UGS Reports Third Quarter Results; PLM Industry Leader Marks Solid Progress on Strategic Plan
14 November 2006
UGS Corp., a leading global provider of product lifecycle management (PLM) software and services, today announced third quarter 2006 results.
Third quarter financial highlights include:
-- EBITDA (defined below) was US$69.1 million, or an 8.3 percent growth
over the same period a year earlier. Net income (loss) for the third
quarter was US$(7.4) million.
-- Operating income was US$15.9 million and includes the impact of
acquisition-related intangible amortization costs of US$38.5 million.
Operating income in the same period a year earlier was US$19.3 million
and included acquisition-related amortization costs of US$39.2 million.
-- Total revenue increased to US$295.5 million, 1.8 percent growth over
the same period a year earlier.
-- Software revenue increased to US$223.1 million (including license and
maintenance revenues), or 1.6 percent growth as compared to the third
quarter 2005.
-- Revenue amounts are not adjusted for the impact of deferred revenues
written off in connection with acquisitions. These write-offs had the
effect of reducing third quarter 2006 revenues by US$0.3 million and
2005 revenues by US$2.2 million.
Year-to-date highlights include:
-- EBITDA (defined below) was US$186.5 million, or a 25.3 percent growth
over the same period a year earlier. Net income (loss) for the first
nine months of the year was US$(33.0) million.
-- Operating income was US$20.6 million and includes the impact of
acquisition-related intangible amortization costs of US$116.8 million.
Operating income in the same period a year earlier was US$36.3 million
and included acquisition-related amortization costs of US$111.6
million.
-- Total revenue increased to US$866.0 million, 4.6 percent growth over
the same period a year earlier.
-- Software revenue increased to US$649.4 million (including license and
maintenance revenues), or 5.7 percent growth as compared to the same
period a year earlier.
-- Revenue amounts are not adjusted for the impact of deferred revenues
written off in connection with acquisitions. These write-offs had the
effect of reducing year-to-date 2006 revenues by US$0.7 million and
2005 revenues for the same nine month period by US$10.2 million.
Other financial highlights:
-- Net cash from operating activities was US$111.6 million for the first
nine months of the year.
-- Long term debt as of Sept. 30, 2006, was US$1,155.3 million compared to
a balance of US$1,212.0 million as of Dec. 31, 2005. This includes a
debt pay-down of US$62.3 million.
"We've continued to be successful at working our strategic plan while still focusing on expanding our EBITDA and cash flow, and retooling our sales engine. Our continued product excellence and focus on customer success earned us contracts or additional business in the quarter with such companies as Boeing, DaimlerChrysler, Unilever, Visteon, Bosch Siemens, Northrop Grumman Ship Systems, Bayer Healthcare and the Jet Propulsion Lab," said Tony Affuso, chairman, CEO and president of UGS. "These contracts reflect the confidence we are receiving across the board from the market, as highlighted most notably by our ranking in the leaders quadrant of the new Gartner Magic Quadrant.
"As always, we continue to focus on customer success, and as a result our retention rate is higher than ever and our maintenance revenue continues to grow solidly."
Business Highlights
-- UGS signed a new reseller agreement with Microsoft that extends the
strategic alliance the two companies announced earlier this year.
Under the new agreement, UGS becomes the first PLM company authorized
to sell SQL Server 2005, Microsoft's flagship database software,
directly to companies looking for a comprehensive PLM solution fully
supported on the Microsoft(R) platform. (see separate release)
-- PRTM, internationally recognized as the leading management consulting
firm to technology-driven companies, joined the UGS Partner Program as
a UGS Consulting and Systems Integration Alliance Partner. (see
separate release)
-- In the mid-market and channel space, UGS recorded a 35 percent increase
in its indirect channel license revenue year-over-year and met its
year-end channel capacity goal to increase the channel by 50 percent.
(see separate release)
-- Ford Motor Company expanded its global deployment of Teamcenter to
include Tecnomatix as the global manufacturing data management and
manufacturing process planning system to support process driven product
design. This solution will enable the reduction of overall vehicle
development cycle time by promoting concurrent engineering and globally
distributing relevant data.
-- An example of UGS' success in I-deas to NX migration was captured in a
third quarter win with Larsen & Toubro Limited, India's largest
technology-driven engineering and construction company. Through the
migration, Larsen & Toubro consolidated multiple CAD systems and
expanded into PLM.
-- Wanfeng Auto Holding Group, a leader in China's auto industry and the
largest aluminum alloy wheel producer in Asia, selected UGS'
Teamcenter(R) Express software for its first collaborative product data
management (cPDM) system. (see separate release)
The company expects to realize revenue from the contracts highlighted above over multiple quarters.
UGS will host its third quarter 2006 earnings call with securities analysts live on the Internet at 10:30 a.m. Central time, Monday, Nov. 13, 2006. Presentation slides will be posted on http://www.ugs.com at 8:30 a.m. Central time. See below for webcast/teleconference access information.
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About UGS
UGS is a leading global provider of product lifecycle management (PLM) software and services with nearly 4 million licensed seats and 46,000 customers worldwide. Headquartered in Plano, Texas, UGS' vision is to enable a world where organizations and their partners collaborate through global innovation networks to deliver world-class products and services while leveraging UGS' open enterprise solutions, fulfilling the mission of enabling them to transform their process of innovation. For more information on UGS products and services, visit http://www.ugs.com.
Note: UGS,Femap, NX, Solid Edge, Teamcenter, Tecnomatix, Velocity Series and Transforming the process of innovation are trademarks or registered trademarks of UGS Corp. or its subsidiaries in the United States and in other countries. Microsoft is a trademark or registered mark of Microsoft Corporation or its subsidiaries in the United States and in other countries. All other trademarks, registered trademarks or service marks belong to their respective holders.
The statements in this news release that are not historical statements, including statements regarding our business, results of operations expected financial performance, expected cost savings related to acquisitions, and other statements identified by forward looking terms such as "may," "will," "expect," "plan," "anticipate" or "project," are forward-looking statements. These statements are subject to numerous risks and uncertainties which could cause actual results to differ materially from such statements, including, among others, risks relating to developments in the PLM industry, loss or downsizing of customers, competition, failure to innovate, substantial, prolonged economic downturns, financial distress in the automotive industry, international operations and exchange rate fluctuations, terrorist activities, acquisitions, changes in pricing models, intellectual property, loss of key employees and complexity of income tax assessments. UGS has included a discussion of these and other pertinent risk factors in its quarterly report on Form 10-Q for the period ended June 30, 2006 filed with the SEC. UGS disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
UGS Corp.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Three months ended
September 30, September 30,
2006 2005
Revenue:
License $85,527 $89,842
Maintenance 137,542 129,706
Services and other 72,476 70,701
Total revenue 295,545 290,249
Cost of revenue:
License 4,114 4,761
Maintenance 15,810 14,459
Services and other 57,195 58,451
Amortization of capitalized software
and acquired intangible assets 39,097 32,059
Total cost of revenue 116,216 109,730
Gross profit 179,329 180,519
Operating expenses:
Selling, general and administrative 112,027 107,803
Research and development 43,416 44,350
Amortization of other intangible assets 7,991 9,018
Total operating expenses 163,434 161,171
Operating income 15,895 19,348
Interest expense and amortization of deferred
financing fees (27,576) (25,197)
Other income (expense), net 1,087 (919)
Loss before income taxes (10,594) (6,768)
Benefit for income taxes (3,161) (2,002)
Net loss $(7,433) $(4,766)
UGS Corp.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Nine months ended
September 30, September 30,
2006 2005
Revenue:
License $251,054 $244,738
Maintenance 398,373 369,614
Services and other 216,571 213,472
Total revenue 865,998 827,824
Cost of revenue:
License 10,213 15,161
Maintenance 46,610 42,317
Services and other 170,210 181,148
Amortization of capitalized software and
acquired intangible assets 113,856 89,283
Total cost of revenue 340,889 327,909
Gross profit 525,109 499,915
Operating expenses:
Selling, general and administrative 337,688 313,382
Research and development 142,029 118,990
In-process research and development - 4,100
Restructuring (535) 1,774
Amortization of other intangible assets 25,357 25,327
Total operating expenses 504,539 463,573
Operating income 20,570 36,342
Interest expense and amortization of deferred
financing fees (80,543) (71,576)
Other income (expense), net 11,024 (14,326)
Loss before income taxes (48,949) (49,560)
Benefit for income taxes (15,943) (14,601)
Net loss $(33,006) $(34,959)
UGS Corp.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
September 30, December 31,
2006 2005
Assets:
Current assets
Cash and cash equivalents $59,257 $61,532
Accounts receivable, net 241,352 251,763
Prepaids and other 35,629 22,389
Deferred income taxes 16,663 26,471
Total current assets 352,901 362,155
Property and equipment, net 30,633 36,645
Goodwill 1,423,338 1,393,472
Capitalized and acquired software, net 417,031 464,994
Customer accounts, net 183,607 203,064
Other intangible assets, net 119,093 135,265
Other assets 35,380 39,623
Total assets $2,561,983 $2,635,218
Liabilities and Stockholder's Equity:
Current liabilities
Accounts payable and accrued liabilities $171,605 $159,976
Deferred revenue 152,301 133,027
Income taxes payable 7,844 11,895
Total current liabilities 331,750 304,898
Other long-term liabilities 61,035 48,511
Deferred income taxes 100,472 147,440
Long-term debt 1,155,296 1,212,046
Stockholder's equity
Common stock, $ .01 par value, 3,000
shares authorized; 100 issued and
outstanding at September 30, 2006 and
December 31, 2005 - -
Additional paid-in capital 1,014,823 1,005,991
Retained deficit (96,208) (63,202)
Accumulated other comprehensive loss,
net of tax (5,185) (20,466)
Total stockholder's equity 913,430 922,323
Total liabilities and stockholder's
equity $2,561,983 $2,635,218
UGS Corp.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine months ended
September 30, September 30,
2006 2005
Cash flows from operating activities
Net loss $(33,006) $(34,959)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Benefit for deferred income taxes (21,241) (40,246)
Depreciation and amortization 154,886 126,792
Amortization of deferred financing fees 4,148 4,231
In-process research and development - 4,100
Stock-based compensation 438 467
Unrealized (gain) loss on revaluation of
foreign denominated assets and liabilities (24,062) 22,782
Unrealized loss (gain) on foreign currency
revaluation of derivative instruments 7,680 (17,044)
Other 3,205 2,920
Changes in operating assets and liabilities,
net of effect of acquisitions:
Accounts receivable 19,285 10,128
Prepaids and other (12,325) 3,674
Accounts payable and accrued liabilities 8,450 990
Deferred revenue 11,799 32,375
Income taxes payable (10,936) 2,676
Other long-term liabilities 3,295 (425)
Total adjustments 144,622 153,420
Net cash provided by operating activities 111,616 118,461
Cash flows from investing activities
Acquisitions, net of cash acquired - (218,437)
Acquired software (4,000) -
Cash received from prior parent for acquisition
related tax matters - 11,354
Payments for purchases of property and equipment (7,589) (8,542)
Capitalized software costs (51,755) (56,889)
Proceeds from sale of marketable securities - 23,194
Other (1,100) (842)
Net cash used in investing activities (64,444) (250,162)
Cash flows from financing activities
Proceeds from revolver credit line 121,800 118,551
Payments on revolver credit line (121,800) (124,551)
Proceeds from notes payable 6,850 10,297
Payments on notes payable (345) (2,773)
Proceeds from bank notes and bonds - 225,271
Payments on bank notes and bonds (62,300) (74,597)
Capital contributed by parent (stock options
exercised) 639 508
Capital contributed by parent (compensatory
payment) 3,819 -
Net cash (used in) provided by financing
activities (51,337) 152,706
Effect of exchange rates on cash and cash
equivalents 1,890 (3,152)
Net (decrease) increase in cash and cash
equivalents (2,275) 17,853
Cash and cash equivalents at beginning of
period 61,532 58,400
Cash and cash equivalents at end of period $59,257 $76,253
EBITDA represents net income (loss) before interest expense, income taxes, depreciation and amortization. EBITDA is not a recognized term under generally accepted accounting principles, or GAAP. EBITDA does not represent net income, as that term is defined under GAAP, and should not be considered as an alternative to net income as an indicator of our operating performance. Additionally, EBITDA is not intended to be a measure of free cash flow available for management or discretionary use as such measures do not consider certain cash requirements such as capital expenditures (including capitalized software expense), tax payments and debt service requirements. We consider EBITDA to be a key indicator of our ability to pay our debt. We have included information concerning EBITDA because we use such information in determining compensation of our management and in our review of the performance of our business. EBITDA as presented herein are not necessarily comparable to similarly titled measures. The following is a reconciliation of EBITDA to net loss, the GAAP measure we believe to be most directly comparable to EBITDA (in thousands).
Three months ended
September 30, September 30,
2006 2005
Reconciliation of net loss to EBITDA:
Net loss $(7,433) $(4,766)
Interest expense 27,576 25,197
Benefit for income taxes (3,161) (2,002)
Depreciation and amortization 52,160 45,389
EBITDA $69,142 $63,818
Nine months ended
September 30, September 30,
2006 2005
Reconciliation of net loss to EBITDA:
Net loss $(33,006) $(34,959)
Interest expense 80,543 71,576
Benefit for income taxes (15,943) (14,601)
Depreciation and amortization 154,886 126,792
EBITDA $186,480 $148,808
CONTACTS:
Doug Barnett - Financial Analysts
972-987-3352
barnettd@ugs.com
Mendi Paschal - Media
972-987-3210
paschal@ugs.com
Source: prnewswire
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