PTC Announces Strong Q3 Results and FY’11 Guidance

Forward-Looking Statements

Statements in this press release that are not historic facts, including statements about our fiscal 2011 and other future financial and growth expectations, anticipated tax rates and the potential effects of our investigation in China, 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 be delayed or 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, the possibility that our acquisition of MKS Inc. may not generate the revenues we expect, and the possibility that the consequences of our 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						Nine Months Ended
				July 2,			July 3,			July 2,			July 3,
				2011			2010			2011			2010

Revenue:
	License			$	81,431		$	67,498		$	231,119		$	206,958
	Service				210,352			175,500			596,405			535,025
Total revenue					291,783			242,998			827,524			741,983

Costs and expenses:
	Cost of license revenue ⁽¹⁾				7,617			7,621			20,129			24,000
	Cost of service revenue ⁽¹⁾				82,792			67,090			238,112			206,548
	Sales and marketing ⁽¹⁾				89,106			79,121			254,790			232,856
	Research and development ⁽¹⁾				51,103			50,597			155,676			151,247
	General and administrative ⁽¹⁾				31,882			22,755			80,078			69,633
	Amortization of acquired intangible assets				4,753			3,836			12,873			11,869
Total costs and expenses					267,253			231,020			761,658			696,153

Operating income					24,530			11,978			65,866			45,830
	Other expense, net				(6,271	)		(320	)		(8,979	)		(1,449	)
Income before income taxes					18,259			11,658			56,887			44,381
	Provision for income taxes				2,733			940			9,084			6,798
Net income				$	15,526		$	10,718		$	47,803		$	37,583

Earnings per share:
	Basic			$	0.13		$	0.09		$	0.41		$	0.32
			Weighted average shares outstanding		118,214			115,188			117,622			115,802

	Diluted			$	0.13		$	0.09		$	0.39		$	0.31
			Weighted average shares outstanding		121,164			119,003			121,149			119,996



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


				Three Months Ended						Nine Months Ended
				July 2,			July 3,			July 2,			July 3,
				2011			2010			2011			2010
	Cost of license revenue			$	4		$	2		$	10		$	21
	Cost of service revenue				1,857			2,186			5,577			7,007
	Sales and marketing				3,062			3,471			7,841			10,065
	Research and development				2,010			2,252			6,152			7,294
	General and administrative				4,627			3,599			12,878			13,270
			Total stock-based compensation	$	11,560		$	11,510		$	32,458		$	37,657


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


				Three Months Ended						Nine Months Ended
				July 2,			July 3,			July 2,			July 3,
				2011			2010			2011			2010

GAAP revenue				$	291,783		$	242,998		$	827,524		$	741,983
	Fair value of acquired MKS deferred maintenance
			revenue		693			-			693			-
Non-GAAP revenue				$	292,476		$	242,998		$	828,217		$	741,983

GAAP operating income				$	24,530		$	11,978		$	65,866		$	45,830
	Fair value of acquired MKS deferred maintenance
			revenue		693			-			693			-
	Stock-based compensation				11,560			11,510			32,458			37,657
	Amortization of acquired intangible assets
			included in cost of license revenue		3,895			4,659			10,597			14,485
	Amortization of acquired intangible assets				4,753			3,836			12,873			11,869
	Acquisition-related charges included in
			general and administrative expenses		6,041			-			6,649			-
Non-GAAP operating income ⁽²⁾				$	51,472		$	31,983		$	129,136		$	109,841

GAAP net income				$	15,526		$	10,718		$	47,803		$	37,583
	Fair value of acquired MKS deferred maintenance
			revenue		693			-			693			-
	Stock-based compensation				11,560			11,510			32,458			37,657
	Amortization of acquired intangible assets
			included in cost of license revenue		3,895			4,659			10,597			14,485
	Amortization of acquired intangible assets				4,753			3,836			12,873			11,869
	Acquisition-related charges included in
			general and administrative expenses		6,041			-			6,649			-
	Non-operating foreign currency transaction loss ⁽³⁾				4,385			-			5,107			-
	Income tax adjustments ⁽⁴⁾				(8,526	)		(6,134	)		(20,184	)		(20,207	)
Non-GAAP net income				$	38,327		$	24,589		$	95,996		$	81,387

GAAP diluted earnings per share				$	0.13		$	0.09		$	0.39		$	0.31
	Stock-based compensation				0.10			0.10			0.27			0.31
	Income tax adjusments				(0.07	)		(0.05	)		(0.17	)		(0.17	)
	Acquisition-related charge				0.05			-			0.05			-
	All other items identified above				0.11			0.07			0.25			0.23
Non-GAAP diluted earnings per share				$	0.32		$	0.21		$	0.79		$	0.68



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

				Three Months Ended						Nine Months Ended
				July 2,			July 3,			July 2,			July 3,
				2011			2010			2011			2010
	GAAP operating margin				8.4	%		4.9	%		8.0	%		6.2	%
			Fair value of deferred maintenance revenue		0.2	%		0.0	%		0.1	%		0.0	%
			Stock-based compensation		4.0	%		4.8	%		3.9	%		5.0	%
			Amortization of acquired intangibles		3.0	%		3.5	%		2.8	%		3.6	%
			Acquisition-related charges		2.0	%		0.0	%		0.8	%		0.0	%
	Non-GAAP operating margin				17.6	%		13.2	%		15.6	%		14.8	%



	(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 the tax effects of non-GAAP adjustments for the three and nine months ended July 2, 2011 and July 3, 2010, which are calculated by applying the applicable tax rate by jurisdiction to the non-GAAP adjustments listed above.


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


	July 2,		September 30,
	2011		2010

ASSETS

Cash and cash equivalents	$	260,751	$	240,253
Accounts receivable, net		186,874		169,281
Property and equipment, net		60,704		58,064
Goodwill and acquired intangibles, net		851,261		546,440
Other assets		321,923		293,026

Total assets	$	1,681,513	$	1,307,064

LIABILITIES AND STOCKHOLDERS' EQUITY

Deferred revenue	$	317,640	$	245,840
Borrowings under revolving credit facility		250,000		-
Other liabilities		311,729		313,920
Stockholders' equity		802,144		747,304

Total liabilities and stockholders' equity	$	1,681,513	$	1,307,064


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



		Three Months Ended						Nine Months Ended
		July 2,			July 3,			July 2,			July 3,
		2011			2010			2011			2010

Cash flows from operating activities:
	Net income	$	15,526		$	10,718		$	47,803		$	37,583
	Stock-based compensation		11,560			11,510			32,458			37,657
	Depreciation and amortization		15,827			15,639			44,547			47,538
	Accounts receivable		2,160			2,467			18,059			11,228
	Accounts payable and accruals ⁽⁵⁾		13,563			7,485			(11,754	)		(5,248	)
	Deferred revenue		9,656			16,111			36,825			32,564
	Income taxes		(8,657	)		(16,551	)		(17,855	)		(23,049	)
	Litigation settlement		-			-			(52,129	)		-
	Other		(11,202	)		2,989			(19,283	)		2,803
Net cash provided by operating activities ⁽⁶⁾			48,433			50,368			78,671			141,076

Capital expenditures			(6,735	)		(4,582	)		(18,295	)		(21,684	)
Acquisitions of businesses, net of cash acquired			(265,153	)		-			(265,153	)		(2,087	)
Proceeds (payments) on debt			250,000			(31,112	)		250,000			(50,832	)
Repurchases of common stock			(39,947	)		(14,974	)		(39,947	)		(60,046	)
Other investing and financing activities ⁽⁷⁾			7,968			1,401			2,516			(11,500	)
Foreign exchange impact on cash			6,681			(4,774	)		12,706			(11,030	)

Net change in cash and cash equivalents			1,247			(3,673	)		20,498			(16,103	)
Cash and cash equivalents, beginning of period			259,504			222,692			240,253			235,122
Cash and cash equivalents, end of period		$	260,751		$	219,019		$	260,751		$	219,019


(5)	Includes accounts payable, accrued expenses, and accrued compensation and benefits

(6)	The third quarter of 2011 cash flow from operations includes cash outflows of approximatley $10 million for PTC and MKS acquisition-related costs paid after the acquisition date.

(7)	The three months ended July 2, 2011 and July 3, 2010 include $0.1 million and $0.1 million, respectively, for payments of withholding taxes in connection with the vesting of restricted stock units and restricted stock. The nine months ended July 2, 2011 and July 3, 2010 include $22.1 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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