01—Abstract
Summary
Summary of the 10-K filed December 14, 2004. Cited figures are marked; the original filing is the authoritative source.
Parametric Technology Corporation (PTC), headquartered in Needham, Massachusetts, develops product lifecycle management (PLM) software, including its Pro/ENGINEER design solutions and Windchill-based collaboration and control solutions.
For fiscal 2004 (ended September 30, 2004), total revenue was $660.0 milliona, down from $671.9 million in 2003, with license revenue of $198.9 million and service revenue of $461.1 million. The company returned to profitability, with operating income of $37.4 million and net income of $34.8 million, compared with a net loss of $98.3 million in 2003. The improvement was attributed primarily to reductions in the operating cost structure, including headcount cuts and total costs and expenses falling to $622.6 million from $751.6 million.
Net income also benefited from a one-time $18.9 millionb tax benefit tied to a favorable IRS examination resolution. Design solutions revenue fell to $480.7 million, while collaboration and control solutions revenue rose to $179.3 million. Management described the design solutions market as mature and saturated in North America and Europe, and pointed to Asia-Pacific as the greatest growth opportunity.
Management also noted that customer reluctance to make large software purchases and weak technology spending in manufacturing continue to weigh on results. Cash, cash equivalents and investments totaled $294.9 millionc at year-end, with operating cash flow of $101.3 million. The company disclosed an ongoing lawsuit brought by its former largest distributor, Rand A Technology Corporation, which seeks substantial damages, and management believes the claims are without merit.
02—Key points
Key Highlights
- Total revenue of $660.0 million in fiscal 2004, down 2% from $671.9 million in fiscal 2003, while license revenue declined 3% to $198.9 million.
- Net income of $34.8 million, or $0.13 per diluted share, versus a net loss of $98.3 million in fiscal 2003, helped by a $1.2 billion...
- Operating income of $37.4 million in 2004 compared with an operating loss of $79.6 million in 2003, as total costs and expenses fell to $622.6 million from $751.6 million.
- A one-time tax benefit of $18.9 million from favorable resolution of prior-year IRS audits, with a $39.5 million refund received in the first quarter of 2005.
- Design solutions revenue declined to $480.7 million, while collaboration and control solutions revenue rose to $179.3 million, including Windchill Link solutions license revenue of $29.7 million.
- Cash, cash equivalents and investments of $294.9 million at September 30, 2004, up from $205.3 million, with operating cash flow of $101.3 million.
- Ongoing lawsuit by Rand A Technology Corporation seeking substantial damages, which the company says is without merit and intends to contest vigorously.
03—Questions
Frequently Asked Questions
Why did PTC return to profitability in fiscal 2004?
The company attributed the improvement primarily to reductions in its operating cost structure. Total costs and expenses fell $129.0 million, driven by headcount reductions, lower facility charges and lower sales and marketing spending. A one-time $18.9 million tax benefit also contributed to net income.
Is PTC's revenue growing?
Not overall. Total revenue declined 2% to $660.0 million in 2004 and 9% in 2003. Management attributed the declines to saturation of the North American and European design markets, customer reluctance to make large software purchases, reduced services delivery capacity and weak technology spending in manufacturing. Collaboration and control solutions revenue increased 3%, while design solutions revenue fell 4%.
What is PTC's strategy for future growth?
Management plans to grow revenue by increasing sales of existing products and pursuing strategic acquisitions, make measured investments in its direct sales force and reseller channel, and expand in Asia-Pacific, which it views as the greatest growth opportunity. It also aims to increase operating margins through its reduced cost structure.
What legal risks does PTC face?
The company is defending a lawsuit filed in May 2003 by Rand A Technology Corporation and Rand Technologies Limited, its former largest distributor, which seeks equitable relief and substantial damages. PTC filed counterclaims and believes Rand's claims are without merit, but says it cannot predict the outcome or rule out a material adverse impact. A shareholder class action was dismissed on November 3, 2004, and the filing states that the plaintiffs did not appeal.
04—Continue