment
    
    
    
    
    
    
    
    
    
    
    407Non-cash charge on marketable securities
    
    
    27
    
    
    
    
    
    
    
    78(Gain) loss on sale of marketable securities
    
    
    (732
    )
    
    
    7
    
    
    
    (113
    )Changes in assets and liabilities, net of effect
from acquisitionsAccounts receivable
    
    
    (6,862
    )
    
    
    3,789
    
    
    
    1,076Prepaid expenses and other assets
    
    
    (490
    )
    
    
    167
    
    
    
    163Other long-term assets and liabilities, net
    
    
    196
    
    
    
    53
    
    
    
    (589
    )Accounts payable and accrued expenses
    
    
    6,108
    
    
    
    1,566
    
    
    
    (843
    )Deferred revenue
    
    
    6,224
    
    
    
    1,056
    
    
    
    1,964Net cash provided by operating activities
    
    
    16,494
    
    
    
    13,770
    
    
    
    4,174Cash flows from investing activitiesPurchases of equipment and furniture
    
    
    (797
    )
    
    
    (1,305
    )
    
    
    (755
    )Proceeds from the sale of equipment
    
    
    
    
    
    
    
    
    
    
    395Proceeds from the sale of marketable securities
    
    
    17,531
    
    
    
    12,723
    
    
    
    6,983Purchase of marketable securities
    
    
    (21,537
    )
    
    
    (15,320
    )
    
    
    (5,648
    )Net cash (used in) provided by investing activities
    
    
    (4,803
    )
    
    
    (3,902
    )
    
    
    975Repayment of line of credit
    
    
    (10,000
    )
    
    
    
    
    
    
    Payment of note payable
    
    
    
    
    
    
    
    
    
    
    (1,850
    )Purchase of treasury stock
    
    
    (12,672
    )
    
    
    (5,136
    )
    
    
    (2,283
    )Proceeds from the issuance of common stock, net
    
    
    7,243
    
    
    
    3,046
    
    
    
    494Net cash used in financing activities
    
    
    (15,429
    )
    
    
    (2,090
    )
    
    
    (3,639
    )Effect of exchange rate changes
    
    
    430
    
    
    
    267
    
    
    
    394Cash and cash equivalents at beginning of year
    
    
    15,218
    
    
    
    7,173
    
    
    
    5,269Cash and cash equivalents at end of year
    
    $
    11,910
    
    
    $
    15,218
    
    
    $
    7,173Supplemental disclosures of cash flow informationCash paid for income taxes
    
    $
    856
    
    
    $
    234
    
    
    $
    276Cash paid for interest
    
    $
    106
    
    
    $
    99
    
    
    $
    846
 See accompanying notes to consolidated financial statements. 25




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##### Table of Contents



ANSOFT CORPORATION AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except per share amounts) 1. Nature of Business and Summary of Significant Accounting Policies Nature of Business Ansoft Corporation (Ansoft or the Company) is a developer of electronic design automation
(EDA) software used in high performance technology products and industries. Ansofts software is
used by electrical engineers in the design of state of the art technology products, such as
cellular phones, internet networking, satellite communications systems, computer chips and circuit
boards, and electronic sensors and motors. Principles of Consolidation and Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and its
subsidiaries. All intercompany transactions have been eliminated. In July 2000, Ansoft announced
its formation of Altra Broadband to pursue the development of critical intellectual property and
products for broadband wireless and optical communications. In spite of certain technical
successes, profitable deployment of intellectual property developed by Altra Broadbands Irvine
Technology Center in this telecom environment was deemed unlikely in the near term. As such, the
Company closed the Irvine Technology Center during the quarter ended October 31, 2002, resulting in
a restructuring charge of $532 that is included in Research and development expense. The restructuring was completed in the quarter ended October 31, 2002. The total $532 restructuring
charge was comprised of a $407 charge for the impairment of fixed assets and a charge of $125 for
the remaining lease obligations for which a liability was recorded as of October 31, 2002. The
impairment charge was based on third-party offers to purchase the remaining assets. Use of Estimates The preparation of consolidated financial statements in conformity with US generally accepted
accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets
and liabilities. The estimates and assumptions used in the accompanying consolidated financial
statements are based on managements evaluation of the relevant facts and circumstances as of the
date of the consolidated financial statements. Actual results may differ from those estimates. Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or
less when purchased to be cash equivalents. Marketable Securities Marketable securities consist of corporate bonds, bond and government agency mutual funds, and
mortgage backed securities that are classified as available for sale as of April 30, 2005 and 2004.
Marketable securities available for sale are recorded at fair market value based on quoted market
prices and any unrealized gains or losses are recorded as a separate component of stockholders
equity. Costs of investments sold/held are determined on the average cost method and are classified
as non-current. An impairment charge is recorded if a decline in the market value of any available
for sale security below cost is deemed to be other than temporary. The impairment is charged to
earnings and a new cost basis for the security is established. Dividend and interest income are
recognized when earned. Equipment and Furniture Equipment and furniture are stated at cost less accumulated depreciation and amortization.
Depreciation for financial reporting purposes is computed using the straight-line method based upon
the estimated useful lives of the assets, which range from three to seven years. Assets acquired
under capital leases and leasehold improvements are amortized over their useful life or the lease
term, as appropriate. 26




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##### Table of Contents



Goodwill and Other Intangible Assets Goodwill and other intangible assets, which include customer lists, a non-compete agreement, and
purchased technology, are stated at cost less accumulated depreciation and are reviewed
periodically (at least annually) for impairment. The non-compete agreement is related to Agilents
HFSS software purchased on May 3, 2001. Purchased technology represents acquired software which
has been fully developed, achieved technological feasibility, reached commercial viability, and is
generating revenue. In accordance with Statement of Financial Accounting Standards (SFAS) No.
142, Goodwill and Other Intangible Assets which was adopted on May 1, 2002 (the beginning of
Ansofts fiscal year 2003), goodwill and purchased intangibles with indefinite useful lives are no
longer amortized but are reviewed periodically (at least annually) for impairment. Accordingly,
Ansoft has ceased to amortize approximately $1.2 million of goodwill, net of amortization,
including workforce intangibles that were subsumed into goodwill upon adoption of SFAS No. 142.
Acquired intangibles with definite lives are amortized on a straight-line basis over the remaining
estimated economic life of the underlying products and technologies (original lives assigned are
three to seven years), and reviewed for impairment in accordance with SFAS No. 144, Accounting for
Impairment or Disposal of Long-lived Assets. The Company reviews the realizability of acquired technology, goodwill and other intangibles on an
ongoing basis, and if there is an indication of impairment, the Company performs procedures under
the applicable accounting pronouncements to quantify any impairment that exists. Determining the
amount of impairment of these assets requires the Company to estimate future cash flows and make
judgments regarding discount rates and other variables that impact the net realizable value or fair
value of those assets, as applicable. Actual future cash flows and other assumed variables could
differ from these estimates. Impairment of Long-Lived Assets SFAS No. 144 provides a single accounting model for long-lived assets to be disposed of. SFAS No.
144 also changes the criteria for classifying an asset held for sale; and broadens the scope of
businesses to be disposed of that qualify for reporting as discontinued operations and changes the
timing of recognizing losses on such operations. The Company adopted SFAS No. 144 on May 1, 2002.
The adoption of SFAS No. 144 did not affect the Companys financial statements. In accordance with SFAS No. 144, long-lived assets, such as property, plant and equipment, and
purchased intangibles subject to amortization, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of
an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of an asset exceeds the fair value of the
asset. Revenue Recognition Revenue consists of fees for licenses of software products and service and other revenue. Ansoft
recognizes revenue in accordance with SOP 97-2, Software Revenue Recognition, and related
interpretations. Accordingly, revenue is recognized when all of the following criteria are met:
persuasive evidence of an arrangement exists, delivery has occurred, the vendors fee is fixed or
determinable, and collectibility is probable. License revenue  Ansoft licenses its software generally on a perpetual basis with no right to
return or exchange the licensed software. License revenue is recognized based on the residual
method. Postcontract customer support (PCS) for an initial three month period is bundled with the
perpetual license fee. Revenue related to the three-month PCS is deferred and recognized ratably
over the three-month term. Ansofts vendor-specific objective evidence of fair value, or VSOE, for
the three-month PCS is based upon the pricing for comparable transactions when the element is sold
separately. Ansofts VSOE for the three-month PCS is based upon one fourth of the customers annual
maintenance contract renewal rates. Service and other revenue consists primarily of PCS revenue. Following the initial three month PCS
period, Ansoft offers customers one-year maintenance contracts generally at 15% of the list price
of the respective software products. Ansoft recognizes all maintenance revenue ratably over the
respective maintenance period. Customers typically renew maintenance agreements annually. 27




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##### Table of Contents



Revenue from customer training, support and other services is recognized as the service is
performed. Deferred revenue Ansofts deferred revenue consists of unearned revenue on annual maintenance contracts and the
deferred component of PCS. Software Development Costs The Company accounts for software development costs in accordance with SFAS No. 86, Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise Marketed. Software development
costs are capitalized beginning when a products technological feasibility has been established by
completion of a working model of the product and ending when a product is available for general
release to customers. Completion of a working model of the Companys products and general release
have generally coincided. As a result, the Company has not capitalized any software development
costs for any periods presented since the amounts have not been material. Income Taxes The Company accounts for income taxes using the asset and liability method. Under the asset and
liability method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax assets are recognized
for deductible temporary differences, net operating loss carryforwards, and credit carryforwards if
it is more likely than not that the tax benefits will be realized. To the extent a deferred tax
asset cannot be recognized under the preceding criteria, a valuation allowance is established. Net Income (Loss) Per Share Basic net income (loss) per share is calculated using the weighted-average number of common shares
outstanding during the period. Diluted net income per share is computed using the weighted-average
number of common shares and potentially dilutive common shares outstanding during the period.
Potentially dilutive common shares consist of the incremental common shares issuable upon the
exercise of employee stock options, and are computed using the treasury stock method. Potentially
dilutive common shares are excluded from the calculation if their effect is antidilutive. Since
there was a net loss for the fiscal year ended April 30, 2003, stock options totaling 551 shares
were excluded from the diluted earnings per share calculation because their inclusion would have
been anti-dilutive. All unexercised stock options for the fiscal year ended April 30, 2005 are
included in the computation of diluted earnings per share. Unexercised stock options of 206 shares
for the year ended April 30, 2004 are not included in the computation of diluted earnings per share
because the option exercise price was greater than the average market price, and therefore their
inclusion would have been anti-dilutive. 28




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##### Table of Contents



The following is a reconciliation of the numerators and denominators of the basic and diluted EPS
computations for the years presented: Income (loss)
    
    
    Shares
    
    
    Per share amountFiscal year ended April 30, 2005Basic net income per share
    
    $
    9,441
    
    
    
    11,621
    
    
    $
    0.81Effect of dilutive securities:Stock options
    
    
    
    
    
    
    1,325
    
    
    
    (0.08
    )Diluted net income per share
    
    $
    9,441
    
    
    
    12,946
    
    
    $
    0.73Fiscal year ended April 30, 2004Basic net income per share
    
    $
    2,556
    
    
    
    11,672
    
    
    $
    0.22Effect of dilutive securities:Stock options
    
    
    
    
    
    
    1,576
    
    
    
    (0.03
    )Diluted net income per share
    
    $
    2,556
    
    
    
    13,248
    
    
    $
    0.19Fiscal year ended April 30, 2003Basic net loss per share
    
    $
    (3,123
    )
    
    
    11,809
    
    
    $
    (0.26
    )Effect of dilutive securities:Stock options
    
    
    
    
    
    
    
    
    
    
    Diluted net loss per share
    
    $
    (3,123
    )
    
    
    11,809
    
    
    $
    (0.26
    )
 Stock-Based Compensation The Company accounts for stock-based compensation in accordance with the Financial Accounting
Standards Boards (FASB) SFAS No. 123 Accounting for Stock-Based Compensation. This statement
permits a company to choose either a fair value based method of accounting for its stock-based
compensation arrangements or to comply with the Accounting Principles Board (APB) Opinion No. 25
intrinsic value based method, adding pro forma disclosures of net income and earnings per share
computed as if the fair value based method had been applied in the financial statements. The
Company has adopted SFAS No. 123 by retaining the APB Opinion No. 25 method of accounting for
stock-based compensation with pro forma disclosures of net income and earnings per share. The pro
forma effects of stock options on the Companys net income (loss) for those periods may not be
representative of the pro forma effect for future periods due to the impact of vesting and
potential awards. Pursuant to APB Opinion No. 25 the Company did not recognize compensation expense
in its statements of operations for the fiscal years ended April 30, 2005, 2004 and 2003. Pro forma information regarding net income and earnings (loss) per share is required by SFAS No.
123. This information is required to be determined as if the Company had accounted for its employee
stock options (including shares issued under the Stock Purchase Plan, collectively called
options) granted subsequent to April 30, 1995 under the fair value method prescribed by SFAS No.
123. The fair value of options granted in fiscal years 2005, 2004 or 2003 has been estimated at the
date of grant using a Black-Scholes option pricing model with the following weighted average
assumptions: Fiscal year ended April 30,2005
    
    
    2004
    
    
    2003Risk-free rate (%)
    
    
    4.02
    
    
    
    2.00
    
    
    
    2.00Volatility (%)
    
    
    70.65
    
    
    
    115.40
    
    
    
    110.00Expected life (in years)
    
    
    6.00
    
    
    
    6.00
    
    
    
    7.50Dividend yield (%)
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00
 29




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The Black-Scholes option valuation model was developed for use in estimating the fair value of
traded options that have no vesting restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions, including the expected stock
price volatility. Because the Companys options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in the opinion of management, the existing models do not
necessarily provide a reliable single measure of the fair value of its options. However, based
solely on this analysis, the weighted average estimated fair value of employee stock options
granted during 2005, 2004 and 2003 was $9.29, $7.78 and $4.65 per share, respectively. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to
expense over the options vesting period. The Companys pro forma information follows: Fiscal year ended April 30,2005
    
    
    2004
    
    
    2003Net income (loss), as reported
    
    $
    9,441
    
    
    $
    2,556
    
    
    $
    (3,123
    )Deduct: Total stock-based employee compensation
expense determined under fair value based method,
net of tax
    
    
    (2,289
    )
    
    
    (2,469
    )
    
    
    (2,956
    )Pro forma net income (loss)
    
    $
    7,152
    
    
    $
    87
    
    
    $
    (6,079
    )Pro forma net income (loss) per basic common share
    
    $
    0.62
    
    
    $
    0.01
    
    
    $
    (0.51
    )Pro forma net income (loss) per diluted common
share
    
    $
    0.55
    
    
    $
    0.01
    
    
    $
    (0.51
    )
 Because the Company anticipates making additional grants and options vest over several years, the
effects on pro forma disclosures of applying SFAS No. 123 are not likely to be representative of
the effects on pro forma disclosures of future years. Comprehensive Income Comprehensive income includes foreign currency translation gains and losses and other unrealized
gains and losses related to marketable securities that have been previously excluded from net
income and reflected instead in equity. The Company has reported the components of comprehensive
income, net of tax of $0 in 2005, 2004 and 2003 in its consolidated statements of stockholders
equity and comprehensive income. The components of accumulated other comprehensive (loss) income are as follows net of tax: April 30,2005
    
    
    2004Foreign currency translation gain (loss)
    
    $
    276
    
    
    $
    (83
    )Unrealized (loss) gain on available for sale securities
    
    
    (614
    )
    
    
    774Accumulated other comprehensive (loss) income
    
    $
    (338
    )
    
    $
    691
 Foreign Currency Translation The functional currency of the Companys foreign subsidiaries is the respective local currency.
Accordingly, assets and liabilities are translated to United States dollars at the exchange rates
in effect as of the balance sheet date, and results of operations are translated using the average
rates in effect for the period presented. Transaction gains and losses, which are included in other
income in the accompanying consolidated statements of income, have not been significant. Fair Value of Financial Instruments The carrying value and fair value of the Companys receivables, payables and debt obligations are
estimated to be substantially the same at April 30, 2005 and 2004. 30




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##### Table of Contents



Reclassification Certain amounts from prior years have been reclassified to conform with the current years
presentation. 2. Recent Accounting Pronouncements On December 16, 2004, the FASB issued FASB Statement No. 123R Share-Based Payment. The Company
will transition to the new requirements of the Statement by using the modified prospective
transition method. This method requires compensation cost to be recognized on the date of adoption
for any outstanding unvested share-based payments, based on the grant date fair value as calculated
under SFAS No. 123. As originally issued, Statement No. 123R was to become effective for the
Company in its fiscal 2006 second quarter. However, on April 14, 2005, the SEC announced that it
would not require registrants to adopt Statement No. 123R until at least the beginning of the first
fiscal year beginning after June 15, 2005 (for the Company, fiscal 2007). The Company is currently evaluating the transition
provisions of this standard. On March 29, 2005, the Securities and Exchange Commission (SEC) staff issued Staff Accounting
Bulletin No. 107, Share-Based Payment (SAB No. 107), which expressed the SEC staffs views on
Statement No. 123R, but did not modify any of Statement No. 123Rs provisions. The Company is
evaluating the views expressed by the SEC in SAB No. 107 in conjunction with its assessment of
Statement No. 123Rs impact to the Company. 3. Equipment and Furniture Equipment and furniture consist of the following: April 30,2005
    
    
    2004Computers and equipment
    
    $
    7,168
    
    
    $
    7,410Furniture and fixtures
    
    
    1,675
    
    
    
    1,610Leasehold improvements
    
    
    929
    
    
    
    8739,772
    
    
    
    9,893Less allowances for depreciation and amortization
    
    
    6,961
    
    
    
    6,295$
    2,811
    
    
    $
    3,598
 4. Other Intangible Assets Other intangible assets consist of the following: April 30,2005
    
    
    2004Customer list
    
    $
    18,488
    
    
    $
    18,488Non-compete
    
    
    2,500
    
    
    
    2,500Purchased technology
    
    
    2,230
    
    
    
    2,230Trademark
    
    
    212
    
    
    
    21223,430
    
    
    
    23,430Less allowances for amortization
    
    
    19,553
    
    
    
    18,089$
    3,877
    
    
    $
    5,341
 These intangible assets are amortized over their estimated useful lives, ranging between three and
seven years. There are no expected residual values related to these intangible assets. Estimated
fiscal year amortization expense is as follows: 2006 - $1,435; 2007 - $1,272; and 2008 - $1,170. 31




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##### Table of Contents



5. Marketable Securities Marketable securities, classified as available for sale, are summarized as follows: Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Marketcost
    
    
    Gain
    
    
    (loss)
    
    
    valueApril 30, 2005Mutual Bond Funds
    
    $
    11,861
    
    
    $
    99
    
    
    $
    (425
    )
    
    $
    11,535Corporate Bonds
    
    
    17,249
    
    
    
    45
    
    
    
    (333
    )
    
    
    16,961Total marketable securities
    
    $
    29,110
    
    
    $
    144
    
    
    $
    (758
    )
    
    $
    28,496April 30, 2004Mutual Bond Funds
    
    $
    17,413
    
    
    $
    1,183
    
    
    $
    (290
    )
    
    $
    18,306Mortgage Backed Securities
    
    
    4,251
    
    
    
    
    
    
    
    (48
    )
    
    
    4,203Corporate Bonds
    
    
    3,064
    
    
    
    
    
    
    
    (71
    )
    
    
    2,993Total marketable securities
    
    $
    24,728
    
    
    $
    1,183
    
    
    $
    (409
    )
    
    $
    25,502
 Other income consists of dividend and interest income and other than temporary declines in fair
value of marketable securities. Dividend and interest income was $1,535 $1,145 and $1,315 in fiscal
year 2005, 2004 and 2003, respectively. Other than temporary declines were $27, $0 and $78 in
fiscal year 2005, 2004 and 2003, respectively. Gross realized gains on the sale of marketable securities were $828, $0 and $113 in fiscal year
2005, 2004 and 2003, respectively. Gross realized losses on the sale of marketable securities were
$96, $7 and $0 in fiscal year 2005, 2004 and 2003, respectively. The following table sets forth certain information relating to the estimated fair value and
unrealized losses on marketable securities available-for-sale as of April 30, 2005. Unrealized
losses have been segregated into those existing for less than twelve months and those existing for
twelve months or longer. Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesMutual Bond Funds
    
    $
    6,657
    
    
    $
    271
    
    
    $
    2,789
    
    
    $
    154
    
    
    $
    9,446
    
    
    $
    425Corporate Bonds
    
    $
    11,099
    
    
    $
    274
    
    
    $
    1,267
    
    
    $
    59
    
    
    $
    12,366
    
    
    $
    333Total
    
    $
    17,756
    
    
    $
    545
    
    
    $
    4,056
    
    
    $
    213
    
    
    $
    21,812
    
    
    $
    758
 At April 30, 2005, the contractual maturities of the debt securities available for sale are: Amortized Cost
    
    
    Fair ValueDue in one year or lessDue after one year through five years
    
    $
    8,896
    
    
    $
    8,709Due after five years through ten years
    
    $
    8,353
    
    
    $
    8,252Due after ten years
    
    $
    
    
    
    $
    Total
    
    $
    17,249
    
    
    $
    16,961
 It is the Companys policy to review the fair value of these marketable securities on a regular
basis to determine whether its investments are other-than-temporarily impaired. If the Company
believes the carrying value of an investment is in excess of its fair value, and this difference is
other-than-temporary, it is the Companys policy to write down the investment to reduce its
carrying value to fair value. 32




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##### Table of Contents



6. Line of Credit On October 21, 2004, the Company entered into a one year secured credit facility, with an aggregate
commitment of up to $30 million, with a domestic financial institution (the Bank). The facility
replaced the Companys $20 million secured facility which was terminated during the first quarter
of fiscal 2005. At the Companys option, borrowings under the credit facility bear interest at
either the Banks prime lending rate or the LIBOR rate plus a margin of 50 basis points. The
facility is secured by the Companys marketable securities. The ability of the Company to borrow under the credit facility is subject to our ongoing compliance
with certain financial and other covenants, including a tangible net worth covenant. As of April
30, 2005, the Company was in compliance with its covenants under the credit facility. As of April 30, 2005, the Company had no borrowings under the credit facility. As of April 30,
2004, the Company had variable rate debt of $10 million outstanding with an average interest rate
of 1.90%. 7. Leases The Company leases its corporate headquarters in Pittsburgh, Pennsylvania, and other facilities
under operating lease agreements that expire over the next five years. Rental expense incurred by
the Company under operating lease agreements totaled $2,499, $2,500 and $2,658 for the years ended
April 30, 2005, 2004 and 2003, respectively. The future minimum lease payments for such operating
leases as of April 30, 2005, are: Year ending April 30,2006
    
    
    1,7562007
    
    
    8912008
    
    
    7122009
    
    
    4212010
    
    
    5
 8. Common Stock Options The Companys 1988 Stock Option Plan (1988 Plan) authorizes the issuance of 850 shares of common
stock for the grant of incentive or nonstatutory stock options to employees and directors. Under
the terms of the 1988 Plan, options to purchase common stock are granted at no less than the
stocks estimated fair market value at the date of the grant and may be exercised during specified
future periods as determined by the Board of Directors. The 1988 Plan provides that the options
shall expire no more than ten years after the date of the grant. The Companys 1995 Stock Option Plan (1995 Plan) authorizes the issuance of 3,500 shares of common
stock for the grant of incentive or nonstatutory stock options to employees and directors. Under
the terms of the 1995 Plan, options to purchase common stock are granted at no less than the
stocks estimated fair market value at the date of the grant and may be exercised during specified
future periods as determined by the Board of Directors. The 1995 Plan provides that the options
shall expire no more than ten years after the date of the grant. Shares underlying outstanding options under the 1988 Plan and the 1995 Plan are as follows: Shares Underlying Outstanding OptionsShares
    
    
    PriceOutstanding, April 30, 2002
    
    
    3,637
    
    
    $
    1.75$13.55Granted
    
    
    651
    
    
    $
    9.03$13.55Exercised
    
    
    (93
    )
    
    $
    1.75$9.75Terminated
    
    
    (212
    )
    
    $
    4.75$12.95Outstanding, April 30, 2003
    
    
    3,983
    
    
    $
    1.75$13.55Granted
    
    
    79
    
    
    $
    8.05$10.91Exercised
    
    
    (482
    )
    
    $
    1.75$12.95Terminated
    
    
    (116
    )
    
    $
    4.75$12.95Outstanding, April 30, 2004
    
    
    3,464
    
    
    $
    1.75$13.55Granted
    
    
    112
    
    
    $
    12.47$21.19Exercised
    
    
    (1,123
    )
    
    $
    1.75$13.55Terminated
    
    
    (3
    )
    
    $
    4.75$12.95Outstanding, April 30, 2005
    
    
    2,450
    
    
    $
    3.50$21.19
 33




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##### Table of Contents



Options to purchase 1,533 shares of common stock were exercisable as of April 30, 2005 and options
to purchase 159 shares of common stock were available for future grant as of April 30, 2005. The following table summarizes information about stock options outstanding as of April 30, 2005: Options Outstanding
    
    
    Options ExercisableWeighted-Number
    
    
    Average
    
    
    Weighted-
    
    
    Number
    
    
    Weighted-Range Of
    
    Outstanding
    
    
    Remaining
    
    
    Average
    
    
    Exercisable
    
    
    AverageExercise
    
    at April 30,
    
    
    Contractual
    
    
    Exercise
    
    
    at April 30,
    
    
    ExercisePrices
    
    2005
    
    
    Life
    
    
    Price
    
    
    2005
    
    
    Price$3.50-$5.13
    
    
    931
    
    
    
    5.0
    
    
    $
    5.07
    
    
    
    654
    
    
    $
    5.10$5.50-$8.25
    
    
    301
    
    
    
    4.8
    
    
    $
    6.33
    
    
    
    262
    
    
    $
    6.24$8.31-$12.47
    
    
    798
    
    
    
    6.7
    
    
    $
    9.42
    
    
    
    432
    
    
    $
    9.11$12.85-$16.36
    
    
    412
    
    
    
    7.0
    
    
    $
    13.20
    
    
    
    185
    
    
    $
    12.98$21.19
    
    
    8
    
    
    
    9.8
    
    
    $
    21.19
    
    
    
    0
    
    
    $
    21.19
 9. Segment Reporting, Export Sales and Credit Risk The Company has adopted the provisions of SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, which requires the reporting of segment information using the
management approach. Under this approach, operating segments are identified in substantially the
same manner as they are reported internally and used by the Companys chief operating decision
maker (CODM) for purposes of evaluating performance and allocating resources. Ansofts chief
operating decision maker is its President and Chief Executive Officer, or CEO. Based on this
approach, the Company has one reportable segment as the CODM reviews financial information on a
basis consistent with that presented in the consolidated financial statements. Ansofts products are classified into two categories, high performance electronics and
electromechanical (EM). Ansofts CEO reviews sales by product category. The following table
presents product sales by market application as a percentage of total sales: 2005
    
    
    2004
    
    
    2003High Performance Electronics
    
    
    81%
    
    
    
    79%
    
    
    
    82%Electromechanical
    
    
        19%
    
    
    
    21%
    
    
    
    18%
 Profitability information by product category is not available as operating expenses and other
income and expense items are managed on a functional basis. Export sales, principally to Asia, accounted for 57%, 57% and 56% of total product revenue in 2005,
2004 and 2003, respectively. Included in export sales to Asia were sales to Japan, which accounted
for approximately 22%, 23% and 21% of total revenue in fiscal 2005, 2004 and 2003, respectively. No
other foreign country accounted for more than 10% of total revenue during these periods. As of
April 30, 2005 and 2004, there were net assets of $ 7.7 million and $5.1 million in Asia and $1.3
million and $1.4 million in Europe. The Company markets its software products to customers throughout the world directly and generally
does not require collateral. However, letters of credit are obtained from certain international
customers prior to shipment. The Company performs ongoing credit evaluations of its customers and
maintains an allowance for potential credit losses. The Company believes that it has adequately
provided for credit losses. 34




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##### Table of Contents



10. Income Tax Income (loss) before taxes includes domestic and foreign income as follows: April 30,2005
    
    
    2004
    
    
    2003Domestic
    
    $
    12,470
    
    
    $
    1,648
    
    
    $
    (4,363
    )Foreign
    
    
    1,130
    
    
    
    1,762
    
    
    
    270Total
    
    $
    13,600
    
    
    $
    3,410
    
    
    $
    (4,093
    )
 The provision for income taxes consists of the following: April 30,2005
    
    
    2004
    
    
    2003Current:Federal
    
    $
    4,474
    
    
    $
    499
    
    
    $
    (586
    )State
    
    
    468
    
    
    
    192
    
    
    
    24Foreign
    
    
    122
    
    
    
    445
    
    
    
    Total
    
    
    5,064
    
    
    
    1,136
    
    
    
    (562
    )Deferred:Federal
    
    
    (1,291
    )
    
    
    (394
    )
    
    
    (91
    )State
    
    
    7
    
    
    
    (72
    )
    
    
    (162
    )Foreign
    
    
    379
    
    
    
    184
    
    
    
    Total
    
    
    (905
    )
    
    
    (282
    )
    
    
    (408
    )Total expense (benefit) for
income tax
    
    $
    4,159
    
    
    $
    854
    
    
    $
    (970
    )
 The Companys actual income tax expense (benefit) differs from the expected income tax expense
(benefit) computed by applying the statutory federal rate to income before income taxes as a result
of the following: April 30,2005
    
    
    2004
    
    
    2003Income tax expense (benefit) at statutory rate
    
    $
    4,623
    
    
    $
    1,159
    
    
    $
    (1,392
    )State income tax, net of federal benefit
    
    
    503
    
    
    
    79
    
    
    
    (92
    )Research and development credit
    
    
    (1,108
    )
    
    
    (480
    )
    
    
    (1,575
    )Rate differential between U.S and foreign
taxes
    
    
    174
    
    
    
    30
    
    
    
    Change in valuation allowance
    
    
    (197
    )
    
    
    (55
    )
    
    
    1,843Intangible amortization
    
    
    31
    
    
    
    74
    
    
    
    77Other, net
    
    
    133
    
    
    
    47
    
    
    
    169Actual income tax expense (benefit)
    
    $
    4,159
    
    
    $
    854
    
    
    $
    (970
    )
 35




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##### Table of Contents



In addition to amounts applicable to income before taxes, the following income tax benefit amounts
were recorded in stockholders equity. Fiscal year ending April 30,2005
    
    
    2004
    
    
    2003Tax effect of stock option exercises
    
    $
    (4,616
    )
    
    $
    (677
    )
    
    $
    (90
    )
 The tax effects of temporary differences that give rise to significant portions of the deferred tax
assets and deferred tax liabilities are presented below: April 30,2005
    
    
    2004Deferred tax assets:Net operating loss carryforward
    
    $
    477
    
    
    $
    241Capital loss carryovers
    
    
    427
    
    
    
    395Allowance for doubtful accounts
    
    
    161
    
    
    
    343Alternative minimum tax credit carryforward
    
    
    156
    
    
    
    256Research and development tax credit carryforward
    
    
    2,623
    
    
    
    2,157Intangible assets
    
    
    3,992
    
    
    
    4,004Foreign tax credit
    
    
    191
    
    
    
    Furniture and equipment
    
    
    30
    
    
    
    Net unrealized losses on available for sale securities
    
    
    1,203
    
    
    
    989Total gross deferred tax assets
    
    
    9,260
    
    
    
    8,385Less valuation allowance
    
    
    (2,854
    )
    
    
    (2,523
    )Net deferred tax assets
    
    
    6,406
    
    
    
    5,862Deferred tax liabilities:Furniture and equipment
    
    
    
    
    
    
    (361
    )Total gross deferred tax liability
    
    
    
    
    
    
    (361
    )Net deferred taxes
    
    
    6,406
    
    
    
    5,501
 The net change in the total valuation allowance for the years ended April 30, 2005 and April 30,
2004 was an increase of $331 and a decrease of $483, respectively. An increase of $528 and a
decrease of $428 in the valuation allowance was recorded in accumulated other comprehensive income
relating to marketable securities for the years ended April 30, 2005 and 2004, respectively.
Management evaluates the recoverability of the deferred tax assets and the level of the valuation
allowance on a quarterly basis. In assessing the realizability of the deferred tax assets,
management considers whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which those temporary differences
become deductible. Management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income, and tax planning strategies in making this assessment. As of April 30, 2005, the Company had foreign operating loss carryforwards of $1,444 which are
available to offset future foreign taxable income over an indefinite period. The Company also has
alternative minimum tax credit carryforwards of $156 which are available to reduce future federal
income taxes, if any, over an indefinite period. The Company has research and development credit
carryforwards of $2,623 as of April 30, 2005. These credits will be available to reduce future
federal income taxes, if any, through April 30, 2023. The Company also has capital loss carryovers
of $1,257 that are available to offset capital gains through April 30, 2007. 11. Employee Benefit Plan The Company has a 401(k) savings and retirement plan which covers its full-time employees who have
attained the age of 21 and have completed six months of service. Eligible employees make voluntary
contributions to the plan. The Company is not required to contribute, nor has it contributed, to
the 401(k) plan. 12. Commitments And Contingencies The Company sells software licenses and services to its customers under proprietary software
license agreements. Each license agreement contains the relevant terms of the contractual
arrangement with the customer, and generally 36




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##### Table of Contents



includes certain provisions for indemnifying the customer against losses,
expense and liabilities from damages that may be incurred by or awarded against the customer in the
event the Companys software or services are found to infringe upon a patent, copyright, or other
proprietary right of a third party. To date, the Company has not had to reimburse any of its customers for any losses related to these
indemnification provisions and no material claims asserted under these indemnification provisions
are outstanding as of April 30, 2005. For several reasons, including the lack of prior
indemnification claims, the Company cannot determine the maximum amount of potential future
payments, if any, related to such indemnification provisions. 37




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. 
 Item 9A. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures We are responsible for the preparation of the financial statements included in this Annual Report.
The financial statements were prepared in accordance with accounting principles generally accepted
in the United States of America and include amounts that are based on the best estimates and
judgments of management. The other financial information contained in this Annual Report is
consistent with the financial statements. Our internal control system is designed to provide reasonable assurance concerning the reliability
of the financial data used in the preparation of Ansofts financial statements, as well as to
safeguard Ansofts assets from unauthorized use or disposition. All internal control systems, no matter how well designed, have inherent limitations. Therefore,
even those systems determined to be effective can provide only reasonable assurance with respect to
financial statement presentation. (b) Managements Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial
reporting and for performing an assessment of the effectiveness of internal control over financial
reporting. Internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. Because of inherent limitations, internal control over financial reporting cannot provide absolute
assurance that financial reporting objectives will be achieved. In addition, projections of any
evaluation of effectiveness to future periods are subject to the risks that controls may become
inadequate because of changes in conditions and that the degree of compliance with the policies or
procedures may deteriorate. Management performed an assessment of the effectiveness of the Companys internal control over
financial reporting as of April 30, 2005 based upon the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on such assessment,
management determined that the Companys internal control over financial reporting was effective as
of April 30, 2005 based on those criteria. KPMG LLP, has issued an audit report on our assessment and on the effectiveness of the Companys
internal control over financial reporting. The KPMG report is
included in (c) Evaluation of Changes in Internal Control over Financial Reporting. (c) Evaluation of
Changes in Internal Control over Financial Reporting There was no change in the Companys internal control over financial reporting that occurred during
the Companys last fiscal quarter of 2005 that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial reporting. 38




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##### Table of Contents



Report of Independent Registered Public Accounting Firm The Board of Directors and
Stockholders Ansoft Corporation: We have audited managements assessment, included in the accompanying Managements Report on
Internal Control over Financial Reporting that Ansoft Corporation (the Company) maintained
effective internal control over financial reporting as of April 30, 2005, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Ansoft Corporations management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on managements assessment and an opinion on
the effectiveness of the Companys internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing
and evaluating the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion. A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance
with generally accepted accounting principles. A companys internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of the companys assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. In our opinion, managements assessment that Ansoft Corporation maintained effective internal
control over financial reporting as of April 30, 2005, is fairly stated, in all material respects,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Ansoft
Corporation maintained, in all material respects, effective internal control over financial
reporting as of April 30, 2005, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Ansoft Corporation and subsidiaries as of
April 30, 2005 and 2004, and the related consolidated statements of operations, stockholders
equity and comprehensive income, and cash flows for each of the years in the three-year period
ended April 30, 2005, and our report dated May 26, 2005 expressed an unqualified opinion on those
consolidated financial statements. /s/ KPMG LLP Pittsburgh, Pennsylvania May 26, 2005 
 Item 9B. Other Information None. 39




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##### Table of Contents



Item 10.Directors and Executive Officers of the Company  - The information relating to
this item is provided in the Companys definitive proxy statement filed with the SEC in connection
with its Annual Meeting of Shareholders of the Company is incorporated herein by reference. 
 Item 11.Executive Compensation - The information set forth under the captions Employment
Contracts and Change of Control Agreements and Executive Compensation in the Companys
definitive proxy statement filed with the SEC in connection with its Annual Meeting of Shareholders
of the Company is incorporated herein by reference. 
 Item 12.Security Ownership of Certain Beneficial Owners, Management and Related Stockholder
Matters - In addition to the information set forth under the caption Equity Compensation
Plans beginning at page 11 in Part II of this Report, information relating to this item is
provided in the Companys definitive proxy statement filed with the SEC in connection with its
Annual Meeting of Shareholders of the Company is incorporated herein by reference. 
 Item 13.Certain Relationships and Related Party Transactions - Information relating to
this item is provided in the Companys definitive proxy statement filed with the SEC in connection
with its Annual Meeting of Shareholders of the Company is incorporated herein by reference. Item 14.Principle Accounting Fees and Service - Information relating to this item is
provided in the Companys definitive proxy statement filed with the SEC in connection with its
Annual Meeting of Shareholders of the Company is incorporated herein by reference. 40




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##### Table of Contents



PART IV 
 Item 15.Exhibits and Financial Statement Schedules (a) Financial statements. The following consolidated financial statements are filed as part of this
Annual Report on Form 10-K. PageReport of Independent Registered Public Accounting Firm
    

    
    21Consolidated Balance Sheets as of April 30, 2005 and 2004
    
    
    22Consolidated Statements of Operations for the years ended April 30, 2005, 2004 and 2003
    
    
    23Consolidated Statements of Stockholders Equity and Comprehensive Income for the years
ended
April 30, 2005, 2004 and 2003
    
    
    24Consolidated Statements of Cash Flows for the years ended April 30, 2005, 2004 and 2003
    
    
    25Notes to Consolidated Financial Statements
    
    
    26
 (b) Exhibits. The exhibits filed or incorporated by reference as a part of this report are listed
in the Index to Exhibits which appears on the following page and are incorporated by reference. (c) Schedules. Schedule IIValuation and Qualifying Accounts and Reserves for each of the years in the three-year period ended
April 30, 2005. Financial statement schedules not listed above have been omitted because they are inapplicable, are
not required under applicable provisions of Regulation S-X, or the information that would otherwise
be included in such schedules is contained in the registrants financial statements or accompanying
notes. Ansoft Corporation
Schedule II-Valuation and Qualifying Accounts and Reserves
For the three years ended April 30, 2005
(In thousands) Balance as of
    
    
    Additions (Deductions)
    
    
    
    Balance as ofthe Beginning
    
    
    Charged to Costs
    
    
    
    the End ofof the Period
    

    
    and Expenses
    
    Deductions
    
    the PeriodYear ended April 30, 2005
Allowance for doubtful accounts
    
    
    903
    
    
    (197)
    
    (281)
    
    425Year ended April 30, 2004
Allowance for doubtful accounts
    
    
    818
    
    
    250
    
    (165)
    
    903Year ended April 30, 2003
Allowance for doubtful accounts
    
    
    621
    
    
    373
    
    (176)
    
    818
 41




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##### Table of Contents



Exhibit Index The Exhibits listed below are filed or incorporated by reference as part of this Annual Report on
Form 10-K. ExhibitNumber
    
    Description3.1
    
    Amended and Restated Certificate of Incorporation of the Company (incorporated by
reference from Registration Statement No. 333-40189)3.2
    
    Certificate of Amendment to the Companys Amended and Restated Certificate of
Incorporation (incorporated by reference from Registration Statement No. 333-40189)3.3
    
    Bylaws of the Company (incorporated by reference from Registration Statement No. 333-1398)10.1
    
    1988 Stock Option Plan of the Company (incorporated by reference from Registration
Statement No. 333-1398)**10.2
    
    1995 Stock Option Plan of the Company (incorporated by reference from Registration
Statement No. 333-1398)**10.3
    
    Zoltan Cendes Stock Option Agreement, dated April 30, 1995 (incorporated by
reference from Registration Statement No. 333-1398)10.4
    
    Loan Agreement by and between Ansoft Corporation and PNC Bank, National Association dated
October 21, 2004 (incorporated by reference from Exhibit 99.1 to Form 8-K filed October
21, 2004)10.5
    
    Jacob K. White Stock Option Agreement dated February 1, 1996, as amended (incorporated by
reference from Registration Statement No. 333-40189)10.6
    
    John N. Whelihan Stock Option Agreement dated February 1, 1996, as amended (incorporated
by reference from Registration Statement No. 333-40189)10.7
    
    Agilent HFSS Technology and License Transfer Agreement dated May 1, 2001 (incorporated
by reference from Exhibit 10.12 of Form 10-K filed July 25, 2003)14
    
    Code of Business Conduct-this code of ethics may be accessed at the Companys website:www.ansoft.com21.1
    
    Subsidiaries of the registrant (incorporated by reference from the Companys Annual
Report on Form 10-K for the fiscal year ended April 30, 1997)31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (filed herewith)
    42




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on June 2, 2005. ANSOFT
CORPORATIONBy
    
    /s/ Nicholas CsendesNicholas CsendesPresident
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities indicated on June
2, 2005. Signature
    
    Title/s/ Nicholas Csendes
    
    Director, President and Chief Executive Officer (Principal Executive Officer)Nicholas Csendes/s/ Thomas A.N. Miller
    
    Chief Financial Officer (Principal Financial and Accounting Officer)Thomas A.N. Miller/s/ Zoltan J. Cendes
    
    Director, Chief Technology Officer and Chairman of the Board of DirectorsZoltan J. Cendes/s/ Peter Robbins
    
    DirectorPeter Robbins/s/ Paul Quast
    
    DirectorPaul Quast/s/ John N. Whelihan
    
    DirectorJohn N. Whelihan
 43