PTC Announces Strong Q4 Results, Initiates FY’12 Targets and

PTC Announces Strong Q4 Results, Initiates FY’12 Targets and Q1 Guidance

Important Information About Non-GAAP References

PTC provides non-GAAP supplemental information to its financial results. Non-GAAP revenue, operating expenses, margin and EPS exclude the effect of purchase accounting on the fair value of the acquired deferred maintenance balance of MKS Inc., stock-based compensation expense, amortization of acquired intangible assets, acquisition-related expenses, certain foreign currency transaction losses, and the related tax effects of the preceding items and any one-time tax items. We use these non-GAAP measures, and we believe that they assist our investors, to make period-to-period comparisons of our operational performance because they provide a view of our operating results without items that are not, in our view, indicative of our core operating results. We believe that these non-GAAP measures help illustrate underlying trends in our business, and we use the measures to establish budgets and operational goals, communicated internally and externally, for managing our business and evaluating our performance. We believe that providing non-GAAP measures affords investors a view of our operating results that may be more easily compared to the results of peer companies. In addition, compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. However, non-GAAP information should not be construed as an alternative to GAAP information as the items excluded from the non-GAAP measures often have a material impact on PTC’s financial results. Management uses, and investors should consider, non-GAAP measures in conjunction with our GAAP results.

Forward-Looking Statements

Statements in this press release that are not historic facts, including statements about our fiscal 2012 and other future financial and growth expectations and anticipated tax rates are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks include the possibility that customers may not purchase our solutions when or at the rates we expect, the possibility the foreign currency exchange rates may vary from our expectations and thereby affect our reported revenue and expense, the possibility that we may not achieve the license, services or maintenance growth rates that we expect, which could result in a different mix of revenue between license, service and maintenance and could impact our EPS results, the possibility that strategic customer wins may not generate the revenue we expect, the possibility that new product releases may not generate the revenue we expect, the possibility that resource constraints could adversely affect our revenue, the possibility that our strategic investments may not generate the growth or revenues we expect, and the possibility that remedial actions relating to our previously announced investigation in China will have a material impact on our operations in China. In addition, our assumptions concerning our future GAAP and non-GAAP effective income tax rates are based on estimates and other factors that could change, including the geographic mix of our revenue, expenses and profits and loans and cash repatriations from foreign subsidiaries. Other risks and uncertainties that could cause actual results to differ materially from those projected are detailed from time to time in reports we file with the Securities and Exchange Commission, including our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q.

PTC, The Product Development Company, and all other PTC product names and logos are trademarks or registered trademarks of Parametric Technology Corporation or its subsidiaries in the United States and in other countries. All other companies referenced herein are trademarks or registered trademarks of their respective holders.

About PTC ( www.ptc.com)

PTC (Nasdaq: PMTC) provides discrete manufacturers with software and services to meet the globalization, time-to-market and operational efficiency objectives of product development. Using the company’s PLM and CAD and related solutions, organizations in the Industrial, High-Tech, Aerospace/Defense, Automotive, Retail/Consumer and Life Sciences industries are able to support key business objectives such as reducing costs and shortening lead times while creating innovative products that meet customer needs and comply with industry regulations.

PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)


	Three Months Ended						Year Ended
	September 30,			September 30,			September 30,			September 30,
	2011			2010			2011			2010

Revenue:
License	$	111,002		$	89,063		$	342,121		$	296,021
Service		228,423			179,003			824,828			714,028
Total revenue		339,425			268,066			1,166,949			1,010,049

Costs and expenses:
Cost of license revenue ⁽¹⁾		8,663			7,047			28,792			31,047
Cost of service revenue ⁽¹⁾		89,864			70,100			327,976			276,648
Sales and marketing ⁽¹⁾		98,261			84,676			353,051			317,532
Research and development ⁽¹⁾		55,730			50,320			211,406			201,567
General and administrative ⁽¹⁾		30,213			23,242			110,291			92,875
Amortization of acquired intangible assets		5,446			3,736			18,319			15,605
Total costs and expenses		288,177			239,121			1,049,835			935,274

Operating income		51,248			28,945			117,114			74,775
Gain on litigation resolution		-			9,039			-			9,039
Other expense, net		(3,587	)		(229	)		(12,566	)		(1,678	)
Income before income taxes		47,661			37,755			104,548			82,136
Provision for income taxes		10,040			50,970			19,124			57,768
Net income (loss)	$	37,621		$	(13,215	)	$	85,424		$	24,368

Earnings (loss) per share:
Basic	$	0.32		$	(0.11	)	$	0.73		$	0.21
Weighted average shares outstanding		117,095			115,134			117,579			115,639

Diluted	$	0.31		$	(0.11	)	$	0.71		$	0.20
Weighted average shares outstanding		120,091			115,134			120,974			119,925



(1)The amounts in the tables above include stock-based compensation as follows:


	Three Months Ended						Year Ended
	September 30,			September 30,			September 30,			September 30,
	2011			2010			2011			2010
Cost of license revenue	$	5		$	3		$	15		$	24
Cost of service revenue		2,155			2,115			7,732			9,122
Sales and marketing		3,587			3,367			11,428			13,432
Research and development		2,395			2,186			8,547			9,480
General and administrative		4,802			3,583			17,680			16,853
Total stock-based compensation	$	12,944		$	11,254		$	45,402		$	48,911

PARAMETRIC TECHNOLOGY CORPORATION
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)


	Three Months Ended						Year Ended
	September 30,			September 30,			September 30,			September 30,
	2011			2010			2011			2010

GAAP revenue	$	339,425		$	268,066		$	1,166,949		$	1,010,049
Fair value of acquired MKS deferred maintenance revenue		1,913			-			2,606			-
Non-GAAP revenue	$	341,338		$	268,066		$	1,169,555		$	1,010,049

GAAP operating income	$	51,248		$	28,945		$	117,114		$	74,775
Fair value of acquired MKS deferred maintenance revenue		1,913			-			2,606			-
Stock-based compensation		12,944			11,254			45,402			48,911
Amortization of acquired intangible assets included in cost of license revenue		4,796			3,882			15,393			18,367
Amortization of acquired intangible assets		5,446			3,736			18,319			15,605
Acquisition-related charges included in general and administrative expenses		1,112			-			7,761			-
Non-GAAP operating income ⁽²⁾	$	77,459		$	47,817		$	206,595		$	157,658

GAAP net income (loss)	$	37,621		$	(13,215	)	$	85,424		$	24,368
Fair value of acquired MKS deferred maintenance revenue		1,913			-			2,606			-
Stock-based compensation		12,944			11,254			45,402			48,911
Amortization of acquired intangible assets included in cost of license revenue		4,796			3,882			15,393			18,367
Amortization of acquired intangible assets		5,446			3,736			18,319			15,605
Acquisition-related charges included in general and administrative expenses		1,112			-			7,761			-
Non-operating foreign currency transaction loss ⁽³⁾		-			-			5,107			-
Gain on litigation resolution ⁽⁴⁾		-			(9,039	)		-			(9,039	)
Income tax adjustments ⁽⁵⁾		(7,662	)		41,548			(27,846	)		21,341
Non-GAAP net income	$	56,170		$	38,166		$	152,166		$	119,553

GAAP diluted earnings (loss) per share	$	0.31		$	(0.11	)	$	0.71		$	0.20
Stock-based compensation		0.11			0.09			0.38			0.41
Income tax adjustments		(0.06	)		0.35			(0.23	)		0.18
Gain on litigation resolution		-			(0.08	)		-			(0.08	)
Acquisition-related charge		0.01			-			0.06			-
All other items identified above		0.10			0.07			0.34			0.29
Non-GAAP diluted earnings per share	$	0.47		$	0.32		$	1.26		$	1.00

GAAP diluted weighted average shares outstanding		120,091			115,134			120,974			119,925
Dilutive effect of stock based compensation plans		-			4,562			-			-
Non-GAAP diluted weighted average shares outstanding		120,091			119,696			120,974			119,925



(2)Operating margin impact of non-GAAP adjustments:

	Three Months Ended						Year Ended
	September 30,			September 30,			September 30,			September 30,
	2011			2010			2011			2010
GAAP operating margin		15.1	%		10.8	%		10.0	%		7.4	%
Fair value of deferred maintenance revenue		0.6	%		4.2	%		0.2	%		4.8	%
Stock-based compensation		3.8	%		2.8	%		3.9	%		3.4	%
Amortization of acquired intangibles		3.0	%		0.0	%		2.9	%		0.0	%
Acquisition-related charges		0.3	%		0.0	%		0.7	%		0.0	%
Non-GAAP operating margin		22.7	%		17.8	%		17.7	%		15.6	%

(3)		In the third quarter of 2011, in connection with our planned acquisition of MKS, we entered into forward contracts to purchase CDN$292 million (equivalent to approximately $305 million when the contracts were entered into). We entered into these forward contracts to reduce our foreign currency exposure related to changes in the Canadian to US Dollar exchange rate from the time we entered into the agreement in early April to acquire MKS (the purchase price is in Canadian Dollars) and the closing date which occurred on May 31, 2011. We realized foreign currency losses of $4.4 million in the third quarter of 2011 recorded as other expense related to the acquisition of MKS. In the first quarter of 2011 we recorded $0.7 million of foreign currency losses related to a previously announced litigation settlement in Japan.

(4)		Reflects resolution of the litigation brought against us by GE Japan, which resulted in a GAAP benefit of $9.0 million to other income in the fourth quarter of 2010 to reduce our accruals related to this litigation to the resolution amount.

(5)		Reflects the tax effects of non-GAAP adjustments for the fourth quarter and full year of 2011 and 2010, which are calculated by applying the applicable tax rate by jurisdiction to the non-GAAP adjustments listed above, as well as, the effect of a business realignment initiative during the fourth quarter of 2010, primarily in Europe, to simplify our corporate structure for tax efficient cash repatriation. This realignment resulted in a one-time non-cash GAAP tax charge of $43.4 million.

PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)


	September 30,		September 30,
	2011		2010

ASSETS

Cash and cash equivalents	$	167,878	$	240,253
Accounts receivable, net		230,220		169,281
Property and equipment, net		62,569		58,064
Goodwill and acquired intangible assets, net		835,411		546,440
Other assets		333,604		293,026

Total assets	$	1,629,682	$	1,307,064

LIABILITIES AND STOCKHOLDERS' EQUITY

Deferred revenue	$	294,324	$	245,840
Borrowings under revolving credit facility		200,000		-
Other liabilities		312,668		313,920
Stockholders' equity		822,690		747,304

Total liabilities and stockholders' equity	$	1,629,682	$	1,307,064

PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)



	Three Months Ended						Year Ended
	September 30,			September 30,			September 30,			September 30,
	2011			2010			2011			2010

Cash flows from operating activities:
Net income (loss)	$	37,621		$	(13,215	)	$	85,424		$	24,368
Stock-based compensation		12,944			11,254			45,402			48,911
Depreciation and amortization		17,847			14,644			62,394			62,182
Accounts receivable		(50,393	)		(11,759	)		(32,334	)		(531	)
Accounts payable and accruals ⁽⁶⁾		7,908			25,839			(3,846	)		20,591
Deferred revenue		(28,630	)		(31,124	)		8,195			1,440
Income taxes		1,994			39,183			(15,861	)		16,134
Litigation settlement		-			(5,038	)		(52,129	)		(5,038	)
Other		736			(14,216	)		(18,547	)		(11,413	)
Net cash provided by operating activities ⁽⁷⁾		27			15,568			78,698			156,644

Capital expenditures		(9,522	)		(5,045	)		(27,817	)		(26,729	)
Acquisitions of businesses, net of cash acquired		(14,873	)		(634	)		(280,026	)		(2,721	)
Proceeds (payments) on debt		(50,000	)		-			200,000			(50,832	)
Repurchases of common stock		(14,973	)		(2,496	)		(54,920	)		(62,542	)
Other investing and financing activities ⁽⁸⁾		2,824			4,139			5,340			(7,361	)
Foreign exchange impact on cash		(6,356	)		9,702			6,350			(1,328	)

Net change in cash and cash equivalents		(92,873	)		21,234			(72,375	)		5,131
Cash and cash equivalents, beginning of period		260,751			219,019			240,253			235,122
Cash and cash equivalents, end of period	$	167,878		$	240,253		$	167,878		$	240,253

(6)		Includes accounts payable, accrued expenses, and accrued compensation and benefits.

(7)		The cash flow from operations for the three months and year ended September 30, 2011 includes cash outflows of approximately $2 million and $12 million, respectively for PTC's MKS and 4CS acquisition-related costs paid after their respective acquisition dates.

(8)		The three months ended September 30, 2011 and 2010 include $0.5 million and $0.1 million, respectively, for payments of withholding taxes in connection with the vesting of restricted stock units and restricted stock. The years ended September 30, 2011 and 2010 include $22.5 million and $20.3 million, respectively, for payments of withholding taxes in connection with vesting of restricted stock units and restricted stock.

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