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11 August 2005

UGS Reports Second Quarter 2005 Consolidated Revenue of US$285.0 Million, or 26.6 Percent Growth

FOR RELEASE Thursday, August 11, 2005

 

PLANO, Texas– UGS Corp., a leading global provider of product lifecycle management (PLM) software and services, today announced financial results for the second quarter ended June 30, 2005.  In the second quarter, UGS marked its eighth consecutive quarter of year-over-year total revenue growth and expanded its market leadership position in the high-growth Collaborative Product Development Management (cPDM) space with a year-over-year 73.9 percent revenue increase including acquisitions, or 42.3 percent without acquisitions.  In addition, UGS’ CAD/CAM/CAE (CAx) business grew above the projected industry analyst average of a compound annual growth rate of approximately 4 percent. 

 

UGS’ growth in the cPDM and CAx segments was fueled by enterprise contracts -which UGS defines as contracts with total contract value of more than US$1 million each -in both core and new PLM industry segments.  Enterprise contractsthrough the first half of 2005, on the strength of a double-digit number of enterprise signings in the second quarter, increased by more than 19 percent over the same period a year ago. In addition, new industry segment contract signings more than doubled in the first half of 2005 compared to the same period a year earlier. 

 

Second quarter financial highlights include (numbers include the impact of UGS’ acquisition of Tecnomatix, which closed on April 1, 2005):

·        Total revenue increased to US$285.0 million, or 26.6 percent growth over the same period a year earlier, and includes US$81.8 million in license software revenue, or a 19.0 percent year-over-year increase.  Acquisitions added revenue of US$23.0 million.  The company saw an increase in total revenue in each geographic segment compared to the same period in 2004.

·        Adjusted operating income (defined below) was US$48.0 million compared to US$31.0 million in the same period a year earlier.  Reported operating income was US$3.2 million and includes the impact of acquisition related intangible amortization costs of US$39.0 million.  In addition, reported operating income includes an in-process research and development charge of US$4.1 million and a restructuring charge of US$1.8 million.  In the same period a year prior, the company reported an operating loss of US$37.6 million which included acquisition related intangible amortization costs of US$17.8 million and an in-process research and development charge of US$50.8 million. 

·        Adjusted EBITDA (defined below) was US$52.1 million and was in line with company expectations given the desire to increase the investment in research and development, selling and marketing, and the increase in costs associated with being an independent company.  In the second quarter of 2004, UGS recorded adjusted EBITDA of US$54.2 million.   

·        In the figures presented above, the company has not made adjustments for the impact of deferred revenues written off in connection with the acquisition of the company and acquisitions by the company.  These write offs had the effect of reducing second quarter 2005 revenues and earnings by US$3.4 million and second quarter 2004 revenues and earnings by US$10.4 million. 

 

“During the second quarter, UGS marked its one year anniversary of operating independently, by continuing to drive revenue growth and exceeding market growth rates in both segments of the PLM market,” said Tony Affuso, chairman, CEO and president of UGS.  “Combining this strong financial performance with successful product introductions and major events directly reaching in excess of 100,000 customers and prospects, it was another banner quarter for UGS.  As the value of PLM becomes more widely known, we’re unarguably marching toward our vision to enable a world where organizations and their partners collaborate through global innovation networks.”

 

Business Highlights

In the second quarter UGS (the company expects to realize revenue from the contracts highlighted below over multiple quarters):

  • Signed several key CAx contracts, including:

¾     Fiat,which continued to invest in UGS technology and ordered US$1.8 million for CAx software and other products and services.

¾     Dyson, the maker of no loss of suction vacuum cleaners and digital motors, which ordered additional seats of UGS NX software.  UGS is Dyson’s sole PLM provider, including CAD and CAM applications.

¾     Panasonic Factory Solutions Co., Ltd.of Osaka, Japan, which purchased UGS’ NX CAD/CAE and Teamcenter Engineering, adding to their existing installation of UGS’ NX digital product development software.  Panasonic Factory Solutions uses NX CAE applications to perform digital engineering analysis and simulation on their high-technology industrial equipment used in the fabrication of printed circuit boards.

  • Announced several key contracts with customers in a wide range of industries across each of the company’s three geographic regions, including P&G for Teamcenter Sourcing; IHI Marine United, Japan’s leading shipbuilding company, for NX and Teamcenter software; andPatria Vehicles Oy, part of the Patria Group, which standardized on UGS’ NX™ and Teamcenter™ software and services for product development throughout its organization and supply chain.
  • Launched Teamcenter 2005, the world’s first integrated software solution to close the gap between idea capture and comprehensive product lifecycle management.  Teamcenter 2005 powers new product ideas from concept to reality by integrating Idea Management and Requirements Planning into the complete digital lifecycle management, product development and manufacturing process.  Strong UGS relationships with Intel, HP and Microsoft complement solutions targeted at the industry’s most critical business initiatives including Product Development and Introduction, Global Product Development and Regulatory Compliance.
  • Hosted or participated in numerous major events across the world through which more than 60 UGS customers provided endorsements of their experiences deploying UGS solutions.  These events included:

¾     UGS’ annual Analyst and Media Forum in New York, which served as the platform for launching Teamcenter 2005 along with concurrent launch events in London, Paris, Munich and Hong Kong.

¾     UGS’ annual Asia Pacific Executive Client Event, held this year in Korea and at which GM Daewoo Auto & Technology won the company’s Asia Pacific PLM Excellence Award.

¾     UGS’ Digital Manufacturing Symposium in Detroit, where attendance has now quadrupled in only two years.

¾     UGS’ Supplier Collaboration Summit in Tokyo, featuring General Motors and Siemens -- two JT Open corporate members -- discussing how the lightweight 3D JT data format has helped enable their successful product lifecycle collaboration projects.

¾     PLM World in Dallas, annually the world’s largest PLM user community, featuring attendance of nearly 1,600. 

  • Completed the acquisition of Tecnomatix to create the number one digital manufacturing solutions provider in the PLM market for approximately $228 million.  Tecnomatix became the digital manufacturing brand offered by UGS.  The acquisition was UGS’ fourth since launching independent operations in May 2004. 
  • Announced the signing of major systems integrator agreements with CSC and EDS.  These alliances complement the company’s existing alliances with HP and Capgemini. 
  • Announced that Asahi Electronics (AEC), Japan’s leading provider of real time 3D graphics and virtual reality solutions, joined the JT Open Program, continuing the strong global momentum for this rapidly expanding initiative.  The JT Open program now has more than 100 members.

 

UGS  will  host its second quarter 2005 earnings with securities analysts live on the Internet at 10:30 a.m. Central time, Thursday, August 11, 2005.  Presentation slides will be posted on www.ugs.com at 8:00 a.m. Central time.  See below for webcast/teleconference access information. 

TO LISTEN VIA STREAMING WEB AUDIO:

URL:https://e-meetings.mci.com

Conference Number: 4069339

Passcode: UGS

Note:  Pop-up blockers must be disabled.

To join:

·       Go to the URL listed above

·       Select Join an Event from the Events tab

·       Enter all requested registration information and follow instructions to proceed 

 

TO LISTEN VIA PHONE:

Domestic and International: +1-517-268-4880

Passcode: UGS

 

TO VIEW THE ACCOMPANYING VISUAL PRESENTATION VIA NET CONFERENCE:

https://e-meetings.mci.com/nc/join.php?i=PA4069339&p=UGS&t=c

Note: Participants who want to view the net conference are advised to visithttp://www.mymeetings.com/updates/net-systemcheck.php?ver=2003 any time prior to the event to ensure their systems are properly configured.

 

NET REPLAY:

URL:   https://e-meetings.mci.com/nc/join.php?i=PA4069339&p=UGS&t=r

Note:  The replay will be available approximately 60 minutes after the call concludes and the link will be live until Sept. 10, 2005.

 

 

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. 

 

Note:  UGS and Teamcenter are registered trademarks of UGS Corp. or its subsidiaries in the United States and in other countries.  Tecnomatix, JT2GO and Open Manufacturing Backbone are 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 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, international operations and exchange rate fluctuations, terrorist activities, acquisitions, changes in pricing models, intellectual property and losses of key employees. UGS has included a discussion of these and other pertinent risk factors in its registration statement on Form S-4 most recently 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.

 

Adjusted operating income represents operating income (loss) adjusted for amortization of acquisition related intangible assets, restructuring charges, and charges for in-process research and development.  Adjusted operating income is not a recognized term under generally accepted accounting principles, or GAAP.  Adjusted operating income does not represent operating income (loss), as that term is defined under GAAP, and should not be considered as an alternative to operating income (loss) as an indicator of our operating performance.  We have included information concerning adjusted operating income because we use such information when evaluating operating income to better evaluate the underlying performance of the Company.  Adjusted operating income as presented herein is not necessarily comparable to similarly titled measures.  The following is a reconciliation between adjusted operating income and operating income (loss), the GAAP measure we believe to be most directly comparable to adjusted operating income (in thousands).

 

 

 

 

Successor

 

 

Predecessor

 

 

 

 

 

 

 

 

 

 

Period of

 

 

Period of

 

Three months

 

May 27, 2004

 

 

April 1, 2004

 

ended

 

through

 

 

through

 

June 30, 2005

 

June 30, 2004

 

 

May 26, 2004

Reconciliation of operating income (loss) to adjusted operating income:

 

 

 

 

 

 

Operating income (loss)

   $       3,150

 

   $    (33,204)

 

 

   $      (4,441)

Acquisition related intangible amortization

           39,025

 

           12,783

 

 

             5,017

Restructuring

             1,774

 

                

 

 

                

In-process research and development

           4,100

 

         50,819

 

 

               

Adjusted operating income

  $     48,049

 

  $     30,398

 

 

  $          576

 

 

 

 

 

 

 

 


EBITDA represents net income (loss) before interest expense, income taxes, depreciation and amortization.  Adjusted EBITDA is defined as EBITDA further adjusted to give effect to certain items that are required in calculating covenant compliance under our senior secured credit facility entered into May 2004.  Adjusted EBITDA is calculated by subtracting from or adding to EBITDA items of income or expense as described below.  EBITDA and Adjusted EBITDA are not a recognized terms under generally accepted accounting principles, or GAAP.  EBITDA and Adjusted EBITDA do 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 and Adjusted EBITDA are not intended to be measures 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. UGS Corp. considers EBITDA and Adjusted EBITDA to be key indicators of our ability to pay our debt.  We have included information concerning EBITDA and Adjusted EBITDA because we use such information in determining compensation of our management and in our review of the performance of our business.  EBITDA and Adjusted EBITDA as presented herein are not necessarily comparable to similarly titled measures.  The following is a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), the GAAP measure we believe to be most directly comparable to EBITDA and Adjusted EBITDA (in thousands).

 

 

Successor

 

 

Predecessor

 

 

 

 

 

 

 

 

 

 

Period of

 

 

Period of

 

Three months

 

May 27, 2004

 

 

April 1, 2004

 

ended

 

through

 

 

through

 

June 30, 2005

 

June 30, 2004

 

 

May 26, 2004

Reconciliation of net (loss) income to EBITDA:

 

 

 

 

 

Net (loss) income

   $    (22,024)

 

   $    (44,688)

 

 

   $      (3,068)

Interest expense

           25,216

 

             7,956

 

 

                812

(Benefit) provision for income taxes

           (8,625)

 

             3,748

 

 

           (1,616)

Depreciation and amortization

         43,869

 

         14,005

 

 

         13,262

EBITDA

  $     38,436

 

  $    (18,979)

 

 

  $       9,390

 

 

 

 

Primární kontakt

Mendi Paschal
+1 972 987 3210
paschal@ugs.com

Doug Barnett -- Financial
1 972 987 3352
doug.barnett@ugs.com