UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: July 3, 2004
Commission File Number: 0-18059
Parametric Technology Corporation
(Exact name of registrant as specified in its charter)
| Massachusetts | 04-2866152 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
140 Kendrick Street, Needham, MA 02494
(Address of principal executive offices, including zip code)
(781) 370-5000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). YES x NO ¨
There were 269,126,477 shares of our common stock outstanding on August 6, 2004 and 268,181,447 shares of our common stock outstanding on July 3, 2004.
PARAMETRIC TECHNOLOGY CORPORATION
INDEX TO FORM 10-Q
For the Quarter Ended July 3, 2004
| Page Number | ||||
| Part I— FINANCIAL INFORMATION |
||||
| Item 1. |
Unaudited Financial Statements: |
|||
| Consolidated Balance Sheets as of July 3, 2004 and September 30, 2003 |
1 | |||
| 2 | ||||
| Consolidated Statements of Cash Flows for the nine months ended July 3, 2004 and June 28, 2003 |
3 | |||
| 4 | ||||
| 5 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 | ||
| Item 3. |
41 | |||
| Item 4. |
41 | |||
| Part II— OTHER INFORMATION |
||||
| Item 1. |
42 | |||
| Item 6. |
43 | |||
| 44 | ||||
i
PARAMETRIC TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
| July 3, 2004 |
September 30, 2003 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 257,741 | $ | 205,312 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $6,245 and $6,845, respectively |
144,126 | 140,151 | ||||||
| Prepaid expenses |
27,008 | 29,616 | ||||||
| Other current assets |
36,674 | 41,007 | ||||||
| Total current assets |
465,549 | 416,086 | ||||||
| Property and equipment, net |
57,354 | 73,563 | ||||||
| Goodwill (Note 5) |
45,222 | 37,404 | ||||||
| Other intangible assets, net (Note 5) |
13,314 | 14,447 | ||||||
| Other assets |
31,717 | 36,190 | ||||||
| Total assets |
$ | 613,156 | $ | 577,690 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 17,327 | $ | 20,569 | ||||
| Accrued expenses and other current liabilities |
56,073 | 48,296 | ||||||
| Accrued compensation and benefits |
53,947 | 55,620 | ||||||
| Deferred revenue |
202,165 | 173,015 | ||||||
| Total current liabilities |
329,512 | 297,500 | ||||||
| Other liabilities |
88,725 | 85,032 | ||||||
| Commitments and contingencies (Note 8) |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.01 par value; 5,000 shares authorized; none issued |
— | — | ||||||
| Common stock, $0.01 par value; 500,000 shares authorized; 268,181 and 266,383 shares issued, respectively |
2,682 | 2,664 | ||||||
| Additional paid-in capital |
1,657,830 | 1,652,303 | ||||||
| Accumulated deficit |
(1,429,194 | ) | (1,421,963 | ) | ||||
| Accumulated other comprehensive loss |
(36,399 | ) | (37,846 | ) | ||||
| Total stockholders’ equity |
194,919 | 195,158 | ||||||
| Total liabilities and stockholders’ equity |
$ | 613,156 | $ | 577,690 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
1
PARAMETRIC TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Three months ended |
Nine months ended |
|||||||||||||||
| July 3, 2004 |
June 28, 2003 |
July 3, 2004 |
June 28, 2003 |
|||||||||||||
| Revenue: |
||||||||||||||||
| License |
$ | 52,405 | $ | 48,621 | $ | 146,893 | $ | 155,382 | ||||||||
| Service |
115,972 | 116,623 | 343,002 | 352,855 | ||||||||||||
| Total revenue |
168,377 | 165,244 | 489,895 | 508,237 | ||||||||||||
| Costs and expenses: |
||||||||||||||||
| Cost of license revenue |
2,260 | 2,875 | 6,301 | 7,498 | ||||||||||||
| Cost of service revenue |
43,764 | 52,420 | 132,440 | 151,744 | ||||||||||||
| Sales and marketing |
55,237 | 72,329 | 170,554 | 231,401 | ||||||||||||
| Research and development |
26,250 | 31,880 | 82,609 | 95,722 | ||||||||||||
| General and administrative |
13,369 | 17,931 | 42,693 | 50,108 | ||||||||||||
| Amortization of intangible assets (Note 5) |
1,227 | 1,459 | 3,972 | 4,400 | ||||||||||||
| Restructuring and other charges (Note 2) |
3,548 | 15,134 | 41,848 | 15,134 | ||||||||||||
| Total costs and expenses |
145,655 | 194,028 | 480,417 | 556,007 | ||||||||||||
| Operating income (loss) |
22,722 | (28,784 | ) | 9,478 | (47,770 | ) | ||||||||||
| Other expense, net |
(300 | ) | (10 | ) | (613 | ) | (1,462 | ) | ||||||||
| Income (loss) before income taxes |
22,422 | (28,794 | ) | 8,865 | (49,232 | ) | ||||||||||
| Provision for income taxes |
6,287 | 4,968 | 16,096 | 11,089 | ||||||||||||
| Net income (loss) |
$ | 16,135 | $ | (33,762 | ) | $ | (7,231 | ) | $ | (60,321 | ) | |||||
| Earnings (loss) per share—Basic and Diluted (Note 4) |
$ | 0.06 | $ | (0.13 | ) | $ | (0.03 | ) | $ | (0.23 | ) | |||||
| Weighted average shares outstanding—Basic |
268,104 | 264,487 | 267,292 | 263,625 | ||||||||||||
| Weighted average shares outstanding—Diluted |
274,983 | 264,487 | 267,292 | 263,625 | ||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
2
PARAMETRIC TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Nine months ended |
||||||||
| July 3, 2004 |
June 28, 2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (7,231 | ) | $ | (60,321 | ) | ||
| Adjustments to reconcile net loss to net cash flows from operating activities: |
||||||||
| Depreciation and amortization |
27,517 | 31,166 | ||||||
| Other non-cash costs and expenses, net |
4,076 | 3,602 | ||||||
| Changes in operating assets and liabilities that provided (used) cash: |
||||||||
| Accounts receivable |
2,795 | 5,683 | ||||||
| Accounts payable and accrued expenses |
(7,781 | ) | (11,394 | ) | ||||
| Accrued compensation and benefits |
(3,458 | ) | 1,925 | |||||
| Deferred revenue |
21,569 | (18,672 | ) | |||||
| Income taxes |
10,620 | 55,320 | ||||||
| Other current assets and prepaid expenses |
13,490 | 11,754 | ||||||
| Other noncurrent assets and liabilities |
119 | (9,034 | ) | |||||
| Net cash provided by operating activities |
61,716 | 10,029 | ||||||
| Cash flows from investing activities: |
||||||||
| Additions to property and equipment |
(6,086 | ) | (16,360 | ) | ||||
| Additions to other intangible assets |
(1,523 | ) | (3,740 | ) | ||||
| Acquisition of a business, net of cash acquired |
(9,822 | ) | — | |||||
| Purchases of investments |
— | (17,119 | ) | |||||
| Proceeds from sales and maturities of investments |
— | 48,556 | ||||||
| Net cash (used) provided by investing activities |
(17,431 | ) | 11,337 | |||||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuance of common stock |
5,217 | 3,952 | ||||||
| Purchases of treasury stock |
— | (169 | ) | |||||
| Net cash provided by financing activities |
5,217 | 3,783 | ||||||
| Effect of exchange rate changes on cash and cash equivalents |
2,927 | 4,288 | ||||||
| Net increase in cash and cash equivalents |
52,429 | 29,437 | ||||||
| Cash and cash equivalents, beginning of period |
205,312 | 178,825 | ||||||
| Cash and cash equivalents, end of period |
$ | 257,741 | $ | 208,262 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
3
PARAMETRIC TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
| Three months ended |
Nine months ended |
|||||||||||||||
| July 3, 2004 |
June 28, 2003 |
July 3, 2004 |
June 28, 2003 |
|||||||||||||
| Net income (loss) |
$ | 16,135 | $ | (33,762 | ) | $ | (7,231 | ) | $ | (60,321 | ) | |||||
| Other comprehensive income (loss), net of tax provision (benefit): |
||||||||||||||||
| Foreign currency translation adjustment, net of tax of $0 for all periods |
(855 | ) | 407 | 1,190 | (102 | ) | ||||||||||
| Net unrealized gain (loss) on securities, net of tax of $0 for all periods |
(221 | ) | 97 | 257 | (135 | ) | ||||||||||
| Other comprehensive income (loss) |
(1,076 | ) | 504 | 1,447 | ||||||||||||