01—Abstract
Summary
Summary of the 10-K filed December 28, 1995. Cited figures are marked; the original filing is the authoritative source.
Parametric Technology Corporation's Form 10-K for the fiscal year ended September 30, 1995 describes a company that develops, markets and supports seven families of integrated mechanical CAD/CAM/CAE software, led by its Pro/ENGINEER product line.
Fiscal 1995 revenue rose to $394,310,000a from $266,974,000 in fiscal 1994, an increase the filing states as 47.7%, and net income was $77,362,000, or $1.20 per share. The filing notes that net income as a percentage of revenue fell to 19.6% in fiscal 1995 from 25.5% in fiscal 1994, mainly because of two non-recurring charges: $19,000,000 for purchased research and development from the CDRS acquisition and $10,438,000 related to the Rasna merger. Excluding those charges, the company reports net income at 25.0% of revenue.
The company made two acquisitions in 1995. It bought the Conceptual Design and Rendering System (CDRS) business from Evans & Sutherland for $33,507,000b in cash, and it merged Rasna Corporation in a pooling-of-interests transaction that involved issuing approximately 3,793,000 shares. Licensed seats rose to approximately 15,900 in fiscal 1995 from 11,800 in fiscal 1994, and the average price per seat was about $18,100.
Service revenue reached 26.9% of total revenue, and revenue outside North America was 49.8%. The balance sheet at September 30, 1995 showed $145,638,000c in cash and cash equivalents and $162,610,000 in short-term investments, with total stockholders' equity of $370,929,000. Net cash provided by operations was $119,017,000.
Management stated that existing cash and investments, together with cash from operations, should be sufficient through at least fiscal 1996. The company also planned to repurchase shares to offset option-related dilution, and the full remaining authorized repurchase program was estimated at approximately $175,000,000d.
02—Key points
Key Highlights
- Fiscal 1995 total revenue of $394,310,000, up from $266,974,000 in fiscal 1994, with license revenue of $288,349,000 and service revenue of $105,961,000.
- Net income of $77,362,000, or $1.20 per share, compared with $68,089,000 or $1.09 per share in fiscal 1994; net income as a percentage of revenue was 19.6% including non-recurring charges and 25.0% excluding them.
- Non-recurring charges totaled $29,438,000 in acquisition and related costs: $19,000,000 for CDRS purchased research and development and $10,438,000 for the Rasna merger.
- Licensed approximately 15,900 seats in fiscal 1995, 34.7% more than the 11,800 seats in fiscal 1994, at an average price of approximately $18,100 per seat.
- Cash and cash equivalents of $145,638,000 and short-term investments of $162,610,000 at September 30, 1995, with no borrowings under the company's line of credit during fiscal 1995.
- Net cash provided by operating activities of $119,017,000 in fiscal 1995, compared with $84,452,000 in fiscal 1994.
- Revenue outside North America was 49.8% of total revenue in fiscal 1995, up from 43.3% in fiscal 1994, and the company has 1,960 employees, 1,151 in the United States and 809 abroad.
03—Questions
Frequently Asked Questions
Why did net margin decline in fiscal 1995 despite strong revenue growth?
Net income as a percentage of revenue was 19.6% in fiscal 1995, down from 25.5% in fiscal 1994. The filing attributes the decline to two non-recurring charges: $19,000,000 for the write-off of purchased research and development in process from the CDRS acquisition, and $10,438,000 related to the Rasna merger. Excluding these charges, net income was 25.0% of revenue.
What acquisitions did the company complete in fiscal 1995?
On April 12, 1995, the company acquired substantially all assets and specified liabilities of the CDRS software business from Evans & Sutherland Computer Corporation for approximately $33,507,000 in cash, accounted for as a purchase. On August 1, 1995, it merged Rasna Corporation into the company, issuing approximately 3,793,000 shares and reserving approximately 522,000 shares for assumed Rasna stock options; this was accounted for as a pooling of interests.
How strong is the company's liquidity position?
At September 30, 1995, the company held $145,638,000 in cash and cash equivalents and $162,610,000 in short-term investments, and total stockholders' equity was $370,929,000. Management believes existing cash and investments, plus cash from operations, will be sufficient to meet working capital, financing and capital expenditure needs through at least fiscal 1996. The company had no borrowings under its $5,000,000 line of credit during fiscal 1995, which expired January 31, 1995.
What is the company's plan for share repurchases?
The board authorized in May 1994 a plan to acquire up to 3,000,000 shares. During fiscal 1994 the company bought 157,000 shares for $4,356,000, all reissued by September 30, 1994. The company intends to repurchase shares in fiscal 1996 to partially offset dilution from stock option exercises and employee stock purchases. The filing estimates that the full remaining authorized repurchase would cost approximately $175,000,000 based on the September 30, 1995 closing stock price.
Who are the main competitors and how does the company compete?
The filing names IBM (CADAM and CATIA), Computervision (CADDS), EDS (UNIGRAPHICS), Intergraph (I/EMS) and Structural Dynamics Research Corporation (I-DEAS Master Series) as its most direct competitors. The company says it competes on product functionality, price/performance, portability, ease of use, sales and marketing strength, support services and corporate reputation, and it emphasizes the automatic engineering change propagation of its Pro/ENGINEER architecture.
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