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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 4, 2004
ASPEN TECHNOLOGY, INC.
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(Exact name of registrant as specified in charter)
Delaware 0-24786 04-2739697
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(State or other juris- (Commission (IRS Employer
diction of incorporation File Number) Identification No.)
Ten Canal Park, Cambridge, Massachusetts 02141
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 949-1000
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(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS AND REQUIRED FD DISCLOSURE
On August 4, 2004, Aspen Technology, Inc. announced that Wayne Sim, Senior
Vice President -Operations and Chief Product Officer, will resign from the
company effective as of August 15, 2004.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On August 4, 2004, the company also announced its financial results for the
fiscal year ended June 30, 2004. The full text of the press release issued in
connection with these announcements is attached as Exhibit 99.1 to this Current
Report on Form 8-K.
The information in this Item 12 of Form 8-K and the Exhibit attached hereto
shall not be deemed "filed" for purposes of Section 18 of the Securities
Exchange Act of 1934 or otherwise subject to the liabilities of that section,
nor shall it be deemed incorporated by reference in any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except as
expressly set forth by specific reference in such a filing.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: August 4, 2004 ASPEN TECHNOLOGY, INC.
By: /s/ Charles F. Kane
--------------------------------
Charles F. Kane
Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
- ---------- ------------
99.1 Press release issued by Aspen Technology, Inc. on
August 4, 2004.
Exhibit 99.1
Aspen Technology Delivers Thirteen Percent Software License
Revenue Growth as Key Process Industry
Markets Remain Strong
CAMBRIDGE, Mass.--(BUSINESS WIRE)--Aug. 4, 2004--
Company announces initiatives designed to generate higher
operating margins
Aspen Technology, Inc. (NASDAQ: AZPN) today reported financial
results for its fiscal 2004 fourth quarter and fiscal year ended June
30, 2004.
Total revenues for the fourth quarter totaled $87.6 million, with
software license revenues growing by thirteen percent to $43.5 million
and services revenues totaling $44.0 million. Management had
previously estimated that total revenues for the fiscal fourth quarter
would be in the range of $81 to $83 million and that software license
revenues would be in the range of $37 to $39 million. On a Generally
Accepted Accounting Principles (GAAP) basis, the company reported a
fourth quarter net loss of $41.4 million, or $1.00 per diluted share,
which includes one-time charges of $42.8 million. On a pro forma
(non-GAAP) basis, excluding these charges, amortization of
intangibles, and the preferred stock dividend and discount accretion,
the company reported fiscal 2004 fourth quarter net income of $6.6
million, or $0.08 per diluted share.
The company initiated several actions in the fourth quarter that
are expected to lower its quarterly expense run rate to approximately
$69 million for the quarter ending September 30, 2004. These actions
include the redeployment and reduction of personnel, scaling back
investments in certain products, and eliminating certain lease
obligations. The company expects to direct a portion of these savings
toward additional sales and marketing resources that will be focused
on its newer products. Management believes its lower expense base and
sharpened focus will position the company to achieve double-digit
operating margins for fiscal 2005.
"The fundamentals of our business continue to remain solid. We
delivered our fifth straight quarter of software license growth and,
for the first time since June 1998, generated pro forma (non-GAAP)
operating margins for the quarter in the double-digits," said David
McQuillin, President and CEO of AspenTech. "Our sales were balanced by
both industry and product mix, as we experienced strength from each of
the chemicals, petroleum, and oil & gas markets. Additionally, our
manufacturing/supply chain product line had its strongest performance
in the past two years.
"With the potential approval of the Federal Trade Commission (FTC)
settlement, we would remove a major external issue that has distracted
us from focusing on our business over the past two years. Our
attention has now turned to building on our momentum and increasing
our operating margins for fiscal 2005. We indicated at the beginning
of this year that we would continue to focus our efforts on bringing
all of our products together to provide an integrated solution for the
Enterprise Operations Management market. The execution of this
integration strategy has enabled us to streamline many of our internal
processes to drive costs out of the business, as well as curtail our
investment in certain products. These changes will enable us to
increase our productivity and efficiency, while driving earnings
growth in fiscal 2005."
During the fourth quarter, the company signed significant software
license transactions with Shell Oil, Procter & Gamble, Dupont, Nova
Chemicals, INVISTA, Sasol, Jacobs Engineering and BASF.
Fiscal 2004 Results
Total revenues for the fiscal year ending June 30, 2004 were
$325.7 million, with software license revenues growing by
approximately nine percent year-over-year to $152.3 million and
services revenue totaling $173.4 million. On a GAAP basis, the company
reported a net loss of $35.0 million, or $0.86 per diluted share, as
compared to a net loss of $170.0 million, or ($4.42) per diluted
share, for fiscal 2003. On a pro forma (non-GAAP) basis, the company
reported fiscal 2004 net income of $24.8 million, or $0.31 per diluted
share.
"During fiscal 2004 we increased our pro forma (non-GAAP)
operating income to $27.0 million from $2.5 million in fiscal 2003,
reduced our debt by over $100 million, and generated $41 million in
cash flow from operations," said Charles Kane, Sr. VP & CFO of
AspenTech. "This improvement has been the result of software license
revenue growth of nine percent, the reduction of total recurring
expenses by more than $21 million, and lowering our DSOs for billed
receivables in the fourth quarter to 54 days, a 31 day year-over-year
improvement. We are extremely pleased with this performance and
anticipate that over the next twelve months we will generate
significantly higher operating margins and have a debt-free balance
sheet by the end of fiscal 2005."
"I am proud of the dramatic improvements we have made in the
financial performance of the company for fiscal 2004," McQuillin said.
"As we approach AspenWorld, the process industry conference we host
every two years, we are excited about our opportunity to showcase how
our new, integrated solutions can help customers improve their
business processes and capture significant economic value."
FTC Settlement
On July 15, 2004, the company announced that Federal Trade
Commission (FTC) commissioners had accepted a Proposed Consent Decree
for public comment to settle proceedings regarding its acquisition of
Hyprotech. Under the terms of the agreement, AspenTech would agree to
sell rights to the Hyprotech product line together with its operator
training business to an FTC-approved buyer, but would otherwise retain
the rights to continue selling and developing all of the engineering
software products it acquired from Hyprotech, excluding the AXSYS
product line. Additionally, AspenTech sold its AXSYS product line to
Bentley Systems on July 21, 2004.
The revenue impact from the sale of the operator training business
and AXSYS product line is expected to be approximately $20 million, of
which approximately $2 million is related to software license revenue.
The fiscal 2004 operating income contribution from these businesses
was approximately $1.5 million.
Business Outlook
For fiscal 2005, the company anticipates that it will generate pro
forma (non-GAAP) earnings per share between $0.31 and $0.40 and that
it will deliver double-digit operating margins for the full fiscal
year. Due to the sale of its operator training business, which
consists primarily of implementation services, the company believes
that software license revenues will represent a higher percentage of
its total revenues in fiscal 2005.
Conference Call and Webcast
The company will hold a conference call and webcast to discuss its
financial results, business outlook, and related corporate and
financial matters, including the previously announced Proposed Consent
Decree with the Federal Trade Commission, at 5:00 p.m. eastern time on
Wednesday, August 4, 2004. Interested parties may listen to a live
webcast of the call by logging on to AspenTech's website:
http://www.aspentech.com and clicking on the "Webcast" link under the
Investor Relations section of the site. A replay of the call will be
archived on AspenTech's website for the next twelve months and will
also be available for forty-eight hours via telephone, beginning at
8:00 p.m. eastern time on August 4, 2004, by dialing (800) 642-1687
and entering in confirmation code: 9142321.
Pro Forma (non-GAAP) Results
AspenTech reports pro forma financial results, which exclude
certain non-operational, non-cash and other specified charges that
management generally does not consider in evaluating the Company's
ongoing operations. These results are provided as a complement to
results provided in accordance with accounting principles generally
accepted in the United States (known as "GAAP"). Management believes
this pro forma measure helps indicate underlying trends in the
Company's business, and uses this pro forma measure to establish
budgets and operational goals that are communicated internally and
externally, to manage the Company's business and to evaluate its
performance. A reconciliation of pro forma to GAAP is included in the
attached condensed consolidated financial statements.
About AspenTech
Aspen Technology, Inc. provides industry-leading software and
implementation services that enable process companies to increase
efficiency and profitability. AspenTech's engineering product line is
used to design and improve plants and processes, maximizing returns
throughout an asset's operating life. Its manufacturing/supply chain
product line allows companies to increase margins in their plants and
supply chains, by managing customer demand, optimizing production, and
streamlining the delivery of finished products. These two offerings
are combined to create solutions for enterprise operations management
(EOM), integrated enterprise-wide systems that provide process
manufacturers with the capability to dramatically improve their
operating performance. Over 1,500 leading companies already rely on
AspenTech's software, including Aventis, Bayer, BASF, BP,
ChevronTexaco, Dow Chemical, DuPont, ExxonMobil, Fluor, Foster
Wheeler, GlaxoSmithKline, Shell, and Total. For more information,
visit www.aspentech.com.
The second, third, fourth, fifth, ninth and tenth paragraphs of
this press release contains forward-looking statements for purposes of
the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. For this purpose, any statement using the term "will,"
"should," "could," "anticipates," "believes" or a comparable term is a
forward-looking statement. Actual results may vary significantly from
AspenTech's expectations based on a number of risks and uncertainties,
including: AspenTech's lengthy sales cycle which makes it difficult to
predict quarterly operating results; the FTC proceeding challenging
AspenTech's acquisition of Hyprotech; fluctuations in AspenTech's
quarterly operating results; AspenTech's dependence on customers in
the cyclical chemicals, petrochemicals and petroleum industries;
AspenTech's ability to raise additional capital as required;
AspenTech's ability to integrate the operations of acquired companies;
intense competition; AspenTech's need to develop and market products
successfully; reliance on relationships with strategic partners; and
other risk factors described from time to time in AspenTech's periodic
reports and registration statements filed with the Securities and
Exchange Commission. AspenTech cannot guarantee any future results,
levels of activity, performance, or achievements. Moreover, neither
AspenTech nor anyone else assumes responsibility for the accuracy and
completeness of any forward-looking statements. AspenTech undertakes
no obligation to update any of the forward-looking statements after
the date of this press release.
AspenTech and the Aspen logo are trademarks of Aspen Technology,
Inc., Cambridge, Mass.
ASPEN TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Year
Ended Ended
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
----------------- -------------------
REVENUES:
Software licenses $43,534 $38,549 $152,270 $139,859
Service and other 44,029 44,220 173,426 182,862
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Total revenues 87,563 82,769 325,696 322,721
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COST OF REVENUES:
Cost of software licenses 3,780 4,179 15,566 13,916
Cost of service and other 25,210 26,292 99,433 106,868
Amortization of technology
related intangible assets 1,790 1,822 7,270 8,219
Impairment of technology
related intangible and
computer software development
assets 3,250 496 3,250 8,533
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Total cost of revenues 34,030 32,789 125,519 137,536
-------------------------------------
Gross profit 53,533 49,980 200,177 185,185
OPERATING COSTS:
Selling and marketing 28,205 25,243 99,486 105,883
Research and development 14,561 15,617 59,095 65,086
General and administrative
(includes litigation defense
and settlement costs of
$5,103, $0, $6,553 and $0 for
the three months ended June
30, 2004 and 2003 and twelve
months ended June 30, 2004
and 2003, respectively) (2) 12,189 7,222 31,714 28,462
Long lived asset impairment
charges 967 - 967 106,264
Restructuring charges and FTC
legal costs 18,833 18,037 20,833 41,080
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Total operating costs 74,755 66,119 212,095 346,775
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Income (loss) from operations (21,222) (16,139) (11,918) (161,590)
Other income (expense), net 184 154 941 (596)
Interest income, net 416 155 2,493 1,353
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Income (loss) before provision
for income taxes (20,622) (15,830) (8,484) (160,833)
Provision for income taxes
(includes write-down of U.S.
net deferred tax assets of
$14,625 in the three and
twelve months ended June 30,
2004) (2) 17,351 - 20,206 -
-------------------------------------
Net income (loss) (37,973) (15,830) (28,690) (160,833)
Accretion of preferred stock
discount and dividend (1) (3,458) (2,372) (6,358) (9,184)
-------------------------------------
Net income (loss) applicable
to common stockholders $(41,431)$(18,202)$(35,048)$(170,017)
=====================================
EARNINGS PER SHARE:
Basic and Diluted net income
(loss) per common share $(1.00) $(0.47) $(0.86) $(4.42)
=====================================
Weighted average shares
outstanding - Basic and
Diluted 41,328 39,026 40,575 38,476
=====================================
PRO FORMA (NON-GAAP) EARNINGS PER SHARE:
Pro forma (non-GAAP) net income excludes Accretion of preferred
stock discount and dividend, Amortization of technology related
intangible assets, Impairment of technology related intangible
assets and computer software development costs, Long lived asset
impairment charges, Litigation defense and settlement costs,
Restructuring charges and FTC legal costs and the write-down of
the U.S. deferred tax assets. Pro forma (non-GAAP) weighted
average shares outstanding assumes the conversion of the Series D
preferred stock to common stock.
Net income $6,595 $4,525 $24,808 $3,263
=====================================
Diluted earnings (loss) per
share $0.08 $0.11 $0.31 $0.08
=====================================
Weighted average shares
outstanding - diluted 86,976 41,051 80,991 38,476
=====================================
(1) Detail of this amount is provided on the reconciliation of net
income (loss) to pro forma (non-GAAP) net income
(2) These parenthetical references will not be presented in our
Form 10-K.
Supplemental information -
Three Months Year
Ended Ended
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
----------------- -------------------
Reconciliation of income (loss) from operations to
pro forma (non-GAAP) income from operations
Income (loss) from operations $(21,222)$(16,139)$(11,918)$(161,590)
Adjustments to income (loss)
from operations
Amortization of technology
related intangible assets 1,790 1,822 7,270 8,219
Impairment of technology related
intangible and computer
software development assets 3,250 496 3,250 8,533
Litigation defense and
settlement costs, included in
General and Administrative
costs 5,103 - 6,553 -
Long lived asset impairment
charges 967 - 967 106,264
Restructuring charges and FTC
legal costs 18,833 18,037 20,833 41,080
-------------------------------------
Pro forma (non-GAAP) income from
operations $8,721 $4,216 $26,955 $2,506
=====================================
Reconciliation of net income
(loss) to pro forma (non-GAAP)
net income
Net income (loss) applicable to
common stockholders $(41,431)$(18,202)$(35,048)$(170,017)
Adjustments to net income (loss)
applicable to common
stockholders
Net effect of adjustments to
income (loss) from operations
(above) 29,943 20,355 38,873 164,096
Preferred stock discount and
dividend accretion 3,458 2,372 12,810 9,184
Gain on conversion of Series B
redeemable preferred stock - - (6,452) -
Write-down of U.S. net deferred
tax assets 14,625 - 14,625 -
-------------------------------------
Pro forma (non-GAAP) net income $6,595 $4,525 $24,808 $3,263
=====================================
ASPEN TECHNOLOGY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
June 30, June 30,
2004 2003
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ASSETS
Current assets:
Cash, cash equivalents and short-term
investments $107,677 $51,567
Accounts receivable, net 52,667 77,725
Unbilled services 15,518 15,279
Current portion of long-term installments
receivable, net 21,475 34,720
Deferred tax asset 31 2,929
Prepaid expenses and other current assets 10,084 11,581
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Total current assets 207,452 193,801
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Long-term installments receivable, net 67,724 73,377
Equipment and leasehold improvements, net 18,664 31,158
Computer software development costs, net 15,933 17,728
Intangible assets, net 34,307 41,279
Purchased intellectual property, net 1,295 1,861
Deferred tax asset 2,492 13,831
Other assets 3,158 5,445
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Total assets $351,025 $378,480
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $58,595 $3,849
Amount owed to Accenture - 8,162
Accounts payable and accrued expenses 84,584 82,094
Unearned revenue 14,783 20,492
Deferred revenue 33,025 37,266
Deferred tax liability 325 -
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Total current liabilities 191,312 151,863
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Long-term debt, less current maturities 1,952 89,911
Deferred revenue, less current portion 5,363 9,815
Deferred tax liability 4,220 13,258
Other liabilities 10,806 16,009
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Redeemable preferred stock 106,761 57,537
Total stockholders' equity 30,611 40,087
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Total liabilities and stockholders' equity $351,025 $378,480
========= =========
CONTACT: Aspen Technology, Inc.
Joshua Young, 617-949-1274
joshua.young@aspentech.com