Wednesday July 23 4:21 PM EDT
Company Press Release
Simulation Sciences Inc. Reports Second Quarter 1997 Results
BREA, Calif.--(BUSINESS WIRE)--July 23, 1997--Simulation Sciences Inc. (Nasdaq:SMCI), a worldwide supplier of
software and services to the process industries, Wednesday reported total revenue of $14.7 million and net income (excluding
a $1.1 million one-time charge for in-process research and development costs) of $1.8 million, or 16 cents per share, for its
second quarter ended June 30, 1997.
The one-time charge for in-process research and development is related to the previously announced acquisition of technology
and assets from Raytheon Engineers & Constructors Inc. in the quarter. Including the one-time charge, net income for the
quarter was $720,000, or 6 cents per share. In the second quarter of 1996, SIMSCI recorded total revenue of $11.8 million
and net income of $543,000, or 7 cents per share.
For the six months ended June 30, 1997, total revenue was $28.3 million and net income (excluding $6.3 million in one-time
charges for in-process research and development costs) was $3.3 million, or 29 cents per share. Including the one-time charge,
the net loss for the period was $3.0 million, or 28 cents per share. For the six months ended June 30, 1996, total revenue was
$21.8 million and net income was $810,000, or 10 cents per share. As discussed in the company's Form 10-K for 1996, the
company's change in contract terms beginning in 1996 affects the comparability of total revenue.
The company noted that the record revenues benefited from the addition of new seats and new products to renewing contracts
and the signing of new customers. Revenue mix changes in the quarter led to higher gross margins. In addition, as the company
implemented a tax reduction program in the second quarter, its overall effective tax rate was reduced to 39 percent from 42
percent.
``In addition to our strong financial performance, we made important strides this quarter in penetrating the chemicals market
and expanding our technology base to provide best-in-class, on-line decision-support tools for the process industry,'' said
Charles R. Harris, president and chief executive officer.
``We are building a flexible enterprise optimization system based on the latest IT enabling technologies. The system is being
designed to enable business managers with process operations responsibility to make better decisions based on more accurate
and timely information about their processes and market economics. Our acquisitions this quarter have provided us with key
technology components for this system,'' continued Harris.
``Most recently we acquired on-line inferential estimator technology from Raytheon Engineers and Constructors Inc., which
provides SIMSCI with a rigorous solution for on-line sensors. These sensors can replace costly on-line analytical instruments
with accurate, easy-to-maintain software models. In addition, our agreements in the quarter with Shell Oil Co. have given us
powerful advanced process control and business planning software, both essential components for enterprise optimization. The
ROMeo product, which is being jointly developed with Shell, will be the first application based on our new enterprise
optimization system architecture. ROMeo is designed to provide a common modeling environment for on-line process
optimization and off-line simulation.
``Through our Bayer AG agreement to purchase Simulation Manager, we not only gained key architectural components for our
enterprise optimization system, but also the opportunity to develop our relationship with one of the world's leading chemical
companies to develop new, more powerful applications designed to meet the needs of the chemicals market. Further, we
believe Simulation Manager will have broad appeal across the process industry. Designed to enable different simulation
applications to interoperate in a heterogeneous network, Simulation Manager meets a key need that many companies face in
the chemicals, petrochemicals, refining and upstream markets. We intend to commercialize Simulation Manager and market it
to the entire process industry.''
``Our growth has been strong in all regions of the world,'' added Harris, ``In addition to Bayer AG as a new chemical client in
Europe, we also have signed a new contract with Mitsubishi Chemical Corp. and renewed license agreements with other
chemical companies in Japan, a further indication of the value of our products in the chemical market. In Japan we also signed
an agreement with the Japan National Oil Corp. (JNOC), to integrate JNOC's horizontal well simulation program,
POPHOZN, with PIPEPHASE, SIMSCI's oil and gas production simulation program.''
``We also continued SIMSCI's enviable record of contract renewals at higher values. During the quarter, several long standing
refining customers with large contracts renewed their license agreements with SIMSCI. These renewals underscore SIMSCI's
value to the refining industry and our commitment to provide effective simulation-based solutions to help our clients design,
operate and manage their processes more efficiently.''
Simulation Sciences (SIMSCI) is a leading provider of commercial simulation software and related services to the petroleum,
petrochemical and industrial chemical process industries as well as the engineering and construction firms that support those
industries. SIMSCI's Windows-based graphical user interface and simulation software products are designed to increase
profitability by reducing capital investment costs, improving yields and enhancing management decision making. SIMSCI
maintains offices in the United States, Venezuela, Egypt, Germany, Singapore, the United Kingdom and Japan, and provides
support and service to more than 650 customers in 70 countries. For more information about SIMSCI, visit the SIMSCI
Website at simsci.com .
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements with respect to products
under development, new product capabilities, opportunities in connection with the acquisition of Simulation Manager, the ability
of the company's products to improve customers' productivity and profitability and the extent to which, if at all, the company
can expand market share, gain market acceptance and develop new products following the acquisitions. Actual results could
differ materially from those projected in the forward-looking statements as a result of the following factors: the size and timing
of customer orders, delays in renewals or failure of existing customers to renew their licenses with the company when their
current licenses expire; the length of the company's sales cycle; changes in contract terms (including terms affecting the timing of
recognition of license revenue) and the rate at which such changes are made; success of the company's service offerings; timing
of new product announcements and introductions by the company and its competitors; the company's ability to develop,
introduce and market new products and product enhancements; distractions and expenses associated with the acquisitions;
market acceptance of the company's products; deferrals of customer orders in anticipation of new products or product
enhancements; the company's ability to control costs, including the need for, and degree of use of, third-party contractors and
the hiring of new employees; the availability of components; changes in the company's management team; and fluctuating
economic conditions. Investors should also refer to the company's prospectus and reports on file with the Securities and
Exchange Commission.
Simulation Sciences Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
1996 1997 1996 1997
(Unaudited) (Unaudited)
Revenue
Software license revenue $ 10,695 $ 14,229 $ 19,637 $ 26,926
Services and other revenue 1,068 479 2,154 1,417
Total revenue 11,763 14,708 21,791 28,343
Cost of revenue
Cost of software license revenue 761 890 1,778 1,795
Cost of services and other revenue 680 459 1,553 1,305
Total cost of revenue 1,441 1,349 3,331 3,100
Gross profit 10,322 13,359 18,460 25,243
Operating expenses
Sales and marketing 3,791 4,544 7,339 8,746
Research and development 4,146 4,081 6,845 7,501
General and administrative 1,599 2,314 3,066 4,476
In-process research and development 1,070 6,270
Total operating expenses 9,536 12,009 17,250 26,993
Income (loss) from operations 786 1,350 1,210 (1,750)
Interest and other income 135 514 163 959
Income (loss) before provision
for income taxes 921 1,864 1,373 (791)
Provision for income taxes 378 1,144 563 2,213
Net income (loss) $ 543 $ 720 $ 810 $ (3,004)
Pro forma and net income
(loss) per share $ 0.07 $ 0.06 $ 0.10 $ (0.28)
Pro forma and weighted
average common shares 7,765 11,341 7,765 10,791
Pro forma information excluding in-process R & D
Net income $ 543 $ 1,790 $ 810 $ 3,266
Pro forma and net income per share $ 0.07 $ 0.16 $ 0.10 $ 0.29
Pro forma and weighted
average common shares 7,765 11,341 7,765 11,208
-0-
Simulation Sciences Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
Dec. 31, June 30,
1996 1997
(unaudited)
Assets
Cash and investments $ 26,321 $ 14,927
Accounts receivable, net 8,981 10,860
Unbilled accounts receivable, net 8,799 18,400
Property and equipment, net 4,045 4,406
Other assets 5,052 7,902
Total assets $ 53,198 $ 56,495
Liabilities and stockholders' equity
Liabilities $ 14,379 $ 15,743
Stockholders' equity 38,819 40,752
Total liabilities and
stockholders' equity $ 53,198 $ 56,495 |
