ECONOMICS

ANSYS, Inc., a global innovator of simulation software and technologies designed to optimize product development processes, today announced record fourth quarter and annual 2003 results. ANSYS' fourth quarter and year-to- date GAAP results include: - Total revenue of $33.3 million, as compared to $25.3 million in the fourth quarter of 2002; total revenue of $113.5 million in 2003 as compared to $91.0 million in 2002; - Diluted earnings per share of $0.45 as compared to $0.41 in the fourth quarter of 2002; diluted earnings per share of $1.34 in 2003 as compared to $1.22 in 2002; and - Cash flows from operations of $10.1 million in the fourth quarter of 2003 and $38.8 million for the year 2003. Excluding the adverse impact on reported software license revenue of purchase accounting adjustments related to the Company's February 2003 acquisition of CFX and acquisition-related amortization (see discussion below), ANSYS' fourth quarter and year-to-date adjusted (non-GAAP) results include: - Total adjusted revenue of $33.8 million, as compared to $25.3 million in the fourth quarter of 2002; total adjusted revenue of $116.5 million in 2003 as compared to $91.0 million in 2002; - An overall adjusted operating profit margin, excluding total amortization, of 35% as compared to 39% for the fourth quarter of 2002; and an overall adjusted operating profit margin, excluding total amortization, of 32% in 2003 as compared to 32% in 2002; and - Adjusted diluted earnings per share of $0.50 as compared to $0.43 for the fourth quarter of 2002; adjusted diluted earnings per share of $1.60 in 2003 as compared to $1.29 in 2002. ANSYS President and CEO, Jim Cashman, commenting on the Company's 2003 results, said, "There are four significant factors that have given us the opportunity to achieve increasingly high levels of business performance. First, we have progressed our vision of providing solutions for total product innovation through simulation-driven design. Second, we have maintained a commitment to technical excellence and R&D investment, which has allowed us to drive this vision in a meaningful timeframe. Next, we have stayed true to our business model and disciplines, even in the more difficult economic times of recent, and finally, we have remained committed to the long-standing relationships that we have with our customers, employees and business partners." Cashman added, "With these factors in mind, we view 2004 as a year that presents an expanding series of opportunities to continue to advance our technology and service strategies to address the ever-increasing needs and business pressures that our customers face. We believe that ANSYS is ideally positioned to articulate and demonstrate a compelling business proposition to both new and existing customers." The adjusted results highlighted above represent non-GAAP (Generally Accepted Accounting Principles) financial measures. A reconciliation of these measures to the appropriate GAAP measures is included in the condensed financial statements included in this release. Adjustments to Reported GAAP Financial Results - Purchase Accounting Adjustment for Acquired Deferred Revenue: As announced February 26, 2003, ANSYS acquired CFX for approximately $22 million in cash. In accordance with the fair value provisions of EITF 01-3 "Accounting in a Business Combination for Deferred Revenue of an Acquiree," acquired deferred software license revenue of approximately $4.8 million was recorded on the opening balance sheet, which was approximately $3.4 million lower than the historical carrying value. Although this purchase accounting requirement has no impact on the Company's business or cash flow, it adversely impacts the Company's reported GAAP software license revenue for the first twelve months post-acquisition. In order to provide investors with financial information that facilitates comparison of both historical and future results, the Company has and will continue to provide adjusted financial information, which excludes the impact of the purchase accounting adjustment, through this twelve-month period. - Acquisition Related Amortization: As previously discussed, the Company completed its recent acquisition of CFX in February 2003. Prior to that, the Company also acquired CADOE S.A. and ICEM CFD Engineering in November 2001 and August 2000, respectively. These acquisitions have all been accounted for as purchases, resulting in the recording of a significant amount of goodwill and identifiable intangible assets. As a result of the amortization associated with intangible assets, ANSYS' quarterly and year-to-date financial results are not comparable with prior periods. To enable investors and other interested parties to compare 2003 financial results to historical and future periods, ANSYS is providing its 2003 fourth quarter and year-to-date reported GAAP results as well as financial results that have been adjusted for the impact of the items described above. Fourth Quarter 2003 and Year Ended December 31, 2003 Reported GAAP Results ANSYS reported net income for the fourth quarter of $7.2 million, or $0.45 diluted earnings per share, based on 16.4 million weighted average shares outstanding. For the quarter ended December 31, 2002, ANSYS reported net income of $6.3 million, or $0.41 diluted earnings per share, based on 15.4 million weighted average shares outstanding. For the year ended December 31, 2003, ANSYS reported net income of $21.3 million, or diluted earnings per share of $1.34, based on 15.9 million weighted average shares outstanding. For the year ended December 31, 2002, ANSYS reported net income of $19.0 million, or diluted earnings per share of $1.22, based on 15.6 million weighted average shares outstanding. Cash and short-term investments at December 31, 2003 totaled $83.0 million and ANSYS remains debt free. Reconciliation of Non-GAAP Measures This earnings release contains non-GAAP financial measures. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States. Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of the adjusted (non-GAAP) financial measures to the most directly comparable GAAP financial measures. Adjusted software license revenue, adjusted operating profit margin, adjusted net income and adjusted diluted earnings per share are presented in this earnings release because management uses this information in evaluating the results of the continuing operations of business and believes that this information provides the users of the financial statements a valuable insight into the operating results. Additionally, management believes that it is in the best interest of its investors to provide financial information that will facilitate comparison of both historical and future results. ANSYS, INC. AND SUBSIDIARIES Consolidated Statements of Income (in thousands, except per share data) (Unaudited) Three months ended Twelve months ended December 31, December 31, December 31, December 31, 2003 2002 2003 2002 Revenue: Software licenses $17,951 $14,052 $58,408 $48,177 Maintenance and service 15,303 11,215 55,127 42,834 Total revenue 33,254 25,267 113,535 91,011 Cost of sales: Software licenses 1,492 1,041 5,365 3,897 Amortization of software and acquired technologies 726 371 3,028 1,471 Maintenance and service 3,330 2,038 13,112 7,863 Total cost of sales 5,548 3,450 21,505 13,231 Gross profit 27,706 21,817 92,030 77,780 Operating expenses: Selling and marketing 7,523 4,997 24,777 20,089 Research and development 6,183 4,693 23,792 19,605 Amortization 281 194 1,055 818 General and administrative 3,291 2,632 12,089 10,194 Total operating expenses 17,278 12,516 61,713 50,706 Operating income 10,428 9,301 30,317 27,074 Other (loss) income (141) (215) 357 311 Income before income tax provision 10,287 9,086 30,674 27,385 Income tax provision 3,086 2,817 9,361 8,426 Net income $7,201 $6,269 $21,313 $18,959 Earnings per share - basic: Basic earnings per share $0.47 $0.43 $1.42 $1.30 Weighted average shares - basic 15,239 14,557 14,958 14,598 Earnings per share - diluted: Diluted earnings per share $0.45 $0.41 $1.34 $1.22 Weighted average shares - diluted 16,398 15,374 15,938 15,594 ANSYS, INC. AND SUBSIDIARIES Reconciliation of Non-GAAP Measures For the three months ended December 31, 2003 (in thousands, except per share data) (Unaudited) Adjusted As Reported Adjustments Results Revenue: Software licenses $17,951 $545(a) $18,496 Maintenance and service 15,303 - 15,303 Total revenue 33,254 545 33,799 Cost of sales: Software licenses 1,492 - 1,492 Amortization of software and acquired technologies 726 (621)(b) 105 Maintenance and service 3,330 - 3,330 Total cost of sales 5,548 (621) 4,927 Gross profit 27,706 1,166 28,872 Operating expenses: Selling and marketing 7,523 - 7,523 Research and development 6,183 - 6,183 Amortization 281 (281)(b) - General and administrative 3,291 - 3,291 Total operating expenses 17,278 (281) 16,997 Operating income 10,428 1,447 11,875 Other (loss) income (141) - (141) Income before income tax provision 10,287 1,447 11,734 Income tax provision 3,086 506 (c) 3,592 Net income $7,201 $941 $8,142 Earnings per share - basic: Basic earnings per share $0.47 $0.54 Weighted average shares - basic 15,239 15,239 Earnings per share - diluted: Diluted earnings per share $0.45 $0.50 Weighted average shares - diluted 16,398 16,398 (a) Amount represents the revenue not reported during the period as a result of the purchase accounting adjustment associated with EITF 01-3, "Accounting in a Business Combination for Deferred Revenue of an Acquiree." (b) Amount represents amortization expense associated with intangible assets acquired in business acquisitions, including amounts primarily related to acquired software, customer list and non-compete agreements. (c) Amount represents the income tax impact of the revenue and amortization expense adjustments referred to in (a) and (b) above. ANSYS, INC. AND SUBSIDIARIES Reconciliation of Non-GAAP Measures For the three months ended December 31, 2002 (in thousands, except per share data) (Unaudited) Adjusted As Reported Adjustments Results Revenue: Software licenses $14,052 $- $14,052 Maintenance and service 11,215 - 11,215 Total revenue 25,267 - 25,267 Cost of sales: Software licenses 1,041 - 1,041 Amortization of software and acquired technologies 371 (241)(a) 130 Maintenance and service 2,038 - 2,038 Total cost of sales 3,450 (241) 3,209 Gross profit 21,817 241 22,058 Operating expenses: Selling and marketing 4,997 - 4,997 Research and development 4,693 - 4,693 Amortization 194 (194)(a) - General and administrative 2,632 - 2,632 Total operating expenses 12,516 (194) 12,322 Operating income 9,301 435 9,736 Other income (215) - (215) Income before income tax provision 9,086 435 9,521 Income tax provision 2,817 152(b) 2,969 Net income $6,269 $283 $6,552 Earnings per share - basic: Basic earnings per share $0.43 $ 0.45 Weighted average shares - basic 14,557 14,557 Earnings per share - diluted: Diluted earnings per share $0.41 $ 0.43 Weighted average shares - diluted 15,374 15,374 (a) Amount represents amortization expense associated with intangible assets acquired in business acquisitions, including amounts primarily related to acquired software, customer list and non-compete agreements. (b) Amount represents the income tax impact of the amortization expense adjustment referred to in (a) above. ANSYS, INC. AND SUBSIDIARIES Reconciliation of Non-GAAP Measures For the twelve months ended December 31, 2003 (in thousands, except per share data) (Unaudited) Adjusted As Reported Adjustments Results Revenue: Software licenses $58,408 $3,000(a) $61,408 Maintenance and service 55,127 - 55,127 Total revenue 113,535 3,000 116,535 Cost of sales: Software licenses 5,365 - 5,365 Amortization of software and acquired technologies 3,028 (2,446)(b) 582 Maintenance and service 13,112 - 13,112 Total cost of sales 21,505 (2,446) 19,059 Gross profit 92,030 5,446 97,476 Operating expenses: Selling and marketing 24,777 - 24,777 Research and development 23,792 - 23,792 Amortization 1,055 (1,055)(b) - General and administrative 12,089 - 12,089 Total operating expenses 61,713 (1,055) 60,658 Operating income 30,317 6,501 36,818 Other income 357 - 357 Income before income tax provision 30,674 6,501 37,175 Income tax provision 9,361 2,275(c) 11,636 Net income $21,313 $4,226 $25,539 Earnings per share - basic: Basic earnings per share $ 1.42 $1.71 Weighted average shares - basic 14,958 14,958 Earnings per share - diluted: Diluted earnings per share $1.34 $1.60 Weighted average shares - diluted 15,938 15,938 (a) Amount represents the revenue not reported during the period as a result of the purchase accounting adjustment associated with EITF 01-3, "Accounting in a Business Combination for Deferred Revenue of an Acquiree." (b) Amount represents amortization expense associated with intangible assets acquired in business acquisitions, including amounts primarily related to acquired software, customer list and non-compete agreements. (c) Amount represents the income tax impact of the revenue and amortization expense adjustments referred to in (a) and (b) above. ANSYS, INC. AND SUBSIDIARIES Reconciliation of Non-GAAP Measures For the twelve months ended December 31, 2002 (in thousands, except per share data) (Unaudited) Adjusted As Reported Adjustments Results Revenue: Software licenses $48,177 $- $48,177 Maintenance and service 42,834 - 42,834 Total revenue 91,011 - 91,011 Cost of sales: Software licenses 3,897 - 3,897 Amortization of software and acquired technologies 1,471 (923)(a) 548 Maintenance and service 7,863 - 7,863 Total cost of sales 13,231 (923) 12,308 Gross profit 77,780 923 78,703 Operating expenses: Selling and marketing 20,089 - 20,089 Research and development 19,605 - 19,605 Amortization 818 (818)(a) - General and administrative 10,194 - 10,194 Total operating expenses 50,706 (818) 49,888 Operating income 27,074 1,741 28,815 Other income 311 - 311 Income before income tax provision 27,385 1,741 29,126 Income tax provision 8,426 609(b) 9,035 Net income $18,959 $1,132 $20,091 Earnings per share - basic: Basic earnings per share $ 1.30 $1.38 Weighted average shares - basic 14,598 14,598 Earnings per share - diluted: Diluted earnings per share $ 1.22 $1.29 Weighted average shares - diluted 15,594 15,594 (a) Amount represents amortization expense associated with intangible assets acquired in business acquisitions, including amounts primarily related to acquired software, customer list and non-compete agreements. (b) Amount represents the income tax impact of the amortization expense adjustment referred to in (a) above. ANSYS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands) (Unaudited) December 31, December 31, 2003 2002 ASSETS: Cash & short-term investments $ 83,015 $61,132 Accounts receivable, net 20,028 15,875 Other assets 76,304 49,994 Total assets $179,347 $127,001 LIABILITIES & STOCKHOLDERS' EQUITY: Deferred revenue $37,874 $ 26,395 Other liabilities 14,399 9,213 Stockholders' equity 127,074 91,393 Total liabilities & stockholders' equity $179,347 $127,001