Important Information About Non-GAAP References

PTC provides non-GAAP supplemental information to its financial results. Non-GAAP revenue, operating expenses, margin and EPS exclude the effect of purchase accounting on the fair value of the acquired deferred maintenance balance of MKS Inc., stock-based compensation expense, amortization of acquired intangible assets, acquisition-related expenses, restructuring charges, certain foreign currency transaction losses, and the related tax effects of the preceding items and any one-time tax items. Constant currency measures are calculated by multiplying results by the exchange rates in effect for the comparable periods in the prior year and assumes no change in tax rates. We use these non-GAAP measures, and we believe that they assist our investors, to make period-to-period comparisons of our operational performance because they provide a view of our operating results without items that are not, in our view, indicative of our core operating results. We believe that these non-GAAP measures help illustrate underlying trends in our business, and we use the measures to establish budgets and operational goals, communicated internally and externally, for managing our business and evaluating our performance. We believe that providing non-GAAP measures affords investors a view of our operating results that may be more easily compared to the results of peer companies. In addition, compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. However, non-GAAP information should not be construed as an alternative to GAAP information as the items excluded from the non-GAAP measures often have a material impact on PTC’s financial results. Management uses, and investors should consider, non-GAAP measures in conjunction with our GAAP results.

Forward-Looking Statements

Statements in this press release that are not historic facts, including statements about our fiscal 2012, fiscal 2013 and other future financial and growth expectations and anticipated tax rates, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks include the possibility that customers may not purchase our solutions when or at the rates we expect, the possibility that our pipeline of opportunities in North America may not generate the revenue we expect, the possibility that we will be unable to achieve planned services margins and operating margin improvements, the possibility that foreign currency exchange rates may vary from our expectations and thereby affect our reported revenue and expenses, and the possibility that we may not achieve the license, services or maintenance growth rates that we expect, which could result in a different mix of revenue between license, service and maintenance and could impact our EPS results. In addition, our assumptions concerning our future GAAP and non-GAAP effective income tax rates are based on estimates and other factors that could change, including the geographic mix of our revenue, expenses and profits and loans and cash repatriations from foreign subsidiaries. Other risks and uncertainties that could cause actual results to differ materially from those projected are detailed from time to time in reports we file with the Securities and Exchange Commission, including our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q.

PTC and all other PTC product names and logos are trademarks or registered trademarks of Parametric Technology Corporation or its subsidiaries in the United States and in other countries. All other companies referenced herein are trademarks or registered trademarks of their respective holders.

About PTC

PTC (Nasdaq: PMTC) enables manufacturers to achieve sustained product and service advantage. The company’s technology solutions help customers transform the way they create and service products across the entire product lifecycle – from conception and design to sourcing and service. Founded in 1985, PTC employs over 6,000 professionals serving more than 27,000 businesses in rapidly-evolving, globally distributed manufacturing industries worldwide. Get more information at www.ptc.com.

PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
							Three Months Ended												Nine Months Ended
							June 30, 2012						July 2, 2011						June 30, 2012						July 2, 2011
Revenue:
	License						$	83,829					$	81,431					$	247,696					$	231,119
	Service							227,154						210,352						682,688						596,405
Total revenue								310,983						291,783						930,384						827,524
Cost of revenue:
	Cost of license revenue (1)							7,634						7,617						23,117						20,129
	Cost of service revenue (1)							85,220						82,792						261,172						238,112
Total cost of revenue								92,854						90,409						284,289						258,241
Gross margin								218,129						201,374						646,095						569,283
Operating expenses:
	Sales and marketing (1)							94,706						89,106						283,446						254,790
	Research and development (1)							53,260						51,103						162,829						155,676
	General and administrative (1)							29,851						31,882						88,957						80,078
	Amortization of acquired intangible assets							5,103						4,753						15,444						12,873
	Restructuring charges							4,126						-						24,928						-
Total operating expenses								187,046						176,844						575,604						503,417
Operating income								31,083						24,530						70,491						65,866
	Other expense, net							(304	)					(6,271	)					(5,914	)					(8,979	)
Income before income taxes								30,779						18,259						64,577						56,887
	Provision for income taxes							7,884						2,733						15,990						9,084
Net income							$	22,895					$	15,526					$	48,587					$	47,803
Earnings per share:
	Basic						$	0.19					$	0.13					$	0.41					$	0.41
				Weighted average shares outstanding				119,042						118,214						118,584						117,622
	Diluted						$	0.19					$	0.13					$	0.40					$	0.39
				Weighted average shares outstanding				120,728						121,164						120,898						121,149
	(1	)		The amounts in the tables above include stock-based compensation as follows:
							Three Months Ended												Nine Months Ended
							June 30, 2012						July 2, 2011						June 30, 2012						July 2, 2011
	Cost of license revenue						$	4					$	4					$	16					$	10
	Cost of service revenue							2,050						1,857						6,734						5,577
	Sales and marketing							3,334						3,062						10,368						7,841
	Research and development							1,886						2,010						6,675						6,152
	General and administrative							6,057						4,627						15,612						12,878
				Total stock-based compensation			$	13,331					$	11,560					$	39,405					$	32,458

PARAMETRIC TECHNOLOGY CORPORATION
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)
					Three Months Ended												Nine Months Ended
					June 30, 2012						July 2, 2011						June 30, 2012						July 2, 2011
GAAP revenue					$	310,983					$	291,783					$	930,384					$	827,524
Fair value of acquired MKS deferred maintenance revenue						227						693						2,485						693
Non-GAAP revenue					$	311,210					$	292,476					$	932,869					$	828,217
GAAP gross margin					$	218,129					$	201,374					$	646,095					$	569,283
Fair value of acquired MKS deferred maintenance revenue						227						693						2,485						693
Stock-based compensation						2,054						1,861						6,750						5,587
Amortization of acquired intangible assets included in cost of license revenue						3,933						3,895						11,967						10,597
Non-GAAP gross margin					$	224,343					$	207,823					$	667,297					$	586,160
GAAP operating income					$	31,083					$	24,530					$	70,491					$	65,866
Fair value of acquired MKS deferred maintenance revenue						227						693						2,485						693
Stock-based compensation						13,331						11,560						39,405						32,458
Amortization of acquired intangible assets included in cost of license revenue						3,933						3,895						11,967						10,597
Amortization of acquired intangible assets						5,103						4,753						15,444						12,873
Acquisition-related charges included in general and administrative expenses						-						6,041						2,512						6,649
Restructuring charges						4,126						-						24,928						-
Non-GAAP operating income (2)					$	57,803					$	51,472					$	167,232					$	129,136
GAAP net income					$	22,895					$	15,526					$	48,587					$	47,803
Fair value of acquired MKS deferred maintenance revenue						227						693						2,485						693
Stock-based compensation						13,331						11,560						39,405						32,458
Amortization of acquired intangible assets included in cost of license revenue						3,933						3,895						11,967						10,597
Amortization of acquired intangible assets						5,103						4,753						15,444						12,873
Acquisition-related charges included in general and administrative expenses						-						6,041						2,512						6,649
Restructuring charges						4,126						-						24,928						-
Non-operating foreign currency transaction losses (3)						-						4,385						761						5,107
Income tax adjustments (4)						(5,338	)					(8,526	)					(23,428	)					(20,184	)
Non-GAAP net income					$	44,277					$	38,327					$	122,661					$	95,996
GAAP diluted earnings per share					$	0.19					$	0.13					$	0.40					$	0.39
Stock-based compensation						0.11						0.10						0.33						0.27
Amortization of acquired intangibles						0.07						0.07						0.23						0.19
Acquisition-related charge						-						0.05						0.02						0.05
Restructuring charges						0.03						-						0.21						-
Non-operating foreign currency transaction losses						-						0.04						0.01						0.04
Income tax adjustments						(0.04	)					(0.07	)					(0.19	)					(0.17	)
All other items identified above						-						0.01						0.02						0.01
Non-GAAP diluted earnings per share					$	0.37					$	0.32					$	1.01					$	0.79
(2) Operating margin impact of non-GAAP adjustments:
					Three Months Ended												Nine Months Ended
					June 30, 2012						July 2, 2011						June 30, 2012						July 2, 2011
GAAP operating margin						10.0	%					8.4	%					7.6	%					8.0	%
Fair value of deferred maintenance revenue						0.1	%					0.2	%					0.3	%					0.1	%
Stock-based compensation						4.3	%					4.0	%					4.2	%					3.9	%
Amortization of acquired intangibles						2.9	%					3.0	%					2.9	%					2.8	%
Acquisition-related charges						0.0	%					2.1	%					0.3	%					0.8	%
Restructuring charges						1.3	%					0.0	%					2.7	%					0.0	%
Non-GAAP operating margin						18.6	%					17.6	%					17.9	%					15.6	%

(3)			In the first quarter of 2012 we recorded $0.8 million of foreign currency transaction losses related to MKS legal entity mergers completed during the quarter. In the third quarter of 2011, in connection with our acquisition of MKS, we had entered into forward contracts to reduce our foreign currency exposure related to changes in the Canadian to U.S. Dollar exchange rate from the time we entered into the agreement in early April to acquire MKS (the purchase price was in Canadian Dollars) and the closing date which occurred on May 31, 2011. We realized foreign currency losses of $4.4 million recorded as other expense related to the acquisition. In the first quarter of 2011 we recorded $0.7 million of foreign currency losses related to a previously announced litigation settlement in Japan.
(4)			Reflects the tax effects of non-GAAP adjustments for the three and nine months ended June 30, 2012 and July 2, 2011, which are calculated by applying the applicable tax rate by jurisdiction to the non-GAAP adjustments listed above, as well as one-time non-cash charges including (i) $3.3 million, net, in the third quarter of 2012, primarily related to a $4.2 million charge as a result of acquired legal entity integration activities, and (ii) a $1.4 million charge in the first quarter of 2012 related to the impact of a reduction in the statutory tax rate in Japan on deferred tax assets from a litigation settlement.

PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
			June 30, 2012					September 30, 2011
ASSETS
Cash and cash equivalents			$	238,047				$	167,878
Accounts receivable, net				203,261					230,220
Property and equipment, net				61,849					62,569
Goodwill and acquired intangible assets, net				799,741					835,411
Other assets				308,563					333,604
Total assets			$	1,611,461				$	1,629,682
LIABILITIES AND STOCKHOLDERS' EQUITY
Deferred revenue			$	323,796				$	294,324
Borrowings under revolving credit facility				140,000					200,000
Other liabilities				284,662					312,668
Stockholders' equity				863,003					822,690
Total liabilities and stockholders' equity			$	1,611,461				$	1,629,682

PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
					Three Months Ended												Nine Months Ended
					June 30, 2012						July 2, 2011						June 30, 2012						July 2, 2011
Cash flows from operating activities:
Net income					$	22,895					$	15,526					$	48,587					$	47,803
Stock-based compensation						13,331						11,560						39,405						32,458
Depreciation and amortization						16,867						15,827						50,152						44,547
Accounts receivable						3,084						2,160						41,782						18,059
Accounts payable and accruals (5)						7,576						13,563						(6,292	)					(11,754	)
Deferred revenue						18,746						9,656						52,228						36,825
Litigation settlement						-						-						-						(52,129	)
Income taxes						(16,210	)					(8,657	)					(28,111	)					(17,855	)
Excess tax benefits from stock-based awards						-						(1,777	)					(453	)					(2,307	)
Other						(2,279	)					(9,425	)					(254	)					(16,976	)
Net cash provided by operating activities (6)						64,010						48,433						197,044						78,671
Capital expenditures						(5,882	)					(6,735	)					(22,506	)					(18,295	)
Acquisitions of businesses, net of cash acquired (7)						-						(265,153	)					(1,170	)					(265,153	)
Proceeds (payments) on debt (7)						(20,000	)					250,000						(60,000	)					250,000
Proceeds from issuance of common stock						1,192						6,287						15,315						22,261
Payments of withholding taxes in connection with vesting of stock-based awards						(1,428	)					(96	)					(20,893	)					(22,052	)
Repurchases of common stock						(19,970	)					(39,947	)					(34,953	)					(39,947	)
Excess tax benefits from stock-based awards						-						1,777						453						2,307
Foreign exchange impact on cash						(3,982	)					6,681						(3,121	)					12,706
Net change in cash and cash equivalents						13,940						1,247						70,169						20,498
Cash and cash equivalents, beginning of period						224,107						259,504						167,878						240,253
Cash and cash equivalents, end of period					$	238,047					$	260,751					$	238,047					$	260,751

(5)			Includes accounts payable, accrued expenses, and accrued compensation and benefits
(6)			The third quarter of 2011 cash flow from operations includes cash outflows of approximately $10 million for PTC and MKS acquisition-related costs paid after the acquisition date.
(7)			We acquired MKS on May 31, 2011, for $265.2 million (net of cash acquired) which was partially funded with $250 million in borrowings under our revolving credit facility.

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