01—Abstract
Summary
Summary of the 10-K filed November 26, 2008. Cited figures are marked; the original filing is the authoritative source.
Parametric Technology Corporation (PTC) develops, markets and supports product lifecycle management (PLM) software and related services, including mechanical CAD/CAM/CAE tools (Pro/ENGINEER, CoCreate, Mathcad, Arbortext) and data management and collaboration solutions (Windchill, ProductView).
For fiscal 2008 (ended September 30, 2008), total revenue was $1,070.3 milliona, up 14% from $941.3 million in 2007 (8% on a constant currency basis). Operating income was $125.2 million, up from $92.8 million, and net income was $79.7 million, down from $143.7 million in 2007, which benefited from a $58.9 million one-time tax benefit from a valuation allowance release. Operating cash flow was $222.2 million, and days sales outstanding improved to 61 days from 74 days.
Non-U.S. revenue accounted for 66% of total revenue. Growth was driven largely by the first-quarter 2008 acquisition of CoCreate Software GmbH for $247.5 millionb net of cash acquired, financed with $220 million of revolver borrowings and cash. Acquisitions of LBS ($13.1 million) and DHI ($1.0 million) also closed in the quarter.
The company reports that the macroeconomic climate and the recent decline in the Euro are the most significant risks for 2009. Management plans to modestly increase investment in research and development, its reseller channel, and globalization efforts, particularly in China, and expects no restructuring charges in 2009 related to current initiatives. The filing also discloses a pending lawsuit by GE Capital Leasing Corporation seeking $47 millionc in damages, trebled, plus attorneys' fees, related to Toshiba financing transactions in Japan.
PTC has deferred $43.8 milliond of related revenue as customer advances and has not accrued any other liability. The company repurchased 1.7 million shares for $27.3 million in 2008 and increased its repurchase authorization to $100 million in November 2008.
02—Key points
Key Highlights
- Total revenue rose to $1,070.3 million in 2008, up 14% from $941.3 million, or 8% on a constant currency basis.
- Operating income of $125.2 million compared with $92.8 million in 2007; operating margin was 11.7% versus 9.9%.
- Net income was $79.7 million, down from $143.7 million in 2007, which included a $58.9 million one-time tax benefit from a valuation allowance release.
- Cash provided by operating activities was $222.2 million, with days sales outstanding improving to 61 days from 74 days.
- CoCreate Software GmbH was acquired for $247.5 million net of cash acquired, financed by $220 million under the revolving credit facility and cash; $88.5 million remained outstanding at September 30, 2008.
- Maintenance revenue reached $497.5 million, up 22%, with Windchill seats under maintenance up 28%.
- GE Capital Leasing Corporation has sued for $47 million in damages (trebled plus fees) over Toshiba transactions in Japan; $43.8 million of related revenue is deferred as customer advances.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2008filed November 26, 2008Financial Statements
| Revenue | $1.07B |
| R&D Expenses | $182.02M |
| Operating Expenses | $945.09M |
| Operating Income | $125.25M |
| Interest Expense | $7.82M |
| Net Income | $79.70M |
| EPS (Basic) | $0.70 |
| EPS (Diluted) | $0.68 |
| Shares Outstanding (Basic) | 113.70M |
| Shares Outstanding (Diluted) | 117.87M |
05—Questions
Frequently Asked Questions
How did PTC perform financially in fiscal 2008?
Revenue grew 14% to $1,070.3 million, and operating income rose to $125.2 million from $92.8 million. Net income declined to $79.7 million from $143.7 million, mainly because fiscal 2007 included a $58.9 million one-time tax benefit from releasing valuation allowances.
What drove revenue growth in 2008?
The filing attributes revenue growth primarily to the CoCreate acquisition, favorable foreign currency movements, and organic growth in maintenance and consulting and training revenue. Maintenance revenue rose 22% to $497.5 million, and license revenue rose 7% to $316.2 million.
What is the status of the GE Capital Leasing lawsuit?
GECL sued in August 2007 alleging it was fraudulently induced to finance over $60 million for Toshiba purchases of PTC products. On October 2, 2008, the court granted PTC's motion to dismiss subject to conditions. On November 17, 2008, GECL moved to vacate that order, and PTC is opposing the motion. PTC disputes the claims and has accrued no liability beyond the deferred revenue of $43.8 million.
What are the main risks management identified for 2009?
Management cited the macroeconomic climate, which could lead customers to delay or reduce technology investments or delay payments, and the recent decline in foreign currency exchange rates, particularly the Euro, which could reduce reported results when foreign earnings are translated into dollars.
What is PTC's capital return activity?
In 2008 PTC repurchased 1.7 million shares for $27.3 million. On November 20, 2008, the board increased the share repurchase authorization to $100 million, expiring May 14, 2009. PTC does not pay cash dividends.
06—Continue