Parametric Technology Reports Fiscal 1999 Second Quarter Results

WALTHAM, Mass., April 20, 1999 - Parametric Technology Corporation (NASDAQ: PMTC) today reported its results for the second quarter ended April 3, 1999.

Revenue for the second quarter was $263.2 million, compared with $264.1 million for the same period last year. Pro forma net income, which excludes nonrecurring charges related to acquisitions and extraordinary items, was $42.8 million, or $0.16 per share, compared with pro forma net income of $66.0 million, or $0.24 per share, for the second quarter of fiscal 1998. PTC's pro forma results include the effects of amortization of intangible assets associated with acquisitions.

During the second quarter of fiscal 1999, Parametric Technology completed the acquisition of Division Group plc and auxilium inc. for a combined purchase price of approximately $150 million. Division, with headquarters in Bristol, UK, and San Diego, Calif., is a developer of enterprise product data visualization, simulation and integration tools. auxilium, with headquarters in Mendota Heights, Minn., is a developer of web-based software tools for the integration of legacy systems, databases and applications. The company also recorded a nonrecurring charge of $39.5 million related to the write-off of in-process research and development for the two acquisitions as well as certain intangible assets and costs associated with company-wide expense reduction efforts.

Including nonrecurring charges related to acquisitions and extraordinary items, net income for the second quarter was $10.5 million, or $0.04 per share, compared with a net loss of $15.9 million, or ($0.06) per share, for the second quarter of fiscal 1998.

Commenting on PTC's results, Chairman and Chief Executive Officer Steven C. Walske stated: "Our recent initiatives involving Pro/ENGINEER, Windchill, and our sales and service organizations showed signs of improvement in both sales productivity and revenue growth this quarter over last. Additionally, our business in Japan improved with several large sales, including the largest deal in the company's history, from Yanmar Diesel Engine Co., Ltd."

Walske noted that Windchill continued to be well received in the marketplace as a growing number of companies worldwide were evaluating, testing, piloting or entering production with Windchill technology to address a variety of business issues. Examples of Windchill activity this quarter included:

In addition to the Yanmar and Hyundai orders, other significant Pro/ENGINEER orders were received in the second quarter from Eaton Corp., Fuji Electric, Harris Corp., Hitachi, INA Werk Schaeffler, LuK, SVG Lithography Systems and York International. In all, the company shipped more than 8,700 new seats of software during the quarter, increasing the total number of seats installed to approximately 213,600. The company also added approximately 1,100 new customers worldwide, bringing PTC's total customer base to over 25,000.

Walske continued: "As part of our ongoing efforts to improve sales productivity, we reorganized the Windchill sales force in order to better represent PTC's full product line to larger customers. We also completed the Division and auxilium acquisitions during the quarter, both of which are critical to our strategy of establishing Windchill as a key enabling technology for Internet-based product and process lifecycle management.

"Combined with our fiscal first quarter acquisition of InPart Design, Inc., a component and supplier management application for the Windchill platform, these acquisitions diluted the company's reported earnings per share by $0.02 in the second quarter and are expected to dilute earnings per share by $0.03 in each of the third and fourth quarters. The acquisitions are expected to contribute to earnings growth during the fiscal year beginning October 1999.

"Aside from acquisitions, we continued to aggressively develop Windchill during the quarter and shipped Release 2.0 which includes new functionality in the area of workflow and process management. Also, Tecnomatix Technologies Ltd. endorsed the Windchill web-centric approach to product and process lifecycle management by agreeing to integrate its "Digital Factory" applications within the Windchill environment."

Also in the second quarter, PTC announced the newest release of its suite of mechanical design automation applications, Pro/ENGINEER 2000i. This release, described by industry analysts as "a new benchmark for solid modeling technology," introduced a unique set of behavioral modeling capabilities, new functionality for very large assemblies, adaptive process features, and intelligent knowledge-based manufacturing. The release also included major enhancements for sharing engineering information over the Internet and it provided significant ease-of-use advancements with its Windows-native graphical user interface.

Walske concluded: "The business developments I've highlighted indicate our enthusiasm for the opportunities in our core business and in our newer market initiatives. With our recent acquisitions we have now combined web-based data management (Windchill) with web-based legacy data integration (auxilium) and web-based data visualization (Division).

"We are encouraged by our progress this quarter and we continue to believe that our ongoing distribution, product and technology initiatives are long-term positives for the company. However, we continue to be cautious in our outlook because the impact of these ongoing initiatives on our near-term results remains uncertain."

The unaudited consolidated statement of income and condensed consolidated balance sheet for the second quarter and first six months of fiscal 1999 are attached.


                   
PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
                   
                   
    Three months ended   Six months ended  
    April 4,   April 3,   April 4,   April 3,  
    1998   1999   1998   1999  
                   
Revenue:                  
License   $ 162,558   $ 141,125   $ 320,816   $ 277,205  
Service   101,513   122,123   202,123   236,160  
Total revenue   264,071   263,248   522,939   513,365  
                   
Costs and expenses:                  
Cost of license   3,443   2,997   7,962   7,136  
Cost of service   33,827   47,567   70,430   89,283  
Sales and marketing   92,811   103,161   189,018   199,273  
Research and development   20,682   30,310   45,961   59,483  
General and administrative   12,314   15,248   27,768   31,812  
Amortization of intangible assets   679   3,607   1,358   6,094  
Acquisition and nonrecurring charges   76,800   39,518   76,800   53,347  
Total costs and expenses   240,556   242,408   419,297   446,428  
                   
Operating income (1)   23,515   20,840   103,642   66,937  
Other expense (income), net   371   (728)   6,249   (2,672)  
Income before income taxes   23,144   21,568   97,393   69,609  
Provision for income taxes   20,069   11,019   52,185   29,069  
Income before extraordinary item   3,075   10,549   45,208   40,540  
Extraordinary loss   (19,017)   -   (19,017)   -  
Net income (loss) (1)   $ (15,942)   $ 10,549   $ 26,191   $ 40,540  
                   
Earnings per share: (1)                  
Basic:                  
Income before extraordinary items   $ 0.01   $ 0.04   $ 0.17   $ 0.15  
Extraordinary loss   (0.07)   -   (0.07)   -  
Net income (loss)   $ (0.06)   $ 0.04   $ 0.10   $ 0.15  
Diluted:                  
Income before extraordinary items   $ 0.01   $ 0.04   $ 0.16   $ 0.15  
Extraordinary loss   (0.07)   -   (0.07)   -  
Net income (loss)   $ (0.06)   $ 0.04   $ 0.09   $ 0.15  
                   
                   
Weighted average shares and dilutive   280,071   275,487   277,589   274,891  
equivalent shares outstanding                  
                   
PARAMETRIC TECHNOLOGY CORPORATION
PRO FORMA RESULTS (1)
(in thousands, except per share data)
                   
Operating income   $ 100,315   $ 60,358   $ 180,442   $ 120,284  
Net income   $ 65,963   $ 42,761   $ 108,096   $ 85,451  
Earnings per share - diluted   $ 0.24   $ 0.16   $ 0.39   $ 0.31  
Weighted average shares and dilutive   280,071   275,487   277,589   274,891  
equivalent shares outstanding                  
                   
(1) The pro forma results exclude nonrecurring charges related to acquistions, restructuring charges and extraordinary items.


  September 30,   April 3,
  1998   1999
       
ASSETS      
       
Cash and investments $ 426,183   $ 345,919
Accounts receivable, net 189,275   204,991
Other assets 217,382   379,558
       
Total assets $ 832,840   $ 930,468
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
       
Total liabilities $ 505,403   $ 496,731
Stockholders' equity 327,437   433,737
       
Total liabilities and stockholders' equity $ 832,840   $ 930,468


About the Company
Parametric Technology Corporation, founded in 1985 and headquartered in Waltham, Mass., develops, markets and supports integrated product development and lifecycle management solutions that help companies spur innovation and achieve sustained competitive advantage. PTC's software solutions are complemented by the strength and experience of its professional services organization, which provides training, consulting and support to customers around the globe. In its fiscal year ended September 30, 1998, the company achieved more than $1 billion in revenue. PTC can be reached at 781-398-5000, or via the web at http://www.ptc.com.



Except for the historical information contained herein, matters discussed in this news release may constitute forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These include market reaction to the pricing and packaging of the Pro/ENGINEER product line, market acceptance of the Windchill family of products, the success of the Windchill and worldwide sales force reorganization, our ability to successfully integrate recent acquisitions, the economic situation in the Asia/Pacific region as well as the risks and uncertainties detailed from time to time in reports filed by PTC with the Securities and Exchange Commission, including the company's most recent reports on Form 10-K and 10-Q.

Parametric Technology Corporation and Pro/ENGINEER are registered trademarks, and Windchill and all names in the PTC product family as well as the PTC logo are trademarks, of Parametric Technology Corporation or its subsidiaries in the United States and/or in other countries. All other companies and products referenced herein have trademarks or registered trademarks of their respective holders.
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