FOR RELEASE Monday, November 14, 2005
PLANO, Texas – UGS Corp., a leading global provider of product lifecycle management (PLM) software and services, today announced financial results for the third quarter ended September 30, 2005. In the third quarter, UGS marked its ninth 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 73.8 percent revenue increase including acquisitions, or 45.9 percent without acquisitions.
UGS’ performance was driven by continued growth in its two key product segments (cPDM and CAx) and growth in each of its geographic regions.
Third quarter financial highlights include:
“We remain focused on growing our business through enabling global innovation networks for our customers. Following the quarter where we marked our one-year anniversary of operating independently, we continue to see a steady stream of cPDM growth and enterprise contracts,” said Tony Affuso, chairman, CEO and president of UGS. “Our customer focus and our leadership position in the PLM market is driving our continued growth and fueling the customer innovation announcements that highlight our success in creating value through global innovation networks.”
Customer Innovation Leadership Announcements
UGS issued two announcements today (see separate releases) highlighting key milestones from the third quarter:
· In a separate announcement today, UGS announced that MTU Aero Engines GmbH, Germany’s leading aircraft engine manufacturer, standardized on UGS for digital product development as part of €1 million (US$1.2 million) contract extension. Under the new extension MTU Aero Engines will add another 85 seats of NXTM software, replacing the existing computer-aided design (CAD) software.
· In a separate announcement today, UGS announced that Renishaw, the world’s leading supplier of metrology and spectroscopy products, selected UGS Tecnomatix™ solutions to streamline its new product introduction (NPI) processes. The company will use Tecnomatix digital manufacturing software to better manage its manufacturing systems by shortening the design cycle, removing wasteful processes and reducing the number of file formats required to produce new products.
Additional Customer Innovation Leadership Announcements
In the third quarter UGS announced major customer innovation leadership contracts (the company expects to realize revenue from the contracts highlighted below over multiple quarters) and executed key product launches. Contract announcement highlights:
· Announced that it extended its PLM agreement with General Motors (GM) and that GM will leverage the Open Manufacturing BackboneTM (OMB), UGS’ globally-scalable digital manufacturing technology platform, to enhance collaboration at the plant floor level.
· Announced that Patria Vehicles Oy, part of the Patria Group, standardized on UGS’ NX and Teamcenter PLM software. The agreement reinforces UGS’ position as leading PLM provider in Finland and creates a framework to deploy NX and Teamcenter for armored wheeled vehicles, Patria Vehicles’ flagship product. NX replaced Patria Vehicles’ existing CAD solutions.
· Announced that Pilatus Aircraft Ltd., the world's leading manufacturer of single-engine turboprop aircraft, awarded UGS a $1 million expansion contract as the company continued its standardization on UGS’ Teamcenter for PLM.
· Announced that leading Swedish contract manufacturer, Partnertech, signed a three-year extension for UGS® digital manufacturing solutions.
Product announcement highlights:
· Launched Version 4 of NX, the latest release of the company’s comprehensive software solution for digital product development. Building on its industry-leading ability to capture knowledge and simulate performance throughout the product development process, NX 4 includes hundreds of customer-driven enhancements that improve manufacturers’ ability to differentiate their products and to transform their process of innovation. New features address product styling, design, simulation and manufacturing, along with data migration tools that benefit I-deas® software users transitioning to NX.
· Through the launch of UGS’ new mid-market product portfolio – UGS Velocity SeriesTM – UGS became the first company to bring enterprise PLM to the mid-market. UGS Velocity Series includes the industry’s first comprehensive, preconfigured portfolio of digital product design, analysis and data management software. New products within UGS Velocity Series include:
¾ Teamcenter Express, a breakthrough mid-market solution for cPDM that applies pre-configured industry best practices to provide ease of installation, setup, ease of use and support, for a lower total cost of ownership. It manages the complete design process for engineering organizations currently experiencing a data explosion brought on by rapidly expanding product complexity.
¾ Solid Edge® Version 18, which includes integrated cPDM technology and delivers hundreds of enhancements, including new analysis and data management features.
¾ FEMAP® 9.1, the latest version of the world’s most popular PC-based computer-aided engineering application - a robust pre- and post-processing finite element modeling application. FEMAP 9.1 delivers in-depth finite element modeling for both full time experts and occasional users.
UGS will host its third quarter 2005 earnings with securities analysts live on the Internet at 10:30 a.m. Central time, Monday, November 14, 2005. Presentation slides will be posted on www.ugs.com at 8:00 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, I-deas, JT, NX, Open Manufacturing Backbone, OMB, Solid Edge, Teamcenter, Tecnomatix, Velocity Series and Transforming the process of innovation are registered trademarks or 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.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Successor
UGS Corp.
Three months
Three months
ended
ended
September 30, 2005
September 30, 2004
Revenue:
Software
$ 89,842
$ 71,890
Maintenance
129,706
95,749
Services and other
70,701
67,483
Total revenue
290,249
235,122
Cost of revenue:
Software
4,761
5,017
Maintenance
14,459
12,843
Services and other
58,451
54,443
Amortization of capitalized software and acquired intangible assets
32,059
25,471
Total cost of revenue
109,730
97,774
Gross profit
180,519
137,348
Operating expenses:
Selling, general and administrative
107,803
88,976
Research and development
44,350
33,464
Amortization of other intangible assets
9,018
7,274
Total operating expenses
161,171
129,714
Operating income
19,348
7,634
Interest expense and amortization of deferred financing fees
(25,197)
(22,452)
Other (expense) income, net
(919)
7,045
Loss before income taxes
(6,768)
(7,773)
Provision (benefit) for income taxes
(2,002)
(2,942)
Net loss
$ (4,766)
$ (4,831)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Successor
Predecessor
UGS Corp.
UGS PLM
Solutions Inc.
Period of
Nine months
May 27, 2004
Period of
ended
through
January 1, 2004
September 30, 2005
September 30, 2004
through May 26, 2004
Revenue:
Software
$ 244,738
$ 112,360
$ 100,780
Maintenance
369,614
130,548
163,012
Services and other
213,472
94,188
94,011
Total revenue
827,824
337,096
357,803
Cost of revenue:
Software
15,161
7,493
7,163
Maintenance
42,317
18,222
21,177
Services and other
181,148
75,504
81,259
Amortization of capitalized software and acquired intangible assets
89,283
34,461
23,540
Total cost of revenue
327,909
135,680
133,139
Gross profit
499,915
201,416
224,664
Operating expenses:
Selling, general and administrative
313,382
120,899
136,817
Research and development
118,990
44,470
52,851
In-process research and development
4,100
50,819
—
Restructuring
1,774
—
—
Amortization of other intangible assets
25,327
10,798
2,500
Total operating expenses
463,573
226,986
192,168
Operating income (loss)
36,342
(25,570)
32,496
Interest expense and amortization of deferred financing fees
(71,576)
(30,408)
(2,021)
Other (expense) income, net
(14,326)
7,265
2,010
(Loss) income before income taxes
(49,560)
(48,713)
32,485
Provision (benefit) for income taxes
(14,601)
806
10,092
Net (loss) income
$ (34,959)
$ (49,519)
$ 22,393
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
Successor
September 30,
December 31,
Assets:
2005
2004
Current assets
Cash and cash equivalents
$ 76,253
$ 58,400
Accounts receivable, net
230,688
233,180
Prepaids and other
18,903
23,869
Deferred income taxes
43,696
62,890
Total current assets
369,540
378,339
Property and equipment, net
35,309
33,751
Goodwill
1,429,059
1,317,948
Capitalized and acquired software, net
482,221
435,816
Customer accounts, net
209,548
217,961
Other intangible assets, net
141,072
116,501
Other assets
40,806
42,696
Total assets
$ 2,707,555
$ 2,543,012
Liabilities and Stockholder’s Equity:
Current liabilities
Accounts payable and accrued liabilities
$ 171,061
$ 150,290
Deferred revenue
143,398
110,027
Income taxes payable
1,117
337
Current portion of long-term debt
—
5,000
Total current liabilities
315,576
265,654
Other long-term liabilities
48,103
41,011
Deferred income taxes
198,066
217,122
Long-term debt
1,232,086
1,049,623
Stockholder’s equity
Common stock, $ .01 par value, 3,000 shares authorized; 100 issued and outstanding at September 30, 2005 and December 31, 2004
—
—
Additional paid-in capital
1,005,751
1,005,479
Retained deficit
(76,096)
(41,136)
Accumulated other comprehensive (loss) income, net of tax
(15,931)
5,259
Total stockholder’s equity
913,416
969,602
Total liabilities and stockholder’s equity
$ 2,707,555
$ 2,543,012
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
Three months
Three months
ended
ended
September 30
September 30
2005
2004
Reconciliation of operating income to adjusted operating income:
Operating income
$ 19,348
$ 7,634
Acquisition related intangible amortization
39,175
33,402
Adjusted operating income
$ 58,523
$ 41,036
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
Three months
Three months
ended
ended
September 30,
September 30,
2005
2004
Reconciliation of net loss to EBITDA:
Net loss
$ (4,766)
$ (4,831)
Interest expense
25,197
22,452
(Benefit) provision for income taxes
(2,002)
(2,942)
Depreciation and amortization
45,389
36,974
EBITDA
$ 63,818
$ 51,653
Reconciliation of EBITDA to Adjusted EBITDA:
EBITDA
$ 63,818
$ 51,653
Impact of revenue reduction resulting from purchase accounting (a)
2,169
16,501
Other items (d)
1,050
3,540
Currency translation impact (e)
1,109
(4,912)
Adjusted EBITDA
$ 68,146
$ 66,782
Successor
Predecessor
Period of
Nine months
May 27, 2004
Period of
ended
through
January 1, 2004
September 30
September 30
through
2005
2004
May 26, 2004
Reconciliation of net (loss) income to EBITDA:
Net (loss) income
$ (34,959)
$ (49,519)
$ 22,393
Interest expense
71,576
30,408
2,021
(Benefit) provision for income taxes
(14,601)
806
10,092
Depreciation and amortization
126,792
50,979
33,471
EBITDA
$ 148,808
$ 32,674
$ 67,977
Reconciliation of EBITDA to Adjusted EBITDA:
EBITDA
$ 148,808
$ 32,674
$ 67,977
Impact of revenue reduction resulting from purchase accounting (a)
8,076
26,914
—
Impact of in-process research and development (b)
4,100
50,819
—
Restructuring (c)
1,774
—
—
Other items (d)
4,445
6,980
—
Currency translation impact (e)
7,865
(4,912)
—
Adjusted EBITDA
$ 177,237
$ 112,475
$ 67,977
(a) Removes the purchase accounting impact for the adjustment to deferred revenue.
(b) Removes the impact of acquired in-process research and development that resulted from the acquisition of UGS PLM Solutions Inc. for the period of May 27, 2004 through September 30, 2004 and from the acquisition of Tecnomatix Technologies, Ltd. for the nine months ended September 30, 2005.
(c) Removes the impact of the restructuring charge.
(d) Represents the impact of management, consulting and advisory fees and related expenses paid to our parent companies and affiliates of each of our sponsors, as well as expenses associated with our retention incentive plan for certain members of management.
(e) Represents the net effect of unrealized gains and losses from revaluing the intercompany debt that resulted from the acquisition of UGS PLM Solutions Inc. and from hedging obligations used to offset foreign exchange currency balance sheet exposures
Mendi
Paschal
+1 972 987 3210
mendi.paschal@siemens.com
Doug
Barnett
972 987 3352
barnettd@ugs.com