Press Release
MSC.Software Reports Third Quarter Revenue Growth Of 29%
SANTA ANA, Calif. - October 23, 2002 - MSC.Software Corp. (NYSE: MNS), the leading global provider of simulation software, services and systems, today announced financial results for the third quarter ended September 30, 2002.
- Third quarter revenues of $81 million (29% increase); Revenue for nine months ended September 30, 2002 of $242.6 million (56% increase);
- Reported net loss, excluding restructuring and other impairment charges, of $1.7 million compared with net income of $1.0 million in the third quarter last year;
- EPS, excluding restructuring and other impairment charges, of ($0.06) per share, compared with $0.04 per share in the third quarter last year.
For the third quarter ended September 30, 2002, MSC.Software reported revenue of $81.0 million, an increase of 29% over revenue of $62.7 million for the third quarter last year. The net loss, excluding restructuring and other impairment charges, was $1.7 million or ($0.06) per share compared with net income of $1.0 million or $0.04 per diluted share in the third quarter last year. Net income in the third quarter last year excludes restructuring and other impairment charges of $1.9 million. The net loss in the third quarter this year excludes restructuring and other impairment charges of $6.0 million. Of this amount, approximately $1.0 million related to capitalized software impairment and $5.0 million related to restructuring charges resulting from organization realignment. Including these charges, the reported net loss was $5.8 million or ($0.20) per share, compared with a reported net loss of $0.2 million or ($0.01) per share in the third quarter last year.
For the nine months ended September 30, 2002, MSC.Software reported revenue of $242.6 million, an increase of 56% over revenue of $156.0 million for the same period last year. The net loss, excluding restructuring and other impairment charges, was $3.6 million or ($0.12) per share compared with net income of $5.2 million or $0.27 per diluted share in the nine month period last year. The reported net loss, including the restructuring and other impairment charges as well as an adjustment for change in accounting principle related to accounting for goodwill, was $53.6 million or ($1.82) per share for the nine months ended September 30, 2002, compared with net income of $4.0 million or $0.21 per diluted share in the nine month period last year. The current nine-month period includes a non-cash charge related to goodwill impairment in the amount of $39.3 million.
"The sustained downturn in the global business environment, especially among small and medium size manufacturers, has continued to have a negative impact on the opportunities for revenue growth in our markets," said Frank Perna, chairman and chief executive officer of MSC.Software. "We are using our visibility into our global customer base to focus our management attention on matching costs and processing opportunities. The integration of Mechanical Dynamics is on schedule and will be completed by the end of the first quarter FY 2003. Strong opportunities for incremental revenue for the combined product lines are being uncovered in all three world regions."
"Ending the legal fees associated with the FTC matter and completing our organizational realignment in Q3 has optimized our cost structure and will result in cost-controlled, profitable growth starting in Q4 FY2002. The organizational changes made this year have decreased total operating expenses by approximately $20 million on an annual basis."
"We continue to remain cautious about the remainder of the year due to uncertainty in world markets. However, we are making great strides in selling complete software, services and systems solutions and increasing our penetration of core accounts, which will help us ride out the current downturn. Our strategy is strong and we are working very hard to help our customers solve problems and develop better products even in these tough times."
Outlook
Based on current visibility, for the fourth quarter the Company expects revenue to be approximately $93 million with an operating margin of approximately 5%-7%. This will result in EPS of $0.05 to $0.07 per share. For fiscal year 2003, the Company expects revenue of approximately $385 million with an operating margin of 11%.
Regional Information
Americas
Revenue increased by 17% to $39.8 million in the Americas with new accounts increasing by 200 customers. Significant software, service and systems customers include NASA, Northrop, TI Group Automotive Systems, Firth Rixson Viking and Orbital Sciences. During the third quarter, 40 transactions over $100,000 were signed in the Americas.
Europe
MSC.Software's European operations saw revenues increase 13% in local currencies and 25% in U.S. dollars to $19.4 million. The total number of new accounts increased by 78 names. Significant software, service and systems customers included Bombardier, Airbus, MAN Technology, FIAT and Visteon. During the third quarter, 17 transactions over $100,000 were signed in Europe.
Asia-Pacific
In the third quarter, Asia-Pacific revenues increased 63% in local currencies and 66% in U.S. dollars to $21.8 million. The region added 132 new account names in the quarter. Major software, service and systems engagements were signed with Toyota, Fujitsu, Nikon, Kawasaki and Sharp. During the third quarter, 18 transactions over $100,000 were signed in the Asia-Pacific region.
Balance Sheet classification of long-term debt
The Company has notified its lenders that it is not in compliance with certain covenants required by its Revolving Credit & Term Loan Agreement (the "Loan Agreement"). These covenants include the minimum consolidated Earnings before Income Taxes, Depreciation and Amortization ("EBITDA") for the previous four rolling quarters, the minimum debt to EBITDA ratio and the minimum bi-weekly cash balance requirement. The Company is currently in negotiations with its lenders to amend the covenants of the Loan Agreement and obtain a waiver of the default for the quarter ended September 30, 2002 and is also negotiating a restructuring of the entire debt facility. If the Company is unable to obtain an appropriate amendment and waiver or refinance the amount outstanding under the Loan Agreement prior to the filing date for our report on Form 10-Q, long-term debt associated with the Loan Agreement totaling $35,938,000 at September 30, 2002 will be reclassified to current liabilities.
MSC.Software's conference call to discuss the third quarter results will be Webcast live today at 8:30 a.m. Pacific (11:30 am Eastern) at the Company's website at http://www.mscsoftware.com/ir. It can also be accessed through the following dial in numbers: US 800.374.0151 or Intl 706.634.4981. An archived version of the conference call will also be available at the Company's website.
About MSC.Software Corporation
MSC.Software (NYSE: MNS) is the leading global provider of simulation software, with related services and systems, that helps companies make money, save time and reduce costs associated with designing and testing manufactured products. MSC.Software works with thousands of companies in hundreds of industries to develop better products faster by utilizing information technology, software, services and systems. MSC.Software employs more than 1500 people in 22 countries. For additional information about MSC.Software's products and services, please visit www.mscsoftware.com.
Except for the historical information contained herein, certain matters discussed in this news release constitute forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. Other factors which could cause such results to differ materially from those described in the forward-looking statements include delays in developing, completing, or shipping new or enhanced products, the ability to assimilate acquisitions into MSC's operations, foreign currency translations, and other risks and uncertainties that are detailed in the Company's annual report on Form 10-K and other reports filed by the Company with the Securities and Exchange Commission.
(Financial Tables Follow)
| Contact: Joanne Keates Vice President, Investor Relations MSC.Software 714.444.8551 joanne.keates@mscsoftware.com |
Contact: Catherine Meek Media Relations MSC.Software 714.445.5647 catherine.meek@mscsoftware.com |
