SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant / /
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14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/X/ Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Aspen Technology, Inc.
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(Name of Registrant as Specified In Its Charter)
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/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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FILING PURSUANT TO RULE 14a-12
This filing is being made pursuant to Rule 14a-12 under the Securities
Exchange Act of 1934, as amended. This filing contains statements about Aspen
Technology, Inc. ("Aspen"), Advent International, Inc. ("Advent"), and the
proposed sale of Aspen's Series D convertible preferred stock and warrants to
Advent and holders of Aspen's Series B convertible preferred stock, and the
exchange of shares of Aspen's Series B convertible preferred stock and warrants
for Series D convertible preferred stock and warrants. Statements in this filing
regarding these proposed transactions, the expected timetable for completing
these transactions, and the benefits to be derived from the proposed transaction
and any other statements about Aspen's future expectations, beliefs, goals,
plans or prospects constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Any statements that are
not statements of historical fact (including statements containing the words
"believes," "plans," "anticipates," "expects," estimates and similar
expressions) should also be considered to be forward-looking statements. There
are a number of important factors that could cause events to differ materially
from those indicated by such forward-looking statements, including: Aspen's
ability to consummate the proposed financing transaction and the other factors
described in Aspen's Annual Report on Form 10-K for the fiscal year ended June
30, 2002 and its most recent quarterly report filed with the SEC. Aspen
expressly disclaims any intention or obligation to update any forward-looking
statements as a result of developments occurring after the date of this filing.
The following is the text of the press release issued by Aspen on June
2, 2003 in connection with the proposed financing transaction with Advent and
the holders of Aspen's Series B convertible preferred stock.
ASPEN TECHNOLOGY TO STRENGTHEN BALANCE SHEET
WITH PROPOSED FINANCING
COMPANY WILL RETIRE SERIES B PREFERRED STOCK AND INTENDS TO REPURCHASE
CONVERTIBLE DEBT
Cambridge, Mass., June 2, 2003--Aspen Technology, Inc. (NASDAQ: AZPN), a leading
provider of software and services that improve profitability for process
manufacturers, today announced it has entered into an agreement to strengthen
its balance sheet.
Under the terms of the agreement, Advent International, a leading global private
equity firm, will invest $100 million in cash to purchase a new issue of Series
D convertible preferred stock from AspenTech. The Company will use $30 million
of the cash proceeds and issue an additional $21 million of Series D preferred
shares to redeem its Series B preferred shares, retiring the $60 million (of
stated value) Series B preferred stock in its entirety. AspenTech will use up to
$60 million of the remaining cash proceeds, net of fees and expenses, for
working capital and to repurchase a significant portion of its convertible
subordinated debentures, which matures in 2005, at prices attractive to the
company. The Series D financing is subject to stockholder and regulatory
approval, as well as other closing conditions.
AspenTech believes this financing will address near-term liquidity pressures and
allow the Company to meet its outstanding obligations, while building
shareholder value. Management and the Board of Directors believe this
transaction will: 1) remove customer concerns surrounding the financial
condition of AspenTech; 2) eliminate the Series B preferred stock, thereby
eliminating its restrictive provisions and the potentially dilutive near-term
issuances of common stock upon redemption; 3) improve the Company's near-term
cash flow; 4) allow investors to analyze AspenTech's underlying equity value
more clearly; and 5) enable management to focus its full attention on
operational matters.
"In the two quarters since I became CEO, we have worked diligently to refocus
and streamline our operations and, in the process, better match our spending
with our revenues," observed David McQuillin, President and Chief Executive
Officer of AspenTech. "We have substantially shrunk the GAAP loss and succeeded
in returning the company to profitability, excluding restructuring and other
charges, in each of the past two quarters. The next logical step in restoring
and building shareholder value is to address the undeniable burden of our
existing financial obligations. I firmly believe that it is in every
stakeholder's interest to strengthen the balance sheet at this time, and that
this financing will have a positive impact on long-term shareholder value."
The Series D shares will be convertible into common stock at a price of $3.33
per share. In conjunction with the Series D financing, AspenTech will issue to
Series D holders warrants to purchase approximately 7.3 million common shares at
a price of $3.33 per share. Series D holders will be entitled to receive
dividends on their preferred shares at a rate of 8 percent annually. The Company
has the flexibility to pay the dividends in cash or common stock, when and as
declared by AspenTech, or to allow the dividends to accrue through redemption or
conversion. The holders of the Series D shares will have the right to redeem for
cash 50 percent of their Series D shares, plus accrued dividends, beginning in
2009, with the remainder of the issue becoming redeemable in 2010. The Company
has the ability to redeem the Series D shares beginning in 2006, provided the
Company's common stock has traded at a weighted-average
price of at least $7.60 (pre-split) for 45 consecutive days. The Series D shares
and new warrants will contain weighted-average anti-dilution protection.
Advent International, which has made more than 80 information technology
investments in recent years, will have the right to appoint up to four of the
nine directors on AspenTech's Board. Joining the Company's Board of Directors
upon the closing of the Series D financing will be Doug Kingsley, Managing
Director and Michael Pehl, Operating Partner of Advent International, and one or
two additional independent members to be designated.
In connection with the financing, AspenTech also announced it will seek
shareholder approval for a 1-for-3 share reverse stock split, in order to align
shares outstanding and the resultant share price with traditional standards for
companies of comparable size. Assuming the reverse split is approved, Aspen
Technology will have approximately 27 million fully diluted shares outstanding
at the current market price upon completion of the financing, including the
conversion of the Series D preferred and the exercise of the Series D warrants.
In the proxy statement relating to this transaction, shareholders will also be
asked to approve an increase in the size of the employee stock option pool
available for grant, to ensure that the Company's incentive compensation
programs remain competitive.
The Company expects to file its proxy statement in connection with this
financing with the Securities and Exchange Commission by mid-June 2003. Assuming
no S.E.C. review of the proxy statement, AspenTech expects to hold a vote on the
financing and related items in August and to close the financing shortly
thereafter.
AspenTech will host a conference call to discuss the information in this release
and related matters on Monday, June 2nd, 2003 at 8:30am, Eastern Time, which can
be accessed at www.aspentech.com by clicking on the Investor Relations
hyperlink. The live dial-in number for the call is 913-981-5507. A supplementary
slide presentation relating to this announcement will also be posted on the
Webcast portion of AspenTech's website. The teleconference will also be
available for replay, beginning at 11:00 a.m. eastern time, by dialing
719-457-0820 and entering confirmation code 459086.
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 TotalFinaElf. For more information, visit
www.aspentech.com.
ABOUT ADVENT INTERNATIONAL
Advent International is one of the world's largest private equity firms, with $6
billion in cumulative capital raised and 14 offices in 13 countries. The firm
has over 90 investment
professionals operating in North America, Europe, Latin America and Asia. Since
its founding in 1984, Advent has financed over 500 companies and has helped
businesses raise $10 billion through public equity and debt offerings. These
include 128 IPOs on 20 stock exchanges worldwide. Advent is committed to helping
management teams build successful businesses by applying its industry expertise,
international resources and local market knowledge. For more information, visit
www.adventinternational.com.
THE THIRD AND FOURTH PARAGRAPHS OF THIS PRESS RELEASE CONTAIN 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 ABILITY TO REPURCHASE CONVERTIBLE SUBORDINATED DEBT AT
ATTRACTIVE PRICES; ASPENTECH'S LENGTHY SALES CYCLE WHICH MAKES IT DIFFICULT TO
PREDICT QUARTERLY OPERATING RESULTS; THE FTC'S INVESTIGATION OF 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.
* * *
The following is the text of the script for Aspen's June 2, 2003
conference call in connection with the proposed financing transaction with
Advent and the holders of Aspen's Series B convertible preferred stock.
The management team of Aspen will be holding a conference call and
simultaneous webcast to discuss the transaction today, June 2, 2003 at 8:30
a.m., Eastern time, which can be accessed at www.aspentech.com by clicking on
the Investor Relations hyperlink. The dial in number for the call is
913-981-5507. The teleconference will also be available for replay, beginning at
11:00a.m., Eastern time, by dialing 719-457-0820 and entering confirmation code
459086.
ASPEN TECHNOLOGY, INC.
SCRIPT FOR CONFERENCE CALL ANNOUNCING PROJECT ALPINE
1. INTRO
a. Welcome to Aspen Technology's conference call in connection with
this morning's press release announcing a proposed transaction to
strengthen the company's balance sheet. I'm Joshua Young, director
of Investor Relations and with me today is David McQuillin, Chief
Executive Officer, and Lisa Zappala, Chief Financial Officer.
b. David and Lisa will begin shortly with some prepared remarks, during
which they will refer to a short slide summary that is available on
our website at WWW.ASPENTECH.COM by clicking on the investor
relations tab and then selecting webcast hyperlink.
c. In order to comply with applicable securities law restrictions, we
will be unable to engage in a question and answer session on this
conference call. In order to assist investors, we have filed an 8-K
with the detailed transaction documents for this financing. Over the
next few weeks, we also plan to file a proxy statement for the
shareholder meeting, which will have additional information,
including a detailed Q&A document on the proposed transaction.
d. This call will be recorded and available for replay on our website
or by dialing 719-457-0820 and entering confirmation code: 459086.
e. Before we begin, I would like to make the usual safe harbor
statement that during the course of this conference call, we may
make projections or other forward-looking statements regarding
future events, or the financial performance of the Company, that
involve risks and uncertainties. The Company's actual results may
differ materially from the projections described in such statements.
Factors that might cause such differences include, but are not
limited to, those discussed in the Risk Factors section of Forms
10-K, 10-Q and 8-K, as filed with the Securities and Exchange
Commission.
f. Also, please note that the following information is related to
current business conditions and our outlook as of the time
the information is provided. Consistent with our prior practice, we
do not expect to update this information prior to release of our
fourth quarter and full fiscal year results, in August.
g. During the course of this call today, we will reference non-GAAP
information as part of our guidance. In compliance with the SEC's
Regulation G, please refer to our 8-K filings that include both our
rationale for why we believe not-GAAP information is important in
describing our operating performance.
h. Now I'll turn the call over to David McQuillin.
2. WHAT WE ANNOUNCED
a. Thanks, Joshua. I am very pleased to announce today a significant
milestone for AspenTech, as Advent International has agreed to make
a substantial equity investment into the company to help us
strengthen our balance sheet. I'm going to spend the next few
minutes describing the proposed transaction at a high level, as well
as its strategic impact on our stakeholders and the motivations that
led to this decision. Lisa will then address the expected impact on
our financial position and prospects, the details of the
transaction, and our estimated timing for key events during the
proxy process. I'll finish by reviewing the reasons we believe this
transaction paves the way forward for AspenTech and its
constituents.
b. As you know, earlier today we announced that we've signed a
definitive agreement to significantly strengthen AspenTech's balance
sheet.
c. A graphic review of the proposed transaction can be found on the
Slide titled "Sources/Uses". Under the agreement, AspenTech will
issue a total of $121 million of a new series of convertible
preferred stock, $21 million of which will be used as an exchange
for Series B preferred shares. The company will receive $100 million
from Advent International in new money;
d. On the right side, you can see that up to, but no more than $45.0
million of cash proceeds may be used to repurchase outstanding 5.25%
Convertible Subordinated Debentures at prices that are attractive to
the company.
e. Along with the exchange of $21 milllion Series D convertible
preferred shares as partial payment, $30 million
of the cash proceeds from the financing will be used to eliminate
the outstanding Series B preferred shares, which otherwise would
have been entitled to receive $60 million over the next eight
months.
f. The remaining cash proceeds, which we estimate will be a minimum of
approximately $15 million, net of fees and expenses, will be used
for working capital purposes.
g. In addition to seeking approval for the new preferred share issuance
and related balance sheet restructuring, we will also be asking
shareholders to approve the following:
i. an expansion of the employee stock option pool, in order to
ensure that our compensation plans remain competitive; and
ii. a 1-for-3 reverse stock split to place the share price,
post-transaction, at a level that will more accurately
reflect our improved financial position.
3. STRATEGIC IMPACT
a. Many of you are aware that our financial performance and operational
effectiveness have improved substantially over the past two fiscal
quarters.
b. This progress has enabled management and the Board of Directors to
turn our attention to the balance sheet, and to the underlying cash
flow and liquidity issues that have hampered our recovery and will
continue to do so until these issues are resolved.
c. Balancing financial and business risk is a critical task for every
company, and this issue has been at the top of my priority list
since I've taken the helm.
i. Many aspects of the business risk we face, such as the
economy or the continuing FTC inquiry, are outside of our
control.
ii. The same cannot be said for our financial risk. Before we
could address the issues relating to our balance sheet, we
first had to restore the company to operating profitability.
iii. As I mentioned earlier, we successfully accomplished that.
Now, we are finally in a position to reduce the debt
level, eliminate the near-term overhang and uncertainty
created from the highly restrictive Series B preferred stock,
and add liquidity to our balance sheet.
d. Both the Board and I agree that this transaction is absolutely
CRITICAL to ALL of our stakeholders. It will impact our ability to
deliver valuable solutions to CUSTOMERS, it will provide stability
and continuity to our SHAREHOLDERS and EMPLOYEES, and finally it
will enable my team to restore AspenTech to attractive growth and
profitability.
i. For CUSTOMERS, this transaction will eliminate concerns about
the adequacy of our short-term cash position and long-term
viability.
a. Over the past year, and especially in today's
challenging environment, these balance sheet issues have
created obstacles in the selling process for AspenTech.
We believe this transaction is essential to restoring
our top-line revenue performance.
b. With sufficient financial resources and relief from
near-term repayment obligations, we believe we can
return to working with customers on how we can help THEM
with their OWN P&L's, and spend less time and energy
discussing OUR balance sheet.
ii. For COMMON SHAREHOLDERS, while there will be some dilution
with this deal, we believe this transaction will better
position our shares to appreciate over time as the
performance of our underlying business improves. This
transaction will resolve several issues that have created a
significant overhang in the stock and would be expected to
continue to negatively affect the stock for the foreseeable
future.
a. Specifically, we know that concerns around near-term
liquidity have prevented many potential investors from
buying our common stock. Our goal with this transaction
is to address these concerns, including:
i. Our debt maturity burden will be substantially
reduced,
ii. The Series B preferred stock will be retired,
thereby eliminating uncertainty regarding
near-term redemptions, which could have
led to significant issuances of common stock;
iii. Our cash position will be enhanced, which
provides additional operating flexibility and
cushion in the event of a prolonged or negative
outcome from the FTC investigation, and
iv. Our near-term cash flow may increase with the
retirement of debt and the associated cash
interest expense, especially given the fact that
the Series D preferred stock does not have
mandatory cash dividend payments.
b. Finally, our balance sheet after the transaction will
enable potential investors to more easily analyze the
value of our underlying equity, thereby eliminating
another barrier to prospective purchasers of our common
stock.
iii. For EMPLOYEES, the willingness of a respected private equity
firm to make this substantial investment is important
evidence that operational improvement is rewarded. The
resulting financial stability, the planned restoration of
normalized salaries, incentive bonuses, and other benefits
previously curtailed over the past twelve months, will go a
long way to boosting morale, as will the opportunity to
participate in future appreciation in shareholder value.
iv. For all stakeholders, this transaction eliminates the
potentially onerous conditions of previous financings, most
notably, the Series B preferred, which has severely limited
our alternatives to raising additional capital and has caused
considerable confusion among our shareholders.
v. Another benefit of this transaction for all stakeholders will
be improved near-term cash flow.
a. This will enable us to invest in growth and bring more
profit to the bottom-line.
b. We will be in a better position to continue to meet our
interest payments, and at maturity, the principal
repayment, on our existing convertible subordinated
debentures
c. And for those to whom AspenTech had outstanding
obligations, this transaction enhances our ability to
make those payments on a timely basis.
vi. Lastly, but not insignificantly, upon completion of this
transaction, AspenTech management will be able to refocus our
complete energies on the strategy and execution of the
business, without the daily distractions of short-term
liquidity concerns.
4. IDENTITY/MOTIVATION OF NEW INVESTOR
a. Advent International, a leading global private equity firm, is
making a substantial capital commitment. They have agreed to invest
$100 million to purchase new Series D convertible preferred shares.
b. We selected Advent after an extensive evaluation of alternatives.
i. They have an excellent track record and demonstrated
expertise, with more than 80 investments in information
technology and software.
ii. As a firm, they have familiarity with AspenTech, having made
two private investments in our company, in 1986 and 1991.
iii. Another positive factor is their willingness to commit the
time and focus of two of their senior executives, Doug
Kingsley and Mike Pehl, who will be appointed to our Board of
Directors once the transaction is approved.
c. Advent chose ASPENTECH, after extensive due diligence, because they
share our vision and believe that together we can create attractive
returns for shareholders.
i. The leadership at AspenTech appreciates the fact that this
transaction represents a tremendous vote of confidence in our
team, and in the value of our franchise.
ii. We realize that Advent's commitment would not have been
possible without the substantial improvement in our financial
performance evident over the last six months.
iii. Our entire organization undertook a series of difficult
actions to restore the balance between revenues and spending,
and the success is obvious from our reported results, as well
as the willingness of an esteemed and independent investment
firm to commit significant capital, both human and financial,
to this endeavor.
d. Now I'd like to turn it over to Lisa to discuss the transaction from
a financial point of view.
5. FINANCIAL STATEMENT IMPACT-BEFORE AND AFTER
a. Thanks, David. I'll spend the next few minutes reviewing the impact
of the proposed transaction on our balance sheet, P&L, and cash
flow.
b. The net impact of the transaction on the balance sheet, if we are
successful in repurchasing convertible debt at attractive prices, is
that we will reduce total debt by at least half, and total equity
will increase by $62 million. The mechanics of this are as follows:
i. We hope to reduce the outstanding amount of our convertible
debentures by up to $45.0 to $50 million (face value).
ii. Shareholders' Equity would increase by $87 million to reflect
the Series D preferred; this entry will accrete to $121
million over seven years;
iii. The series B preferred entry would decrease by $57 million,
which is the amount that has accrued thus far toward the $60
million total obligation.
c. Assuming we repurchase $45 million (face value) of our subordinated
debentures, total debt as a percent of total capitalization, will
decline from 46% to 23%.
i. This includes our obligations to Accenture and our capital
leases.
ii. This is a dramatic improvement and well within the range of
what is typical for companies in our sector.
iii. The Series D, since it is preferred stock, is not technically
a debt obligation. But since it is redeemable for cash in
2009 and 2010 if it has not yet converted, it has some
debt-like characteristics and will sit as Mezzanine Equity on
the balance sheet.
d. We have not previously provided any level of detailed guidance for
Fiscal Year 2004. However, in order to estimate the impact of this
transaction on our P&L, we are providing conservative guidance for
the next twelve months. From a net income and cash flow standpoint,
we anticipate a positive impact from this transaction. However, in
terms of net income available to common holders, both in the
aggregate and earnings per share, this financing will be dilutive.
e. First, in terms of guidance without the transaction, for fiscal year
2004, we are currently estimating total revenues of approximately
$327 to $333 million.
i. We anticipate a full year operating margin between 4% and 6%.
ii. We believe will generate net income, before preferred
dividend or accretion of approximately $9 to $11 million.
iii. However, given the Series B preferred dividends and accretion
below the net income line, net income available to common
shareholders will be approximately $3-5 million, or
$0.06-0.10 per common share, assuming 49 million fully
diluted shares outstanding.
iv. Pro Forma or Adjusted earnings per share, which excludes the
Series B dividend and accretion, would be approximately
$0.18-$0.22.
v. The weighted average share count assumes we will use common
stock to meet our Accenture obligation in July 2003, and to
redeem the maximum portion possible of our Series B preferred
shares.
f. Now, in terms of the impact of the transaction on the income
statement:
i. Interest income will increase, while interest expense will
decline as we repurchase convertible debt.
ii. This will result in net income, before preferred dividend or
accretion, of approximately $11-13 million.
iii. The shares underlying the new Series D preferred will
increase weighted average shares outstanding.
iv. Including Series D preferred dividends and accretion, we
anticipate GAAP NET LOSS to common shareholders in the range
of $2-4 million, or ($0.05)-(0.09) per common share.
v. This assumes 43.5 million fully diluted shares outstanding.
vi. PRO FORMA OR ADJUSTED EARNINGS PER SHARE, EXCLUDING SERIES D
DIVIDEND AND ACCRETION, would be approximately $0.14-$0.17
per common share.
vii. This represents dilution of approximately 23%, using adjusted
earnings per share as the relevant metric.
viii. We believe adjusted earnings per share is the best metric to
measure for several reasons:
1. First, we believe it is the most meaningful indicator of
the Company's operating performance.
2. Second, while the amount of the preferred dividend is
known, our ability to estimate preferred accretion right
now with accuracy is limited due to variables that may
change in determining the value of the Series D
warrants.
g. In terms of cash available relative to remaining obligations, we
have previously said that we expect to end this fiscal year with
cash and equivalents of approximately $49 million.
i. The proposed transaction would raise that balance to
approximately $109 million.
ii. In addition, we anticipate we will generate an additional $30
to $50 million in cash over the next two years.
iii. Post this transaction, on a pro forma basis, we estimate
that, as of June 30th, we'll have remaining commitments over
the next two years totaling $97 million, including the
following obligations:
1. We will pay Accenture approximately $3 million in cash
by the end of July 2003.
2. We will have approximately $86 million face value of
convertible debentures outstanding, prior to any
repurchase, which will mature in June 2005.
3. And finally, we will have capital lease obligations of
approximately $6-$8 million.
iv. Therefore, the near-term obligations would be more than
covered by available cash on hand and that which we expect to
generate.
6. PRINCIPAL TERMS OF SERIES D PREFERRED/RELATED MATTERS
a. Now, let me turn my attention to covering the details of Series D
Preferred Stock.
i. The shares will accrue dividends at a rate of 8%, which we
can pay in cash or in stock, at the timing of our choice. For
example, we can accrue dividends all the way to redemption.
ii. The shares will be convertible at $3.33 per share, which
represents a 12% discount to the average closing price for
the last 15 trading days, and a 5% discount from the 30
trading day average.
iii. The shares are redeemable in cash or stock by AspenTech
beginning in three years, if the stock trades above $7.60 per
share for 45 consecutive days.
v. Series D holders can redeem half their shares for cash
beginning in 2009, and the remaining half beginning in 2010,
assuming they have not previously converted to common.
vi. Series D holders will also receive a total of 7.3 million
warrants with a strike price of $3.33 per share.
vii. As is typical, the investors will have registration rights,
anti-dilution protection, and other customary provisions.
viii. As part of the agreement, Advent International will have the
right to nominate up to four of our nine directors, upon the
closing of the transaction, proportionate to their equity
interest.
b. In addition to seeking shareholder approval for the issuance of the
Series D shares, we will also be asking holders to approve the
expansion of the pool of options available for grant by
approximately 5 million shares. These shares are intended to restore
the competitiveness of our compensation programs, in connection with
this transaction.
c. The last piece of the transaction is the 1 for 3 reverse share split
we are also seeking approval to implement. The intention is to reset
the shares outstanding and share price at levels consistent with
others in the industry.
i. With this financing and our improved financial performance, a
higher stock price seems a better reflection of our current
condition.
ii. With the proposed split, roughly $270 thousand in net income
to common will equal a penny per share, and we'll have 27
million shares outstanding on a fully-diluted basis at the
current market price, giving effect to the transaction.
iii. Specific information regarding the mechanics of the stock
split will be included in the proxy materials we will file
with the S.E.C. shortly.
7. ANTICIPATED TIMING
a. Given the required shareholder approval, we currently anticipate
that the entire transaction will take a few months to complete.
b. Obviously, many of the factors that drive this timetable are outside
of our control.
c. Accordingly, what follows is our current best estimate, but it may
change substantially.
i. We expect to file a preliminary proxy statement with the
S.E.C. outlining the details of the transaction by mid-June.
ii. Assuming no S.E.C. review of the proxy filing, we would
expect to mail the proxy materials in late June/early July.
iii. During July, we will also meet with shareholders, seeking
votes in favor of our proposals. At that time, we will also
schedule a webcast for other investors, where we will share
the same presentation and take your questions.
iv. We currently expect to schedule the shareholder vote in
August, once our audited results are available, and to close
the transaction shortly thereafter. We will then be able to
turn our undivided attention to operating the business!
v. Now I will turn it back to David to wrap up.
8. WHAT WE'RE NOT CHANGING
a. Thanks, Lisa. To sum things up, the proposed financing will
transform our balance sheet and financial model. It is important to
note that there are a number of aspects of our business that will
NOT change.
b. First, our basic business unit approach will remain focused on two
primary areas: engineering solutions and manufacturing/supply chain
solutions.
c. Our commitment to customer satisfaction will remain a key priority.
d. Another factor that will not change is our drive for revenue growth
and increased profitability. We will build value for shareholders as
we grow the top and bottom lines.
e. AspenTech will retain and invest in its reputation for unparalled
product excellence.
f. And we anticipate no significant changes to our strategy, and we
have a great team of people responsible for implementing it.
9. THE WAY FORWARD
a. Now that we have established an acceptable operational model and
demonstrated improved execution capability, this financing is not
only the logical next step, it is essential. Before I close, I want
to reiterate some of the key pieces of this transaction.
i. The financing eliminates the uncertainties that have
surrounded our balance sheet for more than twelve months.
ii. It improves our near-term cash position,
iii. It prevents the onerous conditions of previous financings
from creating considerable dilution for shareholders.
iv. It will bolster customer confidence in AspenTech, and finally
v. It will enable the financial community to more easily analyze
the underlying value of our equity for those investors
considering purchasing of shares of our stock.
b. Even without robust economic growth, we believe this financing, will
lay a foundation for the Company to:
i. Continue to deliver best-in-class solutions that meaningfully
improve customer profitability;
ii. continue to invest in new and enhanced products, customer
support, and market leadership,
iii. reliably grow revenues,
iv. generate positive cash flow from operations,
v. and deliver attractive operating margins.
c. As the economy improves, we expect our top and bottom line
performance will grow more rapidly, as will shareholder value.
d. Our target operating model contemplates operating margins in the
mid-teens over the next two to three years, and we believe we can
steadily improve our financial performance to reach these levels.
10. CONCLUSION
a. We are proud of what we have been able to accomplish over the last
two quarters, from an operational standpoint.
b. We are confident that this financing is the right thing for
AspenTech at this time.
c. While we remain respectful of the challenges that lie ahead,
d. We are optimistic about the opportunities.
e. We look forward to speaking with many of you in the coming weeks,
after we release our definitive proxy.
f. With that, we're going to sign off for today.
g. Thank you for your time and your attention.
* * *
The following is the text of materials shown via webcast of Aspen's
June 2, 2003 conference call in connection with the proposed financing
transaction with Advent and the holders of Aspen's Series B preferred stock.
ASPEN TECHNOLOGY, INC.
CONFERENCE CALL REGARDING
BALANCE SHEET STRENGTHENING
6/02/03
SAFE HARBOR STATEMENT
Some of the information and comments in this presentation may contain
forward-looking statements that involve a number of risks and uncertainties.
Important factors that could cause actual results to differ materially from
those indicated by such forward-looking statements include the risks set forth
under the caption "Risk Factors" in our 10K, 10Q and 8-K filed with the SEC.
2
SOURCES AND USES ($ MILLIONS)
Sources Uses
------------------------------------- -------------------------------------
Series D Pfd. (new $ in) $100.0 Conv. Sub Debs $ 45.0*
Series B Pfd. (Cash) 30.0
Fees/Expenses (est.) 10.0
Working Capital 15.0
------------------------------------- -------------------------------------
Total Sources $100.0 Total Uses $100.0
o IN ADDITION, $21 MM OF SERIES D PREFERRED STOCK WILL BE EXCHANGED FOR
$21 MM OF SERIES B PREFERRED STOCK. THE PREFERRED B STOCK WILL BE FULLY
RETIRED.
* The company's projections for its use of capital represents an expected use
of funds, but actual allocation may differ. The company expects to use up to,
but no more than $45.5 million for the re-purchase of convertible bonds. The
bonds will be re-purchased at prices that are attractive to the company.
3
IMPACT OF PROPOSED RESTRUCTURING
o Removes customer and investor obstacles
o Eliminates near-term liquidity risk, potentially onerous conditions
o Dilutes common shareholders in the short-term
o Paves way forward for appreciation in value
o Enables management to focus on strategy and execution
4
KEY TERMS: SERIES D PREFERRED SHARES
o Convert. at $3.33/share
o 8% dividend, accrued
o Payable in cash or stock at AZPN's option
o Company can elect to accrue dividends through redemption/conversion
o 7.3 million warrants at $3.33/share
o 50% redeemable by holders 2009 & 2010
o Redeemable by AZPN in 2006 if shares trade above $7.60 (45 days)
o Standard anti-dilution, reg. rights, etc.
o Advent appoints up to 4 of 9 directors (2 Advent Partners, 2 Independent)
5
ANTICIPATED TIMING
o File proxy (mid June)
o Mail proxy (late June/early July)
o Meetings w/investors, webcast (July)
o Q4 results & shareholder vote (August)
o Closing
6
WHAT WE'RE NOT CHANGING!
o Drive for attractive growth, profitability
o Commitment to customers
o Solution focus, market leadership
o Product excellence, quality reputation
o Game plan, loyal employees, executive team
7
THE WAY FORWARD
o Eliminates balance sheet uncertainties
o Removes obstacles for customers, investors
o Prevents potentially onerous conditions
o Improves cash flow
o Reveals true underlying equity value
o Refocuses management energy on execution
8
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC
Aspen plans to file with the SEC and mail to its stockholders a Proxy
Statement in connection with the proposed transactions. The Proxy Statement will
contain important information about Aspen, Advent International, Inc., the
proposed transactions and related matters. Investors and security holders are
urged to read the Proxy Statement carefully when it is available.
Investors and security holders will be able to obtain free copies of
the Proxy Statement and other documents filed with the SEC by Aspen through the
web site maintained by the SEC at www.sec.gov. In addition, investors and
security holders will be able to obtain free copies of the Proxy Statement by
contacting Investor Relations, Aspen Technology, Inc., Ten Canal Park,
Cambridge, Massachusetts 02141, telephone (617) 949-1000.
Aspen, Advent and their respective directors and executive officers,
may be deemed to be participants in the solicitation of proxies in respect of
the transactions contemplated by Aspen's financing transaction. Information
regarding Aspen's directors and executive officers is contained in Aspen's Form
10-K for the fiscal year ended June 30, 2002 and its proxy statement dated
November 4, 2002, which have been filed with the SEC. As of June 1, 2003,
Aspen's directors and executive officers beneficially owned approximately
2,300,000 shares of Aspen's common stock, representing approximately 5.9% of
that class. As of June 1, 2003, Advent had no beneficial ownership of Aspen
common stock.
More information about the contemplated financing with Advent and the
holders of Aspen's Series B convertible preferred stock will be set forth on
Aspen's Current Report on Form 8-K filed with the SEC today.