SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16
OR 15d-16 OF
THE SECURITIES EXCHANGE ACT
OF 1934
Report on Form 6-K dated October 29, 2004
Commission File No. 0-28578
DASSAULT SYSTEMES S.A.
(Name of Registrant)
9, Quai Marcel
Dassault, B.P. 310, 92156 Suresnes Cedex, France
(Address of Principal Executive
Offices)
Indicate by check mark whether the
registrant files or will file annual reports under cover of Form 20-F
or Form 40-F
| Form 20-F X | Form 40-F |
Indicate by check mark if the
registrant is submitting the Form 6-K in paper as permitted by Regulation
S-T Rule
101(b)(1):
| Yes | No X |
Indicate by check mark if the
registrant is submitting the Form 6-K in paper as permitted by Regulation
S-T Rule
101(b)(7):
| Yes | No X |
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
| Yes | No X |
If “Yes” is marked,
indicate below the file number assigned to the registrant in connection with Rule
12g3-2(b):
82-___________
An official English translation of Dassault Systemes’ unaudited consolidated and condensed half-year financial statements and activity report from January 1, 2004 to June 30, 2004 (based on French GAAP), as published in the Bulletin des Annonces Legales Obligatoires (BALO) on October 29, 2004.
| 1. | Financial Information |
| a. | Results for the first half of 2004 |
All financial information presented in this report is reported in accordance with French generally accepted accounting principles.
Dassault Systèmes group’s total revenue for the first half of 2004 amounted to 368.7 million euros, increasing 5% on a reported basis and 9% in constant currencies, compared to the first half of 2003.
Software revenue totaled 307.8 million euros, increasing 4% on a reported basis and 8% in constant currencies, compared to the first half of 2003. The increase in software revenue reflects the sales growth of both PLM and SolidWorks solutions.
Service revenue totaled 60.9 million euros, increasing 13% on a reported basis and 18% in constant currencies compared to the first half of 2003. This increase is linked to the 7E7 project with Boeing and an increase in PLM projects in general, including a number of projects focused on best practices.
Operating income totaled 95.4 million euros, increasing 18.8% compared to the first half of 2003. Consolidated net income totaled 56.2 million euros and net diluted income per share equaled .48 euros, compared to 35.1 million euros and .31 euros, respectively, in the first half of 2003 (representing a growth of net income per share of 55%).
Revenue of the parent company, Dassault Systèmes SA totaled 228 million euros in the first half of 2004 (compared to 217.0 million euros in the first half of 2003), and net income totaled 45.0 million euros (compared to 40.0 million euros in the first half of 2003).
As a result of the resilience of the Company’s business model, and despite the negative impact of foreign currency exchange rates, Dassault Systèmes’ performance for the first half of 2004 slightly outperformed market expectations.
Board of Directors’ Meeting
– October 7, 2004 –Page
Dassault Systèmes – société anonyme
with a share capital of 113,403,665 euros
| b. | Transition to IFRS Accounting Standards |
In accordance with applicable regulations, Dassault Systèmes will be required to prepare its consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) as of January 1, 2005. The Company launched its conversion project in September 2003. At this stage, the Company believes that the adoption of the following IFRS may have a significant impact on its consolidated financial statements: Share-based Payments, Business Combinations, Financial Instruments and Employee Benefits. This list is not final, both because the conversion process is not complete and because certain IFRS have yet to be published in their final form.
| 2. | Strategy, technology and partnerships |
| a. | PLM (Product Lifecycle Management) |
Dassault Systèmes and IBM announced that they introduced a new specialized product lifecycle management industry solution (including software and best practices) for Electronics manufacturers, designed to help them better manage the growing complexity of electronic product development. Collaborative Systems Engineering for Electronics (CSE-E) optimizes the early definition stages of product development when companies establish the requirements, functions and systems architecture of a new product, and generally commit up to 80% of its cost. CSE-E also shortens time-to-market by facilitating design reuse from the earliest stages of the development process, and reduces the costs and risks associated with the launch of a new product.
Dassault Systèmes and Lattice Technology announced that they have entered into a long-term strategic partnership to create a significantly more open and efficient 3D XML solution enabling the exchange of 3D data among manufacturers and suppliers, partners and customers. Using Lattice Technology’s applications, users will be able to generate 3D manuals, parts lists, marketing brochures, assembly instructions, and parts databases. The solutions will provide functions to create 3D interactive Web pages or office documents enabling users to combine 3D data, 2D images, structured data, text and graphics together in a single lightweight document.
The highlight of the first quarter of 2004 was the announcement of new release V5R13 of Version 5, part of Dassault Sytsèmes’ portfolio of product lifecycle solutions, for the CATIA, DELMIA, ENOVIA and SMARTEAM brands.
V5R13 brings added value to manufacturers and their subcontractors by allowing them to deploy proven PLM work methodologies aimed at significantly reducing the development cycle.
A major innovation in the V5R13 release is the new ENOVIA VPM Navigator product that enables manufacturers to take maximum advantage of relational design, integrating ENOVIA’s virtual product definition into CATIA’s easy-to-use design environment.
Board of Directors’ Meeting
– October 7, 2004 –Page
Dassault Systèmes – société anonyme
with a share capital of 113,403,665 euros
In September 2004, Dassault Systèmes launched the Version 5 Release 14 of its product lifecycle management portfolio. The new V5R14, called “Imagine and Work as a Global Team”, introduced breakthrough innovations for industrial design and improved collaborative product development.
| b. | SOLIDWORKS |
SolidWorks Corporation introduced SolidWorks2005, delivering new features to make design engineers and others faster, more accurate and more productive as they bring their innovations to market. SolidWorks 2005 software delivers powerful drawing capabilities, significant ease of use, and a number of new productivity features. With more than 250 customer-requested features and enhancements SolidWorks 2005 includes significant new features for machine, mold and consumer product designers. SolidWorks 2005 uniquely encompasses 3D design, analysis, product data management, collaboration, and injection-molded plastic part validation software in a single offering.
SolidWorks Corporation also introduced Cosmos 2005, a new release with 100 improvements on new advanced analysis solutions in easy to use applications.
| 3. | Clients, distribution networks, marketing and services |
In constant currencies, Dassault Systèmes’ revenue increased 9%, with a constant currency increase of 10% in the Americas, 5% in Europe and 15% in Asia.
In the Company’s Process-centric business, 14,709 CATIA licenses were sold in the first half of 2004, up 4% in comparison to the first half of 2003.
During the first quarter of 2004, Schneider Electric and Dassault Systèmes announced a business partnership to sell DELMIA Solutions and develop Consulting and Services for the Automation and Production Engineering (production process planning, production assembly processes, and factory simulation) markets. The solutions to be jointly developed include a new product line called DELMIA Automation, dedicated to the definition, control and surveillance of automated systems.
Boeing deployed the full suite of latest generation of V5 PLM solutions (CATIA, ENOVIA, SMARTEAM and DELMIA) as a development platform company wide and for the 7E7 and future projects. Together, Boeing and Dassault Systèmes are creating a Global Collaboration Environment, a virtual development space for the 7E7 in which Boeing and its partners will digitally conceive, build and test every aspect of the 7E7 before production begins.
Other significant contracts and partnerships announced in the first half of 2004 include:
| • | A partnership among Tata Technologies, IBM and Dassault Systèmes to respond to the increasing demand for PLM solutions in the Indian market; |
Board of Directors’ Meeting
– October 7, 2004 –Page
Dassault Systèmes – société anonyme
with a share capital of 113,403,665 euros
| • | An extension of the partnership among Hong Kong Polytechnic University, MTECH and Dassault Systèmes; |
| • | Sukhoi Civil Aircraft announced its decision to use Dassault Systèmes’ suite of PLM solutions to develop its fleet of regional jets; |
| • | Whirlpool decided to use Delmia Corp.'s digital manufacturing solutions; |
| • | Enovia Corp. and Galaxia Inc. entered into a CAAV5 software partnership to enhance solutions for Enterprise Collateral Business Processes; |
| • | AVIC Information Technology opened a competency center in Chine for Dassault Systèmes PLM Solutions; |
| • | The Bénéteau group chose Dassault Systèmes’ PLM solutions for shipbuilding. |
In the Company’s Design-centric business, the number of SolidWorks licenses sold during the first half of 2004 totaled 14,140, up 14% compared to the first half of 2003.
Finally, effective July 1, 2004, Dassault Systèmes and Rand A Technology Corporation, operating under the name of Rand Worldwide, created Rand North America Inc., a joint venture focused on increasing sales of Dassault Systèmes’ PLM products in North America.
| 3. | Financial Results by business sector –capital operations – outlook |
Process-centric revenue, including PDM, increased 3% on a reported basis, and 7% in constant currencies, compared to the first half of 2003. Dassault Systèmes Process-centric revenue totaled 299.1 million euros (after eliminations) for the first half of 2004.
Product Data Management (PDM) revenue for the first half of 2004 increased by 13% on a reported basis, and 17% in constant currencies compared with the first half of 2003.
Design-centric revenue, SolidWorks, for the first half of 2004 totaled 69.6 million euros (after eliminations), up 13% on a reported basis and 18% in constant currencies compared to the fist half of 2003.
In its July 29, 2004 press release the Company announced, a revenue growth objective of approximately 9% in constant currencies, and that, based upon of the first half results and the outlook for the second half of 2004, operating margin before acquisition costs is likely to be slightly better than the 29% realized in 2003 on a reported U.S. GAAP basis. The Company’s revenue objective for the third quarter of 2004 is between 183 million euros and 188 million euros, based upon an exchange rate of 1.25 U.S. dollars to 1.0 euro.
***
Board of Directors’ Meeting
– October 7, 2004 –Page
Dassault Systèmes – société anonyme
with a share capital of 113,403,665 euros
| DASSAULT SYSTEMES |
| CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AS OF JUNE, 30 2004 |
| CONSOLIDATED BALANCE SHEETS |
| (All amounts in thousands of euro) | June 30, 2004 | December 31, 2003 | ||||||
|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||
| Goodwill | 17,088 | 24,926 | ||||||
| Other intangible assets, net | 7,973 | 6,990 | ||||||
| Property and equipment, net | 58,285 | 56,539 | ||||||
| Financial assets | 44,902 | 39,507 | ||||||
| Investment in equity of unconsolidated affiliates joint-ventures | 738 | 476 | ||||||
| Long-term deferred tax assets | 20,297 |
19,418 |
||||||
| Total fixed assets | 149,283 | 147,856 | ||||||
| Trade accounts receivable | 154,683 | 227,579 | ||||||
| Other current assets | 99,708 | 95,338 | ||||||
| Short-term investments | 16,850 | 20,102 | ||||||
| Cash and cash equivalents | 523,775 |
419,572 |
||||||
| Total current assets | 795,016 | 762,591 | ||||||
| |
|
|||||||
| TOTAL ASSETS | 944,299 | 910,447 | ||||||
| LIABILITIES | ||||||||
| Share capital | 113,532 | 113,404 | ||||||
| Additional paid-in capital | 8,079 | 4,940 | ||||||
| Retained earnings | 456,004 | 372,933 | ||||||
| Net Income | 56,192 |
114,098 |
||||||
| Total Shareholders’ Equity | 633,807 | 605,375 | ||||||
| Provisions for liabilities and charges | 29,425 | 20,855 | ||||||
| Long-term debt | 20,342 | 23,466 | ||||||
| Accounts payable | 34,324 | 42,264 | ||||||
| Accrued wages and other personnel costs | 58,398 | 54,212 | ||||||
| Sales incentive payable and unearned revenue | 110,398 | 100,975 | ||||||
| Other current liabilities | 57,605 | 63,300 | ||||||
| |
|
|||||||
| TOTAL LIABILITIES | 944,299 | 910,447 | ||||||
1
| DASSAULT SYSTEMES |
| CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AS OF JUNE, 30 2004 |
| CONSOLIDATED STATEMENTS OF INCOME |
| Six Months ended, |
Year ended, |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (All amounts in thousands of euro, except per share data) | June 30, 2004 | June 30, 2003 | December 31, 2003 | ||||||||
| Revenue: | |||||||||||
| Software revenue | 307,809 | 296,911 | 645,565 | ||||||||
| Services and other revenue | 60,919 | 53,812 | 109,258 | ||||||||
| Total revenue | 368,728 | 350,723 | 754,823 | ||||||||
| Cost of revenue: | |||||||||||
| Software | (9,829 | ) | (11,397 | ) | (21,709 | ) | |||||
| Services and other | (50,581 | ) | (46,482 | ) | (89,866 | ) | |||||
| Total cost of revenue | (60,410 | ) | (57,879 | ) | (111,575 | ) | |||||
| Gross profit | 308,318 | 292,844 | 643,248 | ||||||||
| Research and development | (107,455 | ) | (106,221 | ) | (215,729 | ) | |||||
| Marketing and sales | (80,957 | ) | (79,723 | ) | (162,578 | ) | |||||
| General and administration | (23,366 | ) | (23,036 | ) | (46,720 | ) | |||||
| Amortization of acquired technology | (1,129 | ) | (3,540 | ) | (5,925 | ) | |||||
| Operating income | 95,411 | 80,324 | 212,296 | ||||||||
| Financial revenue and other, net | 2,474 | (1,459 | ) | 2,458 | |||||||
| Income before income taxes | 97,885 | 78,865 | 214,754 | ||||||||
| Income tax expense | (34,152 | ) | (30,108 | ) | (76,179 | ) | |||||
| Income from consolidated companies | 63,733 | 48,757 | 138,575 | ||||||||
| Equity in net income of unconsolidated affiliates joint-ventures | 429 | 263 | 419 | ||||||||
| Goowill amortization | (7,970 | ) | (13,920 | ) | (24,896 | ) | |||||
| Net income | 56,192 | 35,100 | 114,098 | ||||||||
| Basic net income per share | € 0.50 | € 0.31 | € 1.01 | ||||||||
| Diluted net income per share | € 0.48 | € 0.31 | € 0.99 | ||||||||
| Basic weighted average shares outstanding (in millions) | 113.1 | 113.2 | 113.0 | ||||||||
| Diluted weighted average shares outstanding (in millions) | 116.0 | 114.0 | 114.7 | ||||||||
2
| DASSAULT SYSTEMES |
| CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AS OF JUNE, 30 2004 |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (All amounts in thousands of euro) | Six months ended, | Year ended, | |||||||
|---|---|---|---|---|---|---|---|---|---|
| June 30, 2004 | December 31, 2003 | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||
| Net income | 56,192 | 114,098 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
| Depreciation and amortization of property, plant and equipment | 6,531 | 15,302 | |||||||
| Amortization of intangible assets | 9,934 | 32,647 | |||||||
| Deferred income taxes | (37 | ) | (10,813 | ) | |||||
| Dilution gain on issuance of SolidWorks stock | (2,384 | ) | (2,450 | ) | |||||
| Other | (3,360 | ) | 919 | ||||||
| Changes in current assets and liabilities: | |||||||||
| (Increase) decrease in trade accounts receivable | 68,096 | (5,093 | ) | ||||||
| (Increase) decrease in other current assets | (4,994 | ) | 2,013 | ||||||
| Increase (decrease) in accounts payable,
accrued wages and other personnel costs |
781 | 12,432 | |||||||
| Increase (decrease) in sales incentive payable | (3,818 | ) | 577 | ||||||
| Increase (decrease) in unearned revenue | 11,387 | 4,376 | |||||||
| Increase (decrease) in income taxes payable | 4,194 | 6,116 | |||||||
| Increase (decrease) in other current liabilities | (5,460 | ) | 7,250 | ||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 137,062 | 177,374 | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES |
|||||||||
| Proceeds from sales of property and equipment | 3,065 | 12 | |||||||
| Additions to intangible assets | (2,767 | ) | (3,399 | ) | |||||
| Additions to property and equipment | (10,441 | ) | (15,837 | ) | |||||
| Short-term investments: | |||||||||
| Purchases | - | (63,962 | ) | ||||||
| Proceeds from sales and maturities | 3,997 | 58,029 | |||||||
| Payment for acquisitions, net of cash acquired | (1,050 | ) | (6,085 | ) | |||||
| Increase in long-term receivables | (4,725 | ) | (13,670 | ) | |||||
| Other | - | (282 | ) | ||||||
| NET CASH USED IN INVESTING ACTIVITES | (11,921 | ) | (45,194 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES |
|||||||||
| Purchase of treasury stock | - | (29,450 | ) | ||||||
| Proceeds from exercise of stock options | 12,365 | 4,458 | |||||||
| Cash dividends paid | (38,435 | ) | (37,225 | ) | |||||
| Payments on capital lease obligation | - | (211 | ) | ||||||
| NET CASH USED IN FINANCING ACTIVITIES | (26,070 | ) | (62,428 | ) | |||||
| Effect of exchange rate changes on cash | 5,132 | (22,134 | ) | ||||||
| Increase (decrease) in cash and cash equivalents | 104,203 | 47,618 | |||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 419,572 | 371,954 | |||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 523,775 | 419,572 | |||||||
3
| DASSAULT SYSTEMES |
| CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AS OF JUNE, 30 2004 |
| CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY |
| (All amounts in thousands of euro) | Common Stock | Paid-in capital | Retained earnings | Currency Translation adjustment | Total | ||||||||||||||
| December 31, 2001 | 114,446 | 25,228 | 387,152 | 24,052 | 550,878 | ||||||||||||||
| Net income | 105,986 | 105,986 | |||||||||||||||||
| Foreign currency translation adjustment | (34,933 | ) | (34,933 | ) | |||||||||||||||
| Exercise of stock-options | 125 | 3,268 | 565 | 3,958 | |||||||||||||||
| Cash dividends paid | (37,601 | ) | (37,601 | ) | |||||||||||||||
| December 31, 2002 | 114,571 | 28,496 | 456,102 | (10,881 | ) | 588,288 | |||||||||||||
| Net income | 114,098 | 114,098 | |||||||||||||||||
| Foreign currency translation adjustment | (35,221 | ) | (35,221 | ) | |||||||||||||||
| Purchase and retirement of common shares | (1,375 | ) | (28,075 | ) | (29,450 | ) | |||||||||||||
| Exercise of stock-options | 208 | 4,519 | 158 | 4,885 | |||||||||||||||
| Cash dividend paid | (37,225 | ) | (37,225 | ) | |||||||||||||||
| December 31, 2003 | 113,404 | 4,940 | 533,133 | (46,102 | ) | 605,375 | |||||||||||||
| Net income | 56,192 | 56,192 | |||||||||||||||||
| Foreign currency translation adjustment | 7,345 | 7,345 | |||||||||||||||||
| Exercise of stock-options | 128 | 3,139 | 63 | 3,330 | |||||||||||||||
| Cash dividend paid | (38,435 | ) | (38,435 | ) | |||||||||||||||
| June 30, 2004 | 113,532 | 8,079 | 550,953 | (38,757 | ) | 633,807 | |||||||||||||
4
| DASSAULT SYSTEMES |
| CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AS OF JUNE, 30 2004 |
| NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS |
Dassault Systèmes and its subsidiaries (the “Company”) develops and sells integrated solutions created to manage its customers’ industrial product lifecycles (“Product Lifecycle Management” or “PLM”) from their initial product concept and design to their maintenance through manufacturing simulation and to offer the power of 3D visualization to the largest number of users.
The Company operates in two segments: one dedicated to customers who need to support product development, production and maintenance: the “Process-centric” segment and one for customers primarily focused on product design solutions: the “Design-centric” segment. Process-centric products are organized under the Company’s flagship CATIA brand for product creation (CAD/CAE), its DELMIA brand for digital manufacturing process management, its ENOVIA and SMARTEAM brands for virtual product synthesis, collaboration and product lifecycle integration. Spatial, a wholly-owned subsidiary of the Company, distributes and supports the Company’s CAA V5 development platform. CATIA, ENOVIA and SMARTEAM solutions are marketed, distributed, and supported worldwide by International Business Machines Corporation (IBM).
The Company’s Design-centric products and services are offered under the SolidWorks brand. SolidWorks solutions are marketed, distributed, and supported directly by the Company or through various independent sales representatives.
In addition to the development and sale of software products, the Company also provides services and obtains other revenue from its support of IBM marketing and distribution efforts, direct support to customers, technological consulting services, and hardware resale activities.
5
| DASSAULT SYSTEMES |
| CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AS OF JUNE, 30 2004 |
The consolidated financial statements of Dassault Systèmes and its subsidiaries (the “Company”) are prepared in accordance with generally accepted accounting principles in France, as defined by the January 3, 1985 French Law and by the 99-02 rule issued on June 22, 1999 by the “Comite de reglementation comptable”. The half-year consolidated financial statements were prepared using the same accounting principles as those used for the annual consolidated financial statements.
The Company also prepares separate financial statements in conformity with accounting principles generally accepted in the United States “US GAAP”. Differences between financial statements prepared under French GAAP and US GAAP are summarized in Note K.
The income tax provision is calculated using the estimated average annual effective tax rate applied to the pre-tax income for the period.
Pension costs for the period were estimated based on actuarial valuations performed in fiscal year 2002.
Changes in goodwill and other intangible assets during the six-month period ended June 30, 2004 are presented below:
| (in thousands of euro) | Goodwill | Software | Patents and Trademarks | Total | ||||||||||
| Gross value as of December 31, 2003 | 264,406 | 64,418 | 4,843 | 333,667 | ||||||||||
| Amortization for the year | (239,480 | ) | (58,911 | ) | (3,360 | ) | (301,751 | ) | ||||||
| Net value as of December 31, 2003 | 24,926 | 5,507 | 1,483 | 31,916 | ||||||||||
| Additions | - | 2,764 | 3 | 2,767 | ||||||||||
| Amortization for the semester | (7,970 | ) | (658 | ) | (1,306 | ) | (9,934 | ) | ||||||
| Exchange differences | 132 | 122 | 58 | 312 | ||||||||||
| Net value as of June 30, 2004 | 17,088 | 7,735 | 238 | 25,061 | ||||||||||
Goodwill is amortized over three years.
6
| DASSAULT SYSTEMES |
| CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AS OF JUNE, 30 2004 |
| (in thousands of euro) | Six months ended, | Year ended, | ||||||||||
| June 30, 2004 | December 31, 2003 | |||||||||||
| Investments | ||||||||||||
| ImpactXoft | 8,805 | 8,474 | ||||||||||
| MSC.Software | 5,759 | 5,542 | ||||||||||
| Other | 1,333 |
1,366 |
||||||||||
| Total investments | 15,897 | 15,382 | ||||||||||
| Loans receivable | Interest rate | |||||||||||
| RAND | 23,514 | 23,128 | 5.5% | |||||||||
| ImpactXoft | 8,227 | 3,959 | 5.0% | |||||||||
| Other | 2,538 |
1,742 |
5.0% | |||||||||
| Total loans receivable | 34,279 | 28,829 | ||||||||||
| Less: current portion | (5,274 | ) | (4,704 | ) | ||||||||
| Total loans and investments | 44,902 | 39,507 | ||||||||||
CATIA, ENOVIA and SMARTEAM products are marketed, distributed and supported principally by IBM, pursuant to a mutually, non-exclusive agreement that encompasses such activities.
Revenue obtained through the commercial relationship with IBM comprised 55% of the consolidated revenues of the Company for the period ended June 30, 2004 and 59% for the year ended December 31 2003.
IBM is under no contractual obligation to continue to actively market and distribute the Company’s products, and IBM may choose to discontinue such activities, without penalty, at its discretion. A decision by IBM to cease or substantially reduce its marketing and distribution efforts would likely cause a significant interruption in such activities which would adversely affect the financial position and operating results of the Company, at least in the short-term. However, management believes its long-term relationship with IBM is based upon mutual respect and success, and management is not aware of circumstances related to either party, which would cause the relationship to be terminated.
7
| DASSAULT SYSTEMES |
| CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AS OF JUNE, 30 2004 |
The balances of trade accounts receivable with IBM were €58,236 thousands and €101,986 thousands at June 30, 2004 and December 31, 2003, respectively, substantially all of which relates to software revenue. Management believes that the financial position of IBM mitigates the potential credit risk related to the concentration of its trade accounts receivable with IBM.
The Company licenses products for internal use to both IBM and Dassault Aviation, using commercial terms consistent with those granted to the Company’s other customers of similar size. The Company also provides services and support to Dassault Aviation. These services were provided at market conditions.
Changes to Dassault Systèmes share capital during the six-months period ended June 30, 2004 are as follows:
| Number of shares | Nominal value (in euro) |
Share capital (in euro) |
|||||||||
| Share capital issued as of January 1st, 2004 | 113,403,665 | 1.00 | 113,403,665 | ||||||||
| Number of shares issued in 2004 with reference to the stock option plan of June 28, 1996 | 3,770 | 1.00 | 3,770 | ||||||||
| Number of shares issued in 2004 with reference to the stock option plan of December 15, 1997 | 102,587 | 1.00 | 102,587 | ||||||||
| Number of shares issued in 2004 with reference to the stock option plan of January 28, 1998 | 1,000 | 1.00 | 1,000 | ||||||||
| Number of shares issued in 2004 with reference to the stock option plan of November 9, 1998 | 9,712 | 1.00 | 9,712 | ||||||||
| Number of shares issued in 2004 with reference to the stock option plan of September 15, 1999 | 575 | 1.00 | 575 | ||||||||
| Number of shares issued in 2004 with reference to the stock option plan of October 5, 2001 | 3,780 | 1.00 | 3,780 | ||||||||
| Number of shares issued in 2004 with reference to the stock option plan of May 28, 2002 | 437 | 1.00 | 437 | ||||||||
| Number of shares issued in 2004 with reference to the stock option plan of January 20, 2003 | 5,800 | 1.00 | 5,800 | ||||||||
| Number of shares cancelled | 0 | 1.00 | 0 | ||||||||
| Total | 113,531,326 | 1.00 | 113,531,326 | ||||||||
8
| DASSAULT SYSTEMES |
| CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AS OF JUNE, 30 2004 |
| Six months ended, | Six months ended, | Year ended, | |||||||||
| (in thousands of euro) | June 30, 2004 | June 30, 2003 | December 31, 2003 | ||||||||
| Interest income | 1,871 | 2,283 | 11,046 | ||||||||
| Interest expense | (544 | ) | (816 | ) | (2,672 | ) | |||||
| Foreign exchange losses, net | (1,257 | ) | (3,361 | ) | (7,491 | ) | |||||
| Other, net | 2,404 | 435 | 1,575 | ||||||||
| Financial revenue, net | 2,474 | (1,459 | ) | 2,458 | |||||||
The Company is operating in two reportable segments: the “Process-Centric” segment and the “Design-centric” segment. The “Process-centric” market serves companies seeking to optimize their industrial processes from the design stage through to manufacturing and maintenance, by doing away with all physical mock-ups. The “Design-centric” market serves companies seeking to improve specific design functions.
Data by operating segment is as follows:
| Six-months ended June 30, 2004 |
Six-months ended June 30, 2003 |
Fiscal year ended December 31, 2003 |
|||||||||||||||||||||||
| (in thousands of euro) |
|
Process centric |
|
Design centric |
|
Elim. |
|
Total |
Process centric |
|
Design centric |
|
Elim. |
Total |
Process centric |
|
Design centric |
|
Elim. |
Total |
|||||
| Revenues | 299,604 | 69,758 | (634 | ) | 368,728 | 289,432 | 61,879 | (588 | ) | 350,723 | 630,509 | 126,113 | (1,799 | ) | 754,823 | ||||||||||
| Operating income | 73,048 | 22,363 | 95,411 | 62,489 | 17,835 | 80,324 | 174,984 | 37,312 | 212,296 | ||||||||||||||||
| Net income |
|
40,083 |
|
16,109 |
|
|
|
56,192 |
24,188 |
|
10,913 |
|
|
|
35,101 |
91,528 |
|
22,570 |
|
|
|
114,098 |
|||
9
| DASSAULT SYSTEMES |
| CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AS OF JUNE, 30 2004 |
| rights | ownership | rights | ownership | |||
| Dassault Systèmes K. K. | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| Dassault Data Services | 95% | 95% | Consolidation | 95% | 95% | Consolidation |
| Dassault Systèmes of America Corp. and its subsidiaries | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| SolidWorks Corporation and its subsidiaries | 92.2% | 92.2% | Consolidation | 98.5% | 98.5% | Consolidation |
| Delmia Corp. and its subsidiaries | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| Enovia Corp. | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| Dassault Systemes Corp | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| Dassault Systemes AG | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| SmarTeam Corporation Ltd. and its subsidiaries | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| Dassault Systèmes Provence | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| Delmia GmbH | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| Dassault Systemes Canada Inc. | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| Safework Inc. | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| Spatial Corp. and its subsidiaries | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| Dassault Systemes Srl. | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| Structural Research and Analysis Corp. | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| Invention Machine Corp. | 20% | 20% | Equity method | 20% | 20% | Equity method |
| Dassault Systemes Inc. | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| Knowledge Technologies International Inc. | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| Knowledge Technologies International Limited | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| Knowledge Technologies International France | 100% | 100% | Consolidation | 100% | 100% | Consolidation |
| Dassault Systemes Switzerland | 98% | 98% | Consolidation | 98% | 98% | Consolidation |
| 3D PLM Software Ltd. | 30% | 30% | Equity method | 30% | 30% | Equity method |
| Athys SA | 80% | 80% | Consolidation | 80% | 80% | Consolidation |
10
| DASSAULT SYSTEMES |
| CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AS OF JUNE, 30 2004 |
Quarterly operating results varied significantly and are likely to vary significantly in the future, depending on factors such as foreign currency exchange rates; the number, timing and significance of product enhancements or new products by us or our competitors; our ability to develop, introduce, and market new and enhanced versions of our products; customer order deferrals in anticipation of new or enhanced products; the timing of revenue recognition under our marketing and sales agreement with IBM; general conditions in the product lifecycle management software market, computer industries and regional economies; and other factors and events. A significant portion of sales typically occurs in the last month of each quarter. Therefore, the timing of orders and shipments, including unexpected delays, or actions taken by competitors in reducing prices or introducing new products, could result in significant quarterly fluctuations in operating results.
As is typical in the product lifecycle management software market, we normally experience our highest licensing activity for the year in December. Software revenue, total revenue, operating income and net income have generally been highest in the fourth quarter of each year.
11
| DASSAULT SYSTEMES |
| CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AS OF JUNE, 30 2004 |
The differences are summarized below:
| (in thousands of euro) | Net Equity | Net Income | |||||||
| French GAAP | 633,807 | 56,192 | |||||||
| Available for sale securities (1) | 2,552 | 2,552 | |||||||
| Goodwill amortization (2) | 61,138 | 7,970 | |||||||
| Derivative instruments (3) | (2,170 | ) | - | ||||||
| Dilution gain on issuance of SolidWorks stock (4) | (3,633 | ) | (2,384 | ) | |||||
| Other | (89 | ) | (295 | ) | |||||
| As adjusted for U.S. GAAP | 691,605 | 64,035 | |||||||
| (1) | Under
French GAAP, investments in equity securities are stated at the lower of cost
or fair market value. Unrealized losses are recognized in income. Under US GAAP, in accordance with SFAS 115, available for sales securities are accounted for at fair market value, with the unrealized gains or losses being recorded in shareholders’ equity, except for the net effects of an other than temporary decline in fair value below the cost basis. |
| (2) | Under
French GAAP, goodwill is amortized over its useful life. Under SFAS 141 (“Business Combinations”) and SFAS 142 (“Goodwill and Other Intangible Assets”), goodwill for which the acquisition date is after June 30, 2001 for the year ended December 31, 2001 and all unamortized goodwill for the period ended December 31, 2002 is not amortized. Goodwill amortization is replaced by an annual impairment test implemented at the reporting unit level using fair value measurement. |
12
| DASSAULT SYSTEMES |
| CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AS OF JUNE, 30 2004 |
| (3) | Under
French GAAP, financial instruments designated as hedging instruments are not
recognized but are disclosed as off-balance sheet instruments. The fair market
value of a financial instrument is recognized when the hedged item is
recognized in earnings. Under US GAAP, SFAS 133 requires all derivatives instruments to be recorded on the balance sheet at fair value. Changes in the fair value are recognized in earnings except for certain hedging transactions, which are reported as a component of other comprehensive income. |
| This exception applies to the effective portion of hedges of forecasted transactions and hedges of a the foreign currency exposure of a net investment in a foreign operation. |
| (4) | Under
French GAAP, the issuance of new shares by SolidWorks, which decreased the
Company’s ownership, was recognized as a proceeds of stock. Accordingly, a
dilution gain was recognized in earnings. Under US GAAP, the gain is not recognized as reacquisition of shares is contemplated at the time of issuance. This dilution is accounted for as an equity transaction. |
In July 2004, Dassault Systèmes and Rand A Technology Corporation, operating as RAND Worldwide announced the creation of RAND North America, Inc. The new joint venture, 60% owned by Dassault Systèmes and 40% owned by RAND Worldwide, is focused on increasing sales of Dassault Systèmes Product Lifecycle Management (PLM) software in North America. In connection with this transaction, RAND Worldwide has transferred its North American PLM software sales business unit (approximately 55 employees) to RAND North America, Inc.
13
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DASSAULT SYSTEMES S.A. | ||
|---|---|---|
| Date: October 29, 2004 | By: | /s/ Thibault de Tersant |
| Name: | Thibault de Tersant | |
| Title: | Executive Vice President, Finance and Administration | |