MSC.Software Reports 27% Fourth Quarter Revenue Growth

Core Revenue Growth Excluding Acquisitions Was 13% in the Fourth Quarter and 31% for the Fiscal Year

SANTA ANA, Calif., Feb. 19 /PRNewswire-FirstCall/ -- MSC.Software Corp. , the leading global provider of simulation software, services and systems used in Virtual Product Development environments, today announced financial results for the fourth quarter and fiscal year ended December 31, 2002.

  Fourth quarter highlights include:

   --  Revenues of $101.6 million, an increase of 27% over the
       fourth quarter last year;

   --  Net income of $2.3 million or $0.08 per share, slightly above Company
       guidance for the quarter.

  Fiscal year 2002 highlights include:

   --  Revenues of $344.2 million, up 46% over last year;

   --  Operating income of $6.6 million, excluding restructuring and other
       impairment charges;

   --  Key balance sheet items include $35 million in cash and investments,
       $67 million in deferred revenue and $242 million in shareholders'
       equity.

MSC Software's conference call to discuss the fourth quarter and year end results will be web cast live today at 8:30 am Pacific (11:30 am Eastern) at the Company's website at http://www.mscsoftware.com/ir . It can also be accessed through the following toll-free dial-in numbers: US - (800) 374-0151 or Intl. - (706) 634-4981, referencing MSC Software. An archived version of the conference call will also be available at the Company's website.

"Our revenue growth in the fourth quarter was supported by the fact that we were able to close many of the transactions that had been pushed from the third quarter," said Frank Perna, Jr., chairman and CEO, MSC.Software Corp. "Even without the impact of the third quarter transactions, our systems business was particularly strong, as we saw expanded penetration into our core software and other manufacturing accounts.

"Virtual Product Development and the increasing use of simulation technologies are helping our customers save time and money with their Product Lifecycle Management implementations. Customers are finding significant value in our integrated software, services and systems approach to product delivery. Significant business wins at BMW and a major first tier automotive supplier in the Americas support this fact," continued Mr. Perna.

"We solidified our position in the Desktop and CAD-embedded markets with a number of key product releases including Generative Nonlinear for CATIA V5, and new releases of MSC.visualNastran 4D and MSC.Dynamic Designer. The 2003 release of MSC.Patran began shipping and features numerous enhancements to interoperability among MSC products.

"Although current economic conditions continue to be challenging, the right sizing moves that were executed in FY 2002 will allow us to grow profitably now, and we are well positioned for accelerated revenue growth and improving margins when the economy recovers," concluded Mr. Perna.

For the fourth quarter ended December 31, 2002, MSC.Software reported revenue of $101.6 million, an increase of 27% over reported revenue of $80.1 million for the fourth quarter last year. The reported net income for the fourth quarter was $2.3 million compared with $6.3 million in the fourth quarter last year. Earnings per diluted share were $0.08 compared with $0.21 per diluted share in the fourth quarter last year.

For the fiscal year ended December 31, 2002, MSC.Software reported revenue of $344.2 million compared to $236.1 million of reported revenue in fiscal 2001, an increase of 46%. The pro forma net loss, excluding restructuring and other non cash impairment charges, write off of acquired R&D and cumulative change in accounting principle, for the fiscal year 2002 was ($1.3) million or ($0.05) per diluted share. The reported net loss, including restructuring and other impairment charges, write-off of acquired R&D and cumulative change in accounting principle, was ($51.3) million or ($1.75) per diluted share in fiscal 2002, compared with net income of $10.3 million or $0.47 per diluted share in fiscal 2001.

Americas

In the Americas, revenue increased 18% to $49.8 million in the fourth quarter versus the fourth quarter last year. Revenue increased 55% to $180.5 million for the fiscal year ended December 31, 2002. In the Americas, 75 transactions over $100,000 were signed in the fourth quarter, and the total number of new accounts increased by 240 new names. Key software business completed in the quarter included United Technologies, Delphi, Kodak and Guidant. Key services engagements were completed or are ongoing with customers including Cooper Tire and Ford. Key enterprise systems were delivered to Harley Davidson, Orbitz and Pegasus.

Europe

In spite of very tough economic markets in Europe, MSC.Software's European revenue increased by 8% to $23.5 million in the fourth quarter versus the fourth quarter last year, and increased 24% to $78.9 million in fiscal 2002. Total number of new accounts increased by 57 and the number of transactions over $100,000 totaled 14 in the fourth quarter. Key services engagements were ongoing with BMW, Renault Formula 1 and Jaguar. Major software deals were signed with Eurocopter Germany, British Aerospace and MTU AeroEngines. A total solution including software, services and systems was sold to Ernst- Mach-Institute, a subsidiary of Fraunhofer Gesellschaft, which will use the computing environment for research in the field of high-speed dynamics, including stochastic simulation techniques.

Asia-Pacific

The Asia-Pacific region reported significant revenue growth for MSC.Software, with revenue increasing 75% to $28.3 million in the fourth quarter, and increasing 50% to $84.8 million in fiscal 2002. The total number of new customer accounts increased by 52 new account names. In total 32 transactions over $100,000 were signed in the region in the fourth quarter. Key software contracts were signed with Mitsubishi Motor in Japan and Kwanjin in Korea. Service and system engagements moved forward with Samsung Heavy Industries, Japan Automotive Research and James Hardie Research in Australia.

Outlook

Based on current visibility, the Company expects first quarter revenue and earnings to be within current consensus estimates. In addition the Company is comfortable with the consensus estimates for revenue and earnings for FY 2003.

Invitation

Members of MSC.Software's financial community are invited to attend our Investor and Analyst Day to be held in Santa Ana, CA on Wednesday, March 12th. The day long event will be an opportunity to meet with key members of MSC's management team, see simulation technology in action, and look into the future of Virtual Product Development. Please consult the event website at http://www.mscsoftware.com/ir/events for registration.

About MSC.Software

MSC.Software (NYSE: MNS) is the leading global provider of simulation software, with related services and systems, that helps companies make money, save time and reduce costs associated with designing and testing manufactured products. MSC.Software works with thousands of companies in hundreds of industries to develop better products faster by utilizing information technology, software, services and systems. MSC.Software employs more than 1,500 people in 22 countries. For additional information about MSC.Software's products and services, please visit www.mscsoftware.com .

Except for the historical information contained herein, certain 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. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. Other factors which could cause such results to differ materially from those described in the forward-looking statements include delays in developing, completing, or shipping new or enhanced products, the ability to assimilate acquisitions into MSC's operations, foreign currency translations, and other risks and uncertainties that are detailed in the Company's annual report on Form 10-K and other reports filed by the Company with the Securities and Exchange Commission.

                           MSC.SOFTWARE CORPORATION
                    CONSOLIDATED STATEMENTS OF OPERATIONS
               (Amounts in Thousands, Except Per Share Amounts)

                                       Three  Months  Ended                Twelve  Months  Ended
                                                                December  31,                            December  31,
                                                            2002                  2001                  2002                2001
                                                                  (Unaudited)                              (Unaudited)

      REVENUE:
        Software                                $47,675            $51,436            $160,361      $150,342
        Services                                  24,835              16,353                87,790          59,224
        Systems                                    29,055              12,327                96,000          26,531

          Total  Revenue                    101,565              80,116              344,151        236,097

      COST  OF  REVENUE:
        Software                                    5,182                7,880                22,468          26,193
        Services                                  14,992                9,901                54,299          33,292
        Systems                                    26,846              10,755                81,359          22,125

          Total  Cost  of  Revenue      47,020              28,536              158,126          81,610

      GROSS  PROFIT                            54,545              51,580              186,025        154,487

      OPERATING  EXPENSE:
        Research  and  Development    8,107                5,729                27,368          22,068
        Selling,  General  and
          Administrative                    36,427              32,655              145,520          99,253
        Restructuring  and  Other
          Impairment  Charges                    --                      --                13,815            1,894
        Write-Off  of  Acquired
          In-Process  R&D                            --                      --                  2,380                  --
        Amortization  of  Goodwill
          and  Other  Intangibles        1,918                2,703                  6,574          10,878

          Total  Operating
            Expense                                46,452              41,087              195,657        134,093

      OPERATING  INCOME  (LOSS)        8,093              10,493                (9,632)        20,394

      OTHER  EXPENSE  (INCOME)
        Interest  Expense                    3,667                    625                  8,101            5,239
        Other  Expense  (Income),
          Net                                                765                  (330)                    165          (1,704)

          Total  Other  Expense,
            Net                                          4,432                    295                  8,266            3,535

      INCOME  (LOSS)  BEFORE
        PROVISION  (BENEFIT)  FOR
        INCOME  TAXES  AND
        CUMULATIVE  CHANGE  IN
        ACCOUNTING  PRINCIPLE            3,661              10,198              (17,898)        16,859

      Provision  (Benefit)  for
        Income  Taxes                            1,384                3,938                (5,869)          6,588

      NET  INCOME  (LOSS)  BEFORE
        CUMULATIVE  CHANGE  IN
        ACCOUNTING  PRINCIPLE            2,277                6,260              (12,029)        10,271

      CUMULATIVE  CHANGE  IN
        ACCOUNTING  PRINCIPLE                  --                      --              (39,300)                --

      NET  INCOME  (LOSS)                  $2,277              $6,260            $(51,329)      $10,271

      BASIC  EARNINGS  (LOSS)
        PER  SHARE  BEFORE
        CUMULATIVE  CHANGE                  $0.08                $0.22                $(0.41)          $0.50

      DILUTED  EARNINGS  (LOSS)
        PER  SHARE  BEFORE
        CUMULATIVE  CHANGE                  $0.08                $0.21                $(0.41)          $0.47

      BASIC  EARNINGS  (LOSS)
        PER  SHARE                                  $0.08                $0.22                $(1.75)          $0.50

      DILUTED  EARNINGS  (LOSS)
        PER  SHARE                                  $0.08                $0.21                $(1.75)          $0.47

      Basic  Weighted-Average
        Shares  Outstanding              29,730              28,569                29,379          20,606

      Diluted  Weighted-Average
        Shares  Outstanding              30,194              30,322                29,379          21,900


                                                            PRO  FORMA  RESULTS
          (EXCLUDING  RESTRUCTURING  AND  OTHER  IMPAIRMENT  CHARGES,  WRITE-OFF  OF
                                                                      ACQUIRED
                                        IN-PROCESS  R&D  AND  CUMULATIVE  CHANGE)

      OPERATING  INCOME
        (LOSS)                                      $8,093            $10,493                $6,563        $22,288

      NET  INCOME  (LOSS)                  $2,277              $6,260              $(1,341)      $11,439

      BASIC  EARNINGS  (LOSS)
        PER  SHARE                                  $0.08                $0.22                $(0.05)          $0.56

      DILUTED  EARNINGS  (LOSS)
        PER  SHARE                                  $0.08                $0.21                $(0.05)          $0.52


                                                      MSC.SOFTWARE  CORPORATION
                                        CONDENSED  CONSOLIDATED  BALANCE  SHEETS
                                                        (Amounts  in  Thousands)

                                                                                                December  31,      December  31,
                                                                                                        2002                      2001
                                                                                                                (Unaudited)

                                              ASSETS

      Cash  and  Investments                                                        $34,564                $89,540
      Trade  Accounts  Receivable,  Net                                      97,636                  82,276
      Other  Current  Assets                                                          37,177                  26,184

          Total  Current  Assets                                                    169,377                198,000

      Property  and  Equipment,  Net                                            35,511                  31,209
      Goodwill  and  Other  Intangible  Assets,  Net              264,788                173,355
      Capitalized  Software  Costs,  Net                                    25,957                  25,952
      Other  Assets                                                                          11,641                    5,139

          Total  Assets                                                                  $507,274              $433,655

                      LIABILITIES  AND  SHAREHOLDERS'  EQUITY

      Borrowings  Under  Line  of  Credit                                          $--                        $--
      Current  Portion  of  Long-Term  Debt                                13,750                          --
      Accounts  Payable                                                                  32,706                  22,289
      Restructuring  Reserve                                                          4,207                    1,404
      Deferred  Revenue                                                                  67,327                  48,578
      Other  Current  Liabilities                                                39,008                  31,907

          Total  Current  Liabilities                                          156,998                104,178

      Deferred  Income  Taxes                                                        29,243                  14,489
      Long-Term  Debt,  Less  Current  Portion                          40,104                          --
      Notes  Payable  to  Shareholders,
        Less  Current  Portion                                                        24,470                  24,178
      Subordinated  Notes  Payable,  Less  Current
        Portion                                                                                    6,817                    9,185
      Other  Long-Term  Liabilities                                              7,162                    4,653

          Total  Liabilities                                                          264,794                156,683

          Total  Shareholders'  Equity                                        242,480                276,972

          Total  Liabilities  and  Shareholders'  Equity      $507,274              $433,655
 


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