Tecnomatix Announces Q3 2004 Results

* Net income increased to $0.05 per diluted share compared to a net loss of $(0.43) in same period of 2003

HERZLIA, Israel, Oct. 27 /PRNewswire-FirstCall/ -- Tecnomatix Technologies Ltd. (NASDAQ: TCNO), the driving force in Manufacturing Process Management (MPM), today announced its financial results for the third quarter ended September 30, 2004.

Revenue for the third quarter of 2004 was $25.5 million, compared to $20.3 million for the third quarter of 2003, an increase of 26%. Operating income for the third quarter of 2004 was $0.7 million, compared to an operating loss of $(4.5) million for the third quarter of 2003 which included the special charges of $4.4 million associated with the USDATA acquisition. Net income for the third quarter of 2004 was $0.6 million or $0.05 per diluted share, compared to a net loss of $(4.7) million or $(0.43) per diluted share for the third quarter of 2003.

Revenue for the nine months ended September 30, 2004 were $73.5 million, compared to $61.1 million for the same period of 2003, an increase of 20%. Operating income for the first nine months of 2004 was $1.7 million, compared to an operating loss of $(6.3) million for the first nine months of 2003 which included special charges of $5.9 million associated with restructuring and the USDATA acquisition. Net income for the first nine months of 2004 was $1.3 million or $0.10 per diluted share, compared to a net loss of $(5.9) million or $(0.55) per diluted share for the same period of 2003.

As of September 30, 2004, the Company had a balance of $38.7 million in cash and cash equivalents, short-term investments and long-term investments, compared to $38.0 million as of June 30, 2004.

"We continue to make significant progress with our strategic and financial goals," said Jaron Lotan, president and chief executive officer of Tecnomatix Technologies. "For the third quarter of 2004, we achieved record revenue with growth of 26% year-over-year and we increased our operating and net profits. In addition, we continue to report positive cash flow from operating activities. These results are mainly attributable to the continued deployment of our MPM enterprise solutions across a range of vertical markets.

"During the quarter, we enjoyed year-over-year growth across all territories, which was mainly driven by our Mechanical division. Automotive OEMs like Audi, BMW, Ford, GM/Opel, PSA and Volkswagen further expanded their eMPower Enterprise deployments and Renault F1 placed an initial order for our eMPower solution.

"We are particularly pleased with our success in the Tier 1 automotive supplier industry. This $500 billion dollar industry, which manufacturers all the major components of a car, presents a major growth opportunity for Tecnomatix. This quarter, two U.S. companies, Visteon and Intier, placed initial orders for our MPM Enterprise solution, joining our impressive customer base of more than twenty of the world's top Tier-1 suppliers.

"Outside of the automotive industry, demand for our standalone engineering products is particularly strong. Among the companies placing orders in the third quarter were Fanuc, a leading robot manufacturer, Fiat Avio, an Italian aerospace company, Atomic Energy of Canada (AECL), John Deere and Westinghouse.

"We continue to gain traction in China and Taiwan, which is driving increased market penetration through new and repeat orders. This quarter, several automotive customers progressed with their implementation of eMPower Enterprise solutions including Shanghai Automotive Industry Corporation (SAIC), China's largest car producer, and Yulon Motor Company, a Taiwanese car manufacturer. We are also seeing increased adoption of MPM by the Chinese electronics industry, with companies like Inventec, Siemens Shanghai Mobile Communications and UMC placing orders for our eMPower for Electronics solution.

"Our partnership with UGS is progressing well; our technical teams are working together at several major customer sites and, this quarter, we delivered a new version of the Teamcenter and eMPower integrated product.

"In summary, this has been a productive quarter for Tecnomatix, exhibiting important gains in a range of vertical markets with initial and repeat orders for our eMPower Enterprise solution and for our standalone engineering products," continued Lotan. "Our customers continue to report significant productivity improvements and returns on their investments. We are on track with our ongoing objectives to deliver real value to our customers as well as continued financial growth and increased profitability."

Forward-Looking Guidance

Oren Steinberg, chief financial officer and executive vice president of Tecnomatix Technologies said, "We are maintaining our guidelines for 2004 of approximately 15%-20% growth over 2003 with improved profitability. In the fourth quarter of 2004, we expect to achieve sequential and year-over-year growth.

"Looking at 2005, based on our current performance and visibility, we expect to grow our business and strengthen our business model. Our initial guidance for 2005, is approximately 15% year-over-year growth, on an annual basis, with significant improvements in profitability."

Investor Conference Call / Webcast Details

Tecnomatix will review detailed third quarter 2004 results on October 27, 2004 at 8:30AM EDT. The conference call-in number is 1-973-935-2408. A replay will be available from 12:30PM EDT on October 27 through midnight EST, November 7. The replay number is 1-973-341-3080. The confirmation identification for both, the live call and replay is 5260237. The live call and replay will also be accessible over the web at http://investor.tecnomatix.com/.

About Tecnomatix Technologies and eMPower

Tecnomatix Technologies Ltd. is the driving force in Manufacturing Process Management (MPM). Today's leading global manufacturers are adopting MPM solutions to expand revenue potential and reduce costs by accelerating product introductions, shortening time to volume, and optimizing production execution. eMPower enables our customers to succeed with its collaborative, open platform and applications for defining, simulating, managing, and executing manufacturing processes across the extended enterprise. For more information on eMPower products and solutions for MPM, please visit http://www.tecnomatix.com/.

This press release includes forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. Such statements may relate to the Company's plans, objectives and expected financial and operating results. The risks and uncertainties that may affect forward-looking statements include, but are not limited to: currency fluctuations, global economic and political conditions, market demand for Tecnomatix products and services, long sales cycles, new product developments, assimilating future acquisitions, maintaining relationships with customers and partners, and increased competition. For more details about the risks and uncertainties of the business, refer to the Company's filings with the Securities and Exchange Commission. Tecnomatix undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

  Condensed Consolidated Statements of Operations
  U.S. $ in thousands, except
  per share data                 Nine months ended       Three months ended
                              9/30/2004   9/30/2003   9/30/2004   9/30/2003

   Software license fees         29,694      24,139      10,944       7,925
   Services                      43,833      36,918      14,540      12,378
  Total revenues                 73,527      61,057      25,484      20,303

  Costs and expenses
   Software license fees          5,898       6,254       2,331       1,983
   Services                      14,879      10,910       5,277       3,562
   Amortization of acquired
    intangibles                         438                    23                  143                    23
      Research  and  development,  net  12,025            10,671              4,015              3,249
      Selling  and  marketing                  35,092            29,977            11,795            10,515
      General  and  administrative          3,539              3,623              1,222              1,055
      Restructuring  costs  and
        asset  impairment                                    -              1,487
      In-process  R&D  and
        acquisition  related  costs                  -              4,410                      -              4,410
    Total  costs  and  expenses              71,871            67,355            24,783            24,797

    Operating  income  (loss)                  1,656            (6,298)                701            (4,494)

    Financial  income
      (expenses),  net                                    (91)                476                  (19)              (122)

    Income  (loss)  before  taxes
      on  income                                            1,565            (5,822)                682            (4,616)

    Provision  for  income  taxes              (246)                (41)                (99)                (40)

    Income  (loss)  after  taxes
      on  income                                            1,319            (5,863)                583            (4,656)

    Equity  share  in  net  income
      (loss)  of  affiliate  company            (53)                (74)                    2                  (25)

    Net  income  (loss)                              1,266            (5,937)                585            (4,681)

    Basic  earnings  (loss)  per
    Net  income  (loss)                                0.10              (0.55)              0.05              (0.43)
    Diluted  earnings  (loss)
      per  share:
    Net  income  (loss)                                0.10              (0.55)              0.05              (0.43)

    Weighted  average  number  of
      shares  outstanding:
    Basic                                            12,062,771    10,761,537    11,988,125    10,929,256
    Diluted                                        12,913,129    10,761,537    12,816,934    10,929,256

    Condensed  Consolidated  Balance  Sheets
    U.S.  $  in  thousands
                                                                                              9/30/2004                12/31/2003
    Current  Assets:
        Cash  and  cash  equivalents                                          11,942                          9,232
        Short-term  investments                                                        23                                70
        Accounts  receivable:
            Trade                                                                              26,186                        29,190
            Related  parties                                                                400                                  -
            Other  and  prepaid  expenses                                      5,160                          5,747

    Total  current  assets                                                        43,711                        44,239

    Non-current  receivables                                                    1,241                          1,108

    Long-term  investments:
            Bonds                                                                              26,624                        24,267
            Zuken  Tecnomatix                                                              208                              289

    Total  long-term  investments                                          26,832                        24,556

    Property  and  equipment,  net                                            4,444                          5,628

    Goodwill,  net                                                                      25,496                        25,829

    Acquired  intangibles,  net                                                2,006                          2,444

    Other  assets,  net                                                              13,296                        13,296

    Total  assets                                                                      117,026                      117,100

    Current  Liabilities:
        Current  maturities  of  long-term  loans                    3,333                              833
        Accounts  payable:
              Trade                                                                              2,546                          4,644
              Deferred  revenue                                                        8,470                          7,130
              Other  and  accrued  expenses                                  16,895                        19,163

    Total  current  liabilities                                              31,244                        31,770

    Long-term  liabilities:
        Accrued  restructuring  expense                                    2,829                          1,716
        Long-term  loan  from  bank                                            21,667                        24,167
        Accrued  severance  pay,  net                                              969                          1,095

    Total  long-term  liabilities                                          25,465                        26,978

    Shareholders'  equity                                                        60,317                        58,352

    Total  liabilities  and  shareholders'  equity          117,026                      117,100

      Company  Contact:                                  Company  Investor  Contact:
      Tecnomatix  Technologies  Ltd.          Tecnomatix  Technologies  Ltd.
      Oren  Steinberg                                      Marsha  Shalvi
      +972-9-9594891                                      +972-9-9594733
  Email  Contact                  +972-544-942180
  Email  Contact  

      Investor  Contact:
      The  Ruth  Group
      David  Pasquale/Denise  Roche
  Email  Contact  

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