Mechanical Dynamics Reports 3% Increase in Revenue For the Second Quarter of 1999
20 July 1999
Mechanical Dynamics Reports 3% Increase in Revenue For the Second Quarter of 1999
ANN ARBOR, Mich., July 20 -- Mechanical Dynamics, Inc.
, a worldwide supplier of software and services for the virtual
prototyping market, today reported revenue of $9.2 million for the second
quarter ended June 30, 1999, a 3% increase over the corresponding period in
1998. The company reported a 1999 second quarter net loss of $503,000, or
$0.08 loss per share, compared to the second quarter of 1998, when the company
reported net income of $733,000, or $0.12 diluted earnings per share.
For the six-month period ended June 30, 1999, Mechanical Dynamics reported
revenue of $19.5 million, up 11% from the corresponding period in 1998. The
company reported a net loss of $29,000, or $0.00 per share, for the first six
months of 1999. Excluding acquisition-related costs, net income for the six-
month period ended June 30, 1998, was $1.3 million, or $0.21 diluted earnings
per share.
Michael E. Korybalski, chairman and chief executive officer of Mechanical
Dynamics, stated, "As we indicated in our preannouncement on July 7th, we are
disappointed in the quarter's results. We can now confirm that the revenue
shortfall was primarily attributable to two macro-economic issues, including
continued weakness in the Japanese marketplace and currency degradation in
Europe, and one internal issue related to our sales execution in North
America."
"Based on the quarter's results," Korybalski said, "we have put in place
plans to further control expenses, which will improve our ability to weather
any continuing economic difficulties in Japan and Europe during the second
half of 1999. In addition, we are aggressively taking steps to improve our
sales execution and operating performance in North America."
He added, "Despite our overall disappointing results for the quarter, we
continue to be pleased with our performance versus our competition worldwide,
and in particular, with our operating performance in Europe. Had currency
exchange rates remained constant with their levels as of year-end 1998, our
European revenue would have experienced 25% growth during the quarter.
"In addition, we continue to see strong global demand for our consulting
and implementation services, particularly within our major automotive and
aerospace accounts. During the quarter, the company's services revenue
experienced 20% growth compared to the second quarter of 1998."
Mechanical Dynamics received cumulative orders valued at more than
$100,000 from each of 14 different companies during the second quarter,
according to Korybalski. These large orders came from Audi, BMW, Borg-Warner,
Fiat, Ford, General Motors, Honda, Navistar, Nissan, Peugeot, Renault, Saab,
Toyota, and Volkswagen. Significant orders of less than $100,000 each came
from a number of customers, including Ball Aerospace, Boeing, China Motor
Corporation, MSX International, Pratt & Whitney, Steyr-Daimler-Puch, United
Technologies, Western Star Trucks, and Whirlpool, among others.
Korybalski concluded, "Given our results for the second quarter, and the
continuing economic conditions we are faced with, we are cautious with respect
to our business outlook for the remainder of 1999. However, we are confident
that Mechanical Dynamics' long-term business prospects remain excellent."
Mechanical Dynamics pioneered the field of mechanical system simulation,
and has remained focused on this technology since its founding in 1977.
Thousands of engineering teams from nearly every manufacturing industry today
use the company's ADAMS software to build and test virtual prototypes,
realistically simulating on their computers the full-motion behavior of
complex mechanical system designs. Using ADAMS can help manufacturers reduce
their dependence on costly physical prototypes, improve design quality, and
shorten product development cycles.
Except for historical information contained herein, some 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. These include possible delays in developing, completing, or
shipping new or enhanced products, as well as other risks or uncertainties
that are detailed from time to time in reports filed by Mechanical Dynamics,
Inc. with the Securities and Exchange Commission, including Mechanical
Dynamics, Inc.'s registration statement on Form S-1 and related prospectus
dated May 14, 1996 and the "Risk Factors" described therein.
Additional information about Mechanical Dynamics can be obtained by
writing to the company at 2301 Commonwealth Boulevard, Ann Arbor, Michigan
48105. Phone: 734-994-3800. Fax: 734-994-6418. E-mail: info@adams.com .
World Wide Web: http://www.adams.com
ADAMS and the Mechanical Dynamics logo are registered trademarks of
Mechanical Dynamics, Inc. All other company, brand, or product names are or
may be trademarks of their respective holders.
(Condensed consolidated statements of income and balance sheets follow)
Mechanical Dynamics, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
in thousands except share
and per share data 1999 1998 1999 1998
Revenue:
Software licenses $4,020 $4,621 $9,296 $9,437
Services 5,138 4,284 10,228 8,203
Total revenue 9,158 8,905 19,524 17,640
Cost of revenue:
Software licenses 781 291 1,649 800
Services 2,868 2,287 5,557 4,486
Total cost of
revenue 3,649 2,578 7,206 5,286
Gross profit 5,509 6,327 12,318 12,354
Operating expenses:
Sales and marketing 3,865 3,293 7,785 6,578
Research and
development 1,434 1,295 2,756 2,512
General and
administrative 931 851 1,884 1,689
Goodwill amortization 114 41 227 82
Acquisition-related and
non-recurring charges 0 0 0 1,200
Total operating
expenses 6,344 5,480 12,652 12,061
Operating income (loss) (835) 847 (334) 293
Other income, net 103 197 299 415
Income (loss) before income
taxes and minority
interest (732) 1,044 (35) 708
Provision (credit) for
income taxes (219) 315 (10) 576
Net income (loss) before
minority interest (513) 729 (25) 132
Minority interest in net income
(loss) of subsidiary (10) (4) 4 12
Net income (loss) ($503) $733 ($29) $120
Net income (loss) per
common share ($0.08) $0.12 $0.00 $0.02
Common and common equivalent
shares 6,247,776 6,317,690 6,241,446 6,211,480
Mechanical Dynamics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June 30, December 31,
in thousands 1999 1998
Assets: (Unaudited)
Current assets:
Cash and cash equivalents $15,874 $16,843
Accounts receivable, net 10,225 9,893
Prepaid and deferred expenses 2,175 1,873
Total current assets 28,274 28,609
Property and equipment, net 3,602 3,674
Goodwill, net 3,636 3,820
Other assets 229 144
Total assets $35,741 $36,247
Liabilities and Shareholders' Equity:
Current liabilities:
Borrowings under lines of credit $199 $105
Accounts payable 1,149 1,781
Accrued expenses 2,987 3,544
Deferred revenue 5,330 4,745
Total current liabilities 9,665 10,175
Minority interest 476 472
Shareholders' equity:
Common stock 22,473 22,332
Preferred stock 0 0
Retained earnings 3,044 3,073
Cumulative translation adjustment 83 195
Total shareholders' equity 25,600 25,600
Total liabilities and shareholders'
equity $35,741 $36,247