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13 November 2006

UGS Reports Third Quarter Results; PLM Industry Leader Marks Solid Progress on Strategic Plan

PLANO, Texas – 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® platform.
  • 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.
  • 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.
  • 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® Express software for its first collaborative product data management (cPDM) system.

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 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. 

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, 2006

September 30, 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, 2006

September 30, 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,

2006

December 31,

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,

2006

September 30,

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

 

 

 

 

 


 

Primární kontakt

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

Doug Barnett -- Financial Analysts
+1 972 987 3352
barnettd@ugs.com