MNS Msc.Software Corp

MSC.Software Reports Preliminary Fourth Quarter and Year End Financial Results SANTA ANA, Calif., Feb. 18 /PRNewswire-FirstCall/ -- MSC.Software Corp. , the leading global provider of virtual product development (VPD) products including simulation software and services, today announced preliminary financial results for the fourth quarter and fiscal year ended December 31, 2003. Fourth quarter highlights include: * Revenues of $69.3 million; up 12% sequentially from Q3; * Operating margin at 9.2%, improved from 4.5% in Q3; * Income from continuing operations of $3.3 million or $0.09 per diluted share. Fiscal year 2003 highlights include: * Revenues of $253.2 million, up 2% over FY 2002; * Loss from continuing operations of $240,000 or ($0.01) per diluted share; * Key balance sheet items include $49 million in cash and investments, and $69 million in deferred revenue. Note on Preliminary Results The preliminary fourth quarter and year end results are subject to the final resolution of MSC.Software's foreign pension liability. The final resolution of this item is not expected to have an adverse impact on the fourth quarter or year-end financial results. Conference Call MSC.Software's conference call to discuss the preliminary fourth quarter results will be Webcast live today at 8:30 a.m. Pacific (11:30 am Eastern) and can be accessed from the Company's website at http://www.mscsoftware.com/ir . It can also be accessed through thefollowing dial-in numbers: US - (800) 374-0151 or Intl. - (706) 634-4981. An archived version of the conference call will be available at the Company's website. Upon completion of the conference call, a conference call replay will also be available for 48 hours at: US - (800) 642-1687 or Intl. - (706) 645-9291 using the conference ID code: 5157903. For the fourth quarter ended December 31, 2003, MSC.Software reported revenue of $69.3 million, compared to $72.5 million for the fourth quarter last year. The reported income from continuing operations for the fourth quarter was $3.3 million or $0.09 per diluted share compared to $3.0 million or $0.10 per diluted share in the fourth quarter last year. For the fiscal year ended December 31, 2003, MSC.Software reported revenue of $253.2 million compared to $248.2 million in fiscal 2002, an increase of 2%. The loss from continuing operations for the fiscal year 2003 was $240,000 or ($0.01) per diluted share compared to a loss from continuing operations of $11.0 million of ($0.37) per diluted share for fiscal 2002. For the fiscal year ended December 31, 2003, restructuring, impairment charges and debt prepayment costs totaled $6.9 million, net of tax, or the equivalent of $0.20 per diluted share. For the fiscal year ended December 31, 2002, restructuring, impairment charges and the write-off of acquired IPR&D totaled $11.0 million, net of tax, or the equivalent of $0.37 per diluted share. "The fourth quarter results reinforce the fact that MSC.Software is focused and is executing according to plan and that our key business, product and financial indicators are moving in a positive direction," said Frank Perna, chairman and CEO of MSC.Software. "We continue to see steady incremental revenue from major aerospace programs like the Boeing 7E7 and Lockheed's F-35 Joint Strike Fighter. We also had an excellent quarter in completing government-related contracts. Major services engagements in both Europe and Asia-Pacific were ongoing with customers including BMW and Toyota. A strong services backlog is being driven by our customer's requirements for continual product development process improvements. The MasterKey Token License System is building a strong foundation for growth in our key accounts." "We have entered into an expanded Global Strategic Alliance with IBM targeting our joint automotive, aerospace and defense customers. This new agreement is a validation of our VPD strategy and we have already submitted joint proposals to some of our largest customers." "During the quarter, we had seven significant product releases and are seeing opportunities in the pipeline related to our newer product offerings including Simulation Data Management, SimDesigner and MSC.Robust Design. The adoption of the MasterKey Token License System and the overwhelmingly positive feedback for MSC.Nastran 2004 give us confidence that our integrated product offerings will drive increased usage of VPD products and services." "Our customer base is showingindications that both interest and funding for new projects is increasing. Deferred revenue and maintenance revenue are increasing and we saw an overall improvement in our operating margins to 9.2% in Q4. We are very much looking forward to increasing our operating leverage and momentum into 2004 and 2005 as manufacturers around the world continue to embrace VPD." Americas In the Americas, revenue was $23.2 million in the fourth quarter and $87.5 million for the fiscal year ended December 31, 2003. In the fourth quarter, 61 transactions over $100,000 were signed, and the total number of new accounts increased by 195. Key software and service transactions completed in the quarter included Bell Helicopter, Boeing, Caterpillar, GE Power, NASA, and TI Automotive. Europe MSC.Software's European revenue was $24.4 million in the fourth quarter and $84.5 million for fiscal 2003. In the fourth quarter, the total number of new accounts increased by 24 and the number of transactions over $100,000 totaled 31. Key software and service engagements were signed with Airbus, Audi, SAAB, Alenia, EADS, and Volkswagen. Asia-Pacific The Asia-Pacific region reported revenue of $21.7 million in the fourth quarter and $81.2 million in fiscal 2003. In the fourth quarter, the total number of new customer accounts increased by 91. In the fourth quarter 46 transactions over $100,000 were signed in the region. Key software and service contracts were signed with FHI Gunma and Nittan Valve in Japan, Singapore Air Force, Petronas Research in Malaysia, GE Transportation in India, and Chery Automobile Company in the PRC. Outlook Based on current visibility, the Company expects first quarter revenue to be in the range of $63 million to $66 million and earnings to be in the range of $0.04 to $0.07 per diluted share. The Company expects revenue for FY 2004 to be in the range of $260 million to $280 million and earnings to be in the range of $0.35 to $0.45 per diluted share. About MSC.Software Corporation MSC.Software (NYSE:MNS) is the leading global provider of virtual product development (VPD) products including simulation software and services that help 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 and services. MSC.Software employs more than 1400 people in 23 countries. For additional information about MSC.Software's products and services, please visit http://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 todiffer 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 newor 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) MSC.SOFTWARE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Amounts in Thousands, Except Per Share Amounts) Three Months Ended Twelve Months Ended December 31, December 31, 2003 2002 2003 2002 REVENUE: Software $42,204 $47,675 $150,632 $160,361 Services 27,101 24,835 102,582 87,790 Total Revenue 69,305 72,510 253,214 248,151 COST OF REVENUE: Software 6,849 5,182 21,835 22,468 Software - Impairment of Capitalized Development Costs - - 782 4,751 Services 14,020 14,992 54,721 54,299 Total Cost of Revenue 20,869 20,174 77,338 81,518 GROSS PROFIT 48,436 52,336 175,876 166,633 OPERATING EXPENSE: Research and Development 6,400 7,823 27,156 25,397 Selling, General and Administrative 33,787 33,503 126,135 131,871 Restructuring and Other Impairment Charges - - 4,231 9,064 Write-Off of Acquired In- Process R&D - - - 2,380 Amortization of Intangibles 1,874 1,918 7,584 6,574 Total OperatingExpense 42,061 43,244 165,106 175,286 OPERATING INCOME (LOSS) 6,375 9,092 10,770 (8,653) OTHER EXPENSE Interest Expense 1,153 3,503 5,652 7,443 Other Expense (Income), Net (1) 765 5,347 165 Total Other Expense, Net 1,152 4,268 10,999 7,608 INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE PROVISION (BENEFIT) FOR INCOME TAXES 5,223 4,824 (229) (16,261) Provision (Benefit) for Income Taxes 1,933 1,826 11 (5,247) INCOME (LOSS) FROM CONTINUING OPERATIONS 3,290 2,998 (240) (11,014) DISCONTINUED OPERATIONS Income (Loss) from Discontinued Operations, Net of Tax (231) (721) (2,582) (1,015) Loss from Disposal of Discontinued Operations, Net of Tax - - (20,686) - TOTAL LOSS FROM DISCONTINUED OPERATIONS (231) (721) (23,268) (1,015) INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 3,059 2,277 (23,508) (12,029) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE - - - (39,300) NET INCOME (LOSS) $3,059 $2,277 $(23,508) $(51,329) BASIC EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS $0.11 $0.10 $(0.01) $(0.37) DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS $0.09 $0.10 $(0.01) $(0.37) BASIC EARNINGS (LOSS) PER SHARE FROM DISCONTINUED OPERATIONS $(0.01) $(0.02) $(0.77) $(0.04) DILUTED EARNINGS (LOSS) PER SHARE FROM DISCONTINUED OPERATIONS $(0.01) $(0.02) $(0.77) $(0.04) BASIC AND DILUTED LOSS PER SHARE FROM CUMULATIVE CHANGE $0.00 $0.00 $0.00 $(1.34) BASIC EARNINGS (LOSS) PER SHARE $0.10 $0.08 $(0.78) $(1.75) DILUTED EARNINGS (LOSS) PER SHARE $0.08 $0.08 $(0.78) $(1.75) Basic Weighted-Average Shares Outstanding 30,348 29,730 30,102 29,379 Diluted Weighted-Average Shares Outstanding 42,694 30,194 30,102 29,379 MSC.SOFTWARE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Amounts in Thousands) December 31, December 31, 2003 2002 ASSETS Cash and Investments $48,534 $34,564 Trade Accounts Receivable, Net 73,691 60,896 Current Assets of Discontinued Operations 384 38,341 Other Current Assets 43,797 35,576 Total Current Assets 166,406 169,377 Property and Equipment, Net 29,863 34,888 Capitalized Software Costs, Net 28,322 25,957 Goodwill and Other Intangible Assets, Net 237,212 246,382 Long-term Assets of Discontinued Operations - 19,029 OtherAssets 23,233 11,641 Total Assets $485,036 $507,274 LIABILITIES AND SHAREHOLDERS' EQUITY Accounts Payable $10,679 $9,919 Current Portion of Long-Term Debt - 13,750 Current Portion of Notes Payable to Shareholders - 4,590 Deferred Revenue 69,392 67,327 Restructuring Reserve 1,229 4,105 Current Liabilities of Discontinued Operations 3,330 24,868 Other Current Liabilities 34,938 37,029 Total Current Liabilities 119,568 161,588 Deferred Income Taxes 21,700 29,243 Long-Term Debt, Less Current Portion - 40,104 Notes Payable to Shareholders 4,677 10,536 Subordinated Convertible Debentures 100,000 - Subordinated Notes Payable, Less Current Portion 7,015 6,817 Long-Term Liabilities of Discontinued Operations - 9,344 Other Long-Term Liabilities 8,438 7,162 Total Liabilities 261,398 264,794 Total Shareholders' Equity 223,638 242,480 Total Liabilities and Shareholders' Equity $485,036 $507,274 DATASOURCE: MSC.Software Corp. CONTACT: investor, Joanne Keates, Vice President, Investor Relations, +1-714-444-8551, , or media, Todd Evans, Corporate Communications, +1-714-445-3066, Web site: http://www.mscsoftware.com/ http://www.mscsoftware.com/ir

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