Mechanical Dynamics Reports 19% Increase in Revenue For the Q3 of 1999
19 October 1999
Mechanical Dynamics Reports 19% Increase in Revenue For the Third Quarter of 1999
ANN ARBOR, Mich., Oct. 19 -- Mechanical Dynamics, Inc.
, a worldwide supplier of software and services for the virtual
prototyping market, today reported revenue of $9.7 million for the third
quarter ended September 30, 1999, a 19% increase over the corresponding period
in 1998. The company reported 1999 third quarter net income of $640,000, or
$0.10 diluted earnings per share, compared to a net loss before acquisition-
related and non-recurring charges of $383,000, or $0.06 per share, in the
third quarter of 1998.
During the third quarter of 1999, Mechanical Dynamics identified research
and development tax credits earned by the company as a result of its
investment in new technologies during 1999 as well as certain prior years.
The effect of these tax credits was a $504,000 reduction in the company's
third quarter provision for income taxes, resulting in an $0.08 favorable
impact on diluted earnings per share. Excluding these credits, the company's
effective tax rate for the quarter was approximately 30%.
For the nine-month period ended September 30, 1999, Mechanical Dynamics
reported revenue of $29.3 million, up 13% from the corresponding period in
1998. The company reported net income of $611,000, or $0.10 diluted earnings
per share, for the first nine months of 1999. Excluding acquisition-related
costs, net income for the nine-month period ended September 30, 1998, was
$937,000, or $0.15 diluted earnings per share.
Michael E. Korybalski, chairman and chief executive officer of Mechanical
Dynamics, said, "I am pleased by our progress over the past quarter. We
generated both sequential and strong year-over-year revenue growth during the
third quarter, despite continued economic pressures in Japan and a challenging
marketplace overall for companies operating in the engineering software space.
Geographically, we delivered double-digit revenue growth in each of our three
major regions -- North America, Europe, and Japan. And, from an expense
standpoint, we executed well on our short-term objective of controlling costs
to return to operating profitability."
Mechanical Dynamics received cumulative orders valued at more than
$100,000 from each of 17 different companies during the third quarter,
according to Korybalski. These large orders came from Audi, BMW, Ford,
General Motors, Honda, Mitsubishi, MSX International, Navistar, Nevada
Automotive Test Center, Nissan, Orion Bus, Rover, Toyota, Volkswagen, and
Whirlpool, among others. Significant orders of less than $100,000 each came
from a number of customers, including Boeing, Canon, Daihatsu, Dana
Corporation, Delphi Automotive Systems, Hyundai, Nikon Research, Raytheon,
Seiko Epson, and Shimano, among others.
Korybalski added, "During the third quarter, we also delivered significant
advancements in our industry-leading mechanical system simulation technology
with the August release of ADAMS Version 10.0. This release significantly
expands the capabilities available to our software's users, particularly those
in our targeted automotive, aerospace, rail, and general machinery industries.
"Highlighting the ADAMS 10.0 release are three new product offerings --
ADAMS/Engine, ADAMS/Hydraulics, and ADAMS/PostProcessor. In addition, we
added enhancements to CAT/ADAMS -- our system-level simulation software
embedded in Dassault Systemes' popular CATIA computer-aided design software --
which make this tool highly useful for body hardware applications such as
latches, hinges, and sunroofs in the automotive and other industries."
Mechanical Dynamics pioneered the field of mechanical system simulation,
and has remained focused on expanding 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 which 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
Online: http://www.adams.com
MECHANICAL DYNAMICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
in thousands except share and per
share data 1999 1998 1999 1998
Revenue:
Software licenses $4,572 $4,093 $13,868 $13,530
Services 5,157 4,087 15,385 12,290
Total revenue 9,729 8,180 29,253 25,820
Cost of revenue:
Software licenses 871 689 2,520 1,489
Services 2,797 2,414 8,354 6,900
Total cost of revenue 3,668 3,103 10,874 8,389
Gross profit 6,061 5,077 18,379 17,431
Operating expenses:
Sales and marketing 3,631 3,499 11,416 10,077
Research and development 1,362 1,358 4,118 3,870
General and administrative 886 881 2,770 2,570
Goodwill amortization 113 75 340 157
Acquisition-related and non-recurring
charges 0 203 0 1,403
Total operating expenses 5,992 6,016 18,644 18,077
Operating income (loss) 69 (939) (265) (646)
Other income, net 116 207 415 622
Income (loss) before income taxes and
minority interest 185 (732) 150 (24)
Provision (credit) for income
taxes (449) (160) (459) 416
Net income (loss) before minority
interest 634 (572) 609 (440)
Minority interest in net income (loss)
of subsidiary (6) 14 (2) 26
Net income (loss) $640 ($586) $611 ($466)
Net income (loss) per common
share $0.10 ($0.09) $0.10 ($0.08)
Common and common equivalent
shares 6,260,443 6,213,082 6,247,778 6,173,224
MECHANICAL DYNAMICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September December
30, 31,
in thousands 1999 1998
Assets: (Unaudited)
Current assets:
Cash and cash equivalents $17,122 $16,843
Accounts receivable, net 9,111 9,893
Prepaid and deferred expenses 2,449 1,873
Total current assets 28,682 28,609
Property and equipment, net 3,495 3,674
Goodwill, net 3,527 3,820
Other assets 482 144
Total assets $36,186 $36,247
Liabilities and Shareholders' Equity:
Current liabilities:
Borrowings under lines of credit $74 $105
Accounts payable 991 1,781
Accrued expenses 2,917 3,544
Deferred revenue 5,160 4,745
Total current liabilities 9,142 10,175
Minority interest 470 472
Shareholders' equity:
Common stock 22,535 22,332
Preferred stock 0 0
Retained earnings 3,684 3,073
Cumulative translation adjustment 355 195
Total shareholders' equity 26,574 25,600
Total liabilities and shareholders' equity $36,186 $36,247