Innovation and collaborative, synchronized program management for new programs
FOR RELEASE Thursday, February 22, 2007
PLANO, Texas – UGS Corp., a leading global provider of product lifecycle management (PLM) software and services, today announced fourth quarter 2006 and full year 2006 results. Fourth quarter financial highlights include:
Financial highlights from the full year 2006 include:
“We are pleased with our strong performance in the quarter and that execution of our strategic plan delivered solid earnings and top-line organic revenue growth as planned, with 12 percent license revenue growth in the quarter,” said Tony Affuso, chairman, CEO and president of UGS. “Our vision continues to be supported by customers who are market leaders and invest in UGS PLM to further their global innovation networks. We look forward to more growth in 2007 driven by our world-class product portfolio to be enhanced with major releases of Teamcenter and NX.”
Business Highlights and Announcements
The company expects to realize revenue from the contracts highlighted above over multiple quarters.
Because of the income tax impact of currency fluctuations on intercompany debt in one of the company’s foreign subsidiaries, the company is restating its earnings for 2004 and 2005 by increasing its deferred income tax expense in 2004 by a currently estimated amount of US$12.0 million and correspondingly increasing its deferred income tax benefit in 2005 by a currently estimated amount of US$12.0 million. There is no impact on the company’s cash flows from operations.
UGS will host its year-end and fourth quarter 2006 earnings call with securities analysts live on the Internet at 11:30 a.m. Central time, Thursday, Feb. 22, 2007. Presentation slides will be posted on www.ugs.com prior to the call. See below for webcast/teleconference access information.
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UGS is a leading global provider of product lifecycle management (PLM) software and services with 4.3 million licensed seats and 47,000 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.
Note: UGS, Geolus, NX, 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. 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 |
|
|
December 31, 2006 |
December 31, 2005 |
Revenue: |
|
|
License |
$ 128,129 |
$ 114,248 |
Maintenance |
142,754 |
134,575 |
Services and other |
81,866 |
77,974 |
Total revenue |
352,749 |
326,797 |
Cost of revenue: |
|
|
License |
5,682 |
6,052 |
Maintenance |
16,763 |
14,094 |
Services and other |
62,459 |
60,629 |
Amortization of capitalized software and acquired intangible assets |
40,149 |
34,074 |
Total cost of revenue |
125,053 |
114,849 |
Gross profit |
227,696 |
211,948 |
Operating expenses: |
|
|
Selling, general and administrative |
121,944 |
107,491 |
Research and development |
46,483 |
48,494 |
Amortization of other intangible assets |
7,996 |
8,820 |
Total operating expenses |
176,423 |
164,805 |
Operating income |
51,273 |
47,143 |
Interest expense and amortization of deferred financing fees |
(27,364) |
(26,161) |
Other income (expense), net |
6,289 |
(3,345) |
Income before income taxes |
30,198 |
17,637 |
Provision for income taxes |
7,530 |
4,744 |
Net income |
$ 22,668 |
$ 12,893 |
|
UGS Corp.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
|
|
|
|
|
|
|
|
|
|
Year |
|
|
Ended |
|
|
December 31, 2006 |
December 31, 2005 |
Revenue: |
|
|
$ 379,183 |
$ 358,986 |
|
541,127 |
504,189 |
|
298,437 |
291,446 |
|
1,218,747 |
1,154,621 |
|
|
|
|
15,895 |
21,213 |
|
63,373 |
56,411 |
|
232,669 |
241,777 |
|
154,005 |
123,357 |
|
465,942 |
442,758 |
|
752,805 |
711,863 |
|
|
|
|
459,632 |
420,873 |
|
188,512 |
167,484 |
|
— |
4,100 |
|
(535) |
1,774 |
|
33,353 |
34,147 |
|
680,962 |
628,378 |
|
71,843 |
83,485 |
|
(107,907) |
(97,737) |
|
17,313 |
(17,671) |
|
(18,751) |
(31,923) |
|
(8,413) |
(21,899) |
|
$ (10,338) |
$ (10,024) |
|
UGS Corp.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
|
December 31, |
December 31, |
|
2006 |
2005 |
ASSETS |
|
|
Current assets |
|
|
Cash and cash equivalents |
$ 61,509 |
$ 61,532 |
Accounts receivable, net |
283,163 |
251,763 |
Prepaids and other |
40,740 |
22,389 |
Deferred income taxes |
11,229 |
26,471 |
Total current assets |
396,641 |
362,155 |
Property and equipment, net |
32,301 |
36,645 |
Goodwill |
1,452,674 |
1,388,802 |
Capitalized and acquired software, net |
394,130 |
464,994 |
Customer accounts, net |
177,117 |
203,064 |
Other intangible assets, net |
114,115 |
135,265 |
Other assets |
34,488 |
39,623 |
Total assets |
$ 2,601,466 |
$ 2,630,548 |
LIABILITIES AND STOCKHOLDER’S EQUITY |
|
|
Current liabilities |
|
|
Accounts payable and accrued liabilities |
$ 169,674 |
$ 159,534 |
Deferred revenue |
154,221 |
133,027 |
Income taxes payable |
6,373 |
11,895 |
Current portion of long-term debt |
2,000 |
— |
Total current liabilities |
332,268 |
304,456 |
Other long-term liabilities |
71,932 |
48,953 |
Deferred income taxes |
96,093 |
130,728 |
Long-term debt |
1,155,220 |
1,212,046 |
|
|
|
Total stockholder’s equity |
945,953 |
934,365 |
Total liabilities and stockholder’s equity |
$ 2,601,466 |
$ 2,630,548 |
UGS Corp.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
Year Ended December 31, 2006 |
Year Ended December 31, 2005 |
Cash flows from operating activities |
|
|
Net loss |
$ (10,338) |
$ (10,024) |
Adjustments to reconcile net income (loss) to net cash provided by |
|
|
operating activities: |
|
|
Benefit for deferred income taxes |
(21,111) |
(53,438) |
Depreciation and amortization |
207,925 |
175,645 |
Amortization of deferred financing fees |
5,530 |
5,621 |
In-process research and development |
— |
4,100 |
Stock-based compensation |
689 |
545 |
Unrealized loss (gain) on revaluation of foreign denominated assets and liabilities |
(36,027) |
27,307 |
Unrealized loss (gain) on foreign currency revaluation of derivative instruments |
12,017 |
(18,749) |
Other |
3,544 |
1,934 |
Changes in operating assets and liabilities, net of effect of acquisitions: |
|
|
Accounts receivable |
(22,894) |
(13,046) |
Prepaids and other |
(17,210) |
(948) |
Accounts payable and accrued liabilities |
10,695 |
(12,262) |
Deferred revenue |
11,969 |
24,212 |
Income taxes payable |
(13,828) |
4,114 |
Other long-term liabilities |
5,034 |
2,060 |
Total adjustments |
146,333 |
147,095 |
Net cash provided by operating activities |
135,995 |
137,071 |
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 |
— |
18,171 |
Payments for purchases of property and equipment |
(13,500) |
(14,829) |
Capitalized software costs |
(65,623) |
(69,775) |
Proceeds from sale of marketable securities |
— |
23,194 |
Other |
(4,598) |
(1,762) |
Net cash used in investing activities |
(87,721) |
(263,438) |
Cash flows from financing activities |
|
|
Proceeds from revolving credit line |
171,300 |
175,051 |
Payments on revolving credit line |
(169,300) |
(181,051) |
Proceeds from notes payable |
6,850 |
10,297 |
Payments on notes payable |
(345) |
(2,773) |
Proceeds from bank notes and bonds |
— |
225,350 |
Payments on bank notes and bonds |
(62,300) |
(94,029) |
Capital contributed by parent (stock options exercised) |
667 |
669 |
Capital contributed by parent (compensatory payment) |
3,819 |
— |
Capital contributed by parent (other) |
830 |
— |
Net cash (used in) provided by financing activities |
(48,479) |
133,514 |
Effect of exchange rate on cash and cash equivalents |
182 |
(4,015) |
Net increase (decrease) in cash and cash equivalents |
(23) |
3,132 |
Cash and cash equivalents at beginning of period |
61,532 |
58,400 |
Cash and cash equivalents at end of period |
$ 61,509 |
$ 61,532 |
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 |
|||
December 31, |
|
December 31, |
|
2006 |
|
2005 |
|
Reconciliation of net income to EBITDA: |
|
|
|
Net income |
$ 22,668 |
|
$ 12,893 |
Interest expense |
27,364 |
|
26,161 |
Provision for income taxes |
7,530 |
|
4,744 |
Depreciation and amortization |
53,039 |
|
48,853 |
EBITDA |
$ 110,601 |
|
$ 92,651 |
|
|
|
|
Year ended |
|||
December 31, |
|
December 31, |
|
2006 |
|
2005 |
|
Reconciliation of net loss to EBITDA: |
|
|
|
Net loss |
$ (10,338) |
|
$ (10,024) |
Interest expense |
107,907 |
|
97,737 |
Benefit for income taxes |
(8,413) |
|
(21,899) |
Depreciation and amortization |
207,925 |
|
175,645 |
EBITDA |
$ 297,081 |
|
$ 241,459 |
|
|
|
|