Elsag Bailey Process Automation N.V. Reports Fourth Quarter and 1997 Results.AMSTERDAM, the Netherlands--(BUSINESS WIRE)--March 3, 1998-- Elsag Bailey Process Automation N.V. (NYSE NYSE See: New York Stock Exchange :EBY EBY Ente Binacional Yaciretá (Argentina-Paraguay) ) today announced financial results for the fourth quarter and full-year ending December 31, 1997. OPERATING RESULTS Net income recorded by Elsag Bailey in the fourth quarter applicable to common shareholders, before non-recurring charges, was $14.3 million, or $0.38 per share, assuming conversion of the preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. . On the same basis, this quarter's net income compares to $24.3 million or $0.66 per share in the fourth quarter 1996. Non-recurring charges taken this quarter were $59.6 million, and the tax benefit associated with these charges, was $19.0 million. The net tax benefit includes a cumulative catch-up effect The catch-up effect, also called the theory of convergence, states that poorer economies tend to grow faster than richer economies. Therefore, all economies will eventually converge in terms of per capita income. , and the recording of a tax benefit relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of technology, offset by non-deductible losses. The non-recurring charges were for the impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. in book value of capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. technology and software, principally as a result of the release of new enhanced products including the Company's Symphony(TM) Enterprise Management and Control System. Charges were also taken for employee severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and related expenses relating to the streamlining of operations in Germany, the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , and certain European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. locations. The Company also initiated further rationalization rationalization, in psychology: see defense mechanism. of the workforce at a manufacturing site in Germany this quarter, however the related pre-tax charge of approximately $7 million will be recorded in the first quarter of 1998, consistent with final agreements reached with labor organizations. After non-recurring charges and dividends on preferred shares, net loss this quarter was $30.5 million, or $1.04 per share, calculated on 29,201,981 shares. This included a $28.4 million tax benefit resulting primarily from the non-recurring charges and the final tax calculation for the full year. On the same basis, this compares to a 1996 fourth quarter profit of $4.6 million, or $0.16 per share. Revenues were $400 million in the fourth quarter, compared to revenues of $427 million in the fourth quarter of 1996. Bookings were $418 million, compared to bookings of $443 million one year ago. Currency translation negatively impacted revenues and bookings in the 1997 fourth quarter by approximately 9 percent. Gross margin, before non-recurring charges, was 34.2 percent of revenues, compared to 35.5 percent recorded for the fourth quarter of 1996. Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: , before amortization and non-recurring charges, was 4.6 percent, down from 9.0 percent one year ago. Lastly, earnings before interest, taxes, depreciation, and amortization Earnings before interest, taxes, depreciation, and amortization (EBITDA) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) were $34.5 million, before non-recurring costs, as compared to $52.1 million in the same quarter one year ago. FULL-YEAR SUMMARY For the twelve months ending December 31, 1997, Elsag Bailey's net income applicable to common shareholders, before non-recurring charges, was $36.3 million, compared to $56.4 million last year. Earnings per share before non-recurring charges and assuming conversion of the preferred shares, was $0.95, compared to $1.53 in 1996. Non-recurring charges taken during 1997 were $79.4 million before tax, and $53.6 million after tax. After the non-recurring charges and dividends on preferred shares, net loss applicable to common shareholders, was $33.3 million, or $1.14 per share, calculated on 29,201,981 shares. This compares to a net loss of $147.3 million, or $5.28 per share, on the same basis last year. Elsag Bailey's revenues were $1,513 million in 1997, compared to $1,606 million in 1996. Bookings were $1,486 million, compared to $1,626 million last year. Currency translation negatively impacted revenues and bookings for the year by approximately 8 percent. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. , before amortization and non-recurring charges, was $83.0 million, compared to $129.2 million in 1996. Earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
Vincenzo Cannatelli, Managing Director and Chief Executive Officer commented on the Company's 1997 performance, stating, "Elsag Bailey is gradually but successfully emerging from a very challenging period. We faced a number of difficult issues this year--both internal and external--and I am pleased to say that our response to these challenges has made us a stronger and more competitive company. "Organizationally, further streamlining of Hartmann & Braun required major restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). efforts throughout 1997. Economically, we experienced continued weakness in some of our key domestic markets, and the effect of currency translation reduced our top-line growth by nearly $300 million since the acquisition of Hartmann & Braun. "Given these factors," Mr. Cannatelli stated, "I believe we have shaped Elsag Bailey into a more efficient, more customer responsive organization, setting the stage for improvements in profitability and shareholder value. We have created three distinct global business units to market our product lines for greater efficiencies and improved service. We successfully released new components of our Symphony(TM) Enterprise Management and Control System, and new analytical analytical, analytic pertaining to or emanating from analysis. analytical control control of confounding by analysis of the results of a trial or test. and instrumentation instrumentation, in music: see orchestra and orchestration. instrumentation In technology, the development and use of precise measuring, analysis, and control equipment. products. At the same time, we took aggressive actions to further reduce our cost structure, and we generated more than $31 million in cash proceeds from divestitures of non-core or underperforming assets underperforming asset An asset that earns a lower rate of return than it would be capable of earning if it were properly used. A firm with underperforming assets is a prime target for takeover. Compare nonperforming asset. . "Looking back on the performance of our three key business units in 1997, our Systems market showed continued strong sales growth in the Americas within a very competitive, price driven environment that impacted margins. Germany and France continued their weak market performance, although local signs of economic improvement are encouraging. The remainder of Europe showed a solid performance. In the Asia-Pacific region, Japan remained weak, while our market in China and the rest of the region continued to show growth. Overall, we continue to focus on improving our margins in Systems. We are very pleased with the acceptance from key customers of our new systems technologies, reinforcing our leading position in key domestic markets. "Our Instrumentation unit, which offers one of the broadest product lines in our industry, showed growth in the Americas and most of Europe, but again with weakness in Germany. Margins remained solid, as we were able to offset price pressures by continued reductions in our operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . "Our Analytical unit, which enjoys a worldwide leadership position, continues to show good margins and overall results despite a weak German market and delays in a few big orders. We remain confident in our ability to further strengthen our position and pursue additional market opportunities, thanks to the stabilization Stabilization The action undertakes a country when it buys and sells its own currency to protect its exchange value. Actions registered competitive traders undertake by on the NYSE to meet the exchange requirement that 75% of their traded be stabilizing, meaning that sell orders of the Advanced Optima(TM) product line, the broad acceptance of our FTIR FTIR Fourier Transform Infrared (spectroscopy) FTIR Frustrated Total Internal Reflection FTIR Fourier Transfer Ir technology, and the recent successful introduction of Advance Maxum(TM) that, in our opinion, represents the most significant advance in process chromatography chromatography (krō'mətŏg`rəfē), resolution of a chemical mixture into its component compounds by passing it through a system that retards each compound to a varying degree; a system capable of accomplishing this is called a in the last thirty years." --- The Company highlighted that its net debt level at December 31, 1997 was $603.5 million, a substantial reduction from $680.7 million at the end of 1996. This reduction in debt came as a result of improved management of working capital, the divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of non-core or underperforming assets, as well as the impact of currency translation. These divestitures included the sale of Fluid Data, Inc., based in Angelton, Texas; an Ultraviolet Disinfection Ultraviolet disinfection is a form of wastewater treatment. It is commonly used in garden pond filtration systems to kill algae. Large scale urban UV wastewater treatment is performed in cities such as Edmonton, Alberta. unit, based in Ontario, Canada; and office buildings in Pennsylvania Pennsylvania (pĕnsəlvā`nyə), one of the Middle Atlantic states of the United States. It is bordered by New Jersey, across the Delaware River (E), Delaware (SE), Maryland (S), West Virginia (SW), Ohio (W), and Lake Erie and New York , The Netherlands, and South Africa South Africa, Afrikaans Suid-Afrika, officially Republic of South Africa, republic (2005 est. pop. 44,344,000), 471,442 sq mi (1,221,037 sq km), S Africa. . --- Elsag Bailey's fourth quarter impairment of existing technology follows the release of the Company's flagship Symphony(TM) Enterprise Management and Control System. A fourth quarter charge of $38.6 million will result in an annual reduction of approximately $10.0 million in amortization expense for the next few years. In connection with the write-off of intangibles, the Company recognized in the fourth quarter the full recording of the tax benefit associated with a certain European tax ruling, which was previously amortized over the period 1994-1999. This benefit would have amounted to an $8.6 million annual tax credit through 1999. Both the anticipation of tax benefits from European rulings, and a more conservative recognition of the tax credit from losses, will result in an increased tax charge in 1998. --- The Company's majority shareholder, Finmeccanica, S.p.A., has recently selected an investment bank to advise in reviewing its options relative to the disposition of its holdings in Elsag Bailey. As a result, the Company has determined that it was in its best interest to postpone post·pone tr.v. post·poned, post·pon·ing, post·pones 1. To delay until a future time; put off. See Synonyms at defer1. 2. To place after in importance; subordinate. its earlier decision to proceed with the refinancing Refinancing An extension and/or increase in amount of existing debt. of its long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. through access to public debt markets and the issue of new bank debt, until later in the year. As a result of this decision, the existing long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. credit facility (Bank of America
Bank of America (NYSE: BAC TYO: 8648 ) is the largest commercial bank in the United States in terms of deposits, and the largest company of its kind in the world. facility) has been amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. and will terminate on January 14, 1999. A new committed facility Committed Facility A credit facility whereby terms and conditions are clearly defined by the lending institution and imposed upon the borrowing company. Notes: In committed facilities, the borrowing companies must meet specific requirements set forth by the lending for the amount of $150 million has also been finalized See finalization. with Cofiri (a financial institution affiliated with Finmeccanica), the proceeds of which were drawn down on February 27, 1998, and utilized to reduce the outstanding commitment on the Bank of America facility. This new facility will terminate on April 30, 1999. Mr. Cannatelli commented, "These new and revised facilities provide adequate committed funds to finance the Company's working capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. through 1998, and allow us sufficient time to arrange new permanent long-term financing Long-term financing Liabilities repayable in more than one year plus equity. at the best possible conditions for our shareholders." --- The Company announced the promotion of Antonio Cavo to the position of Group Executive Vice President. Mr. Cavo has recently served as Group Vice President responsible for Europe, Africa, and the Middle East. In his 12 years with the Company, he has also had responsibility for North and South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. , and the Asia-Pacific region. Carlo Ferro has been promoted to the position of Vice President and Group Controller, bringing all financial responsibilities under his leadership, other than Treasury, which will remain the responsibility of Jean-Paul Marie, Vice President, Group Treasury. In preparation for the expected European common currency and the Company's own logistics objectives, Elsag Bailey has also organized its management team to serve a more unified European region. Wolf Klinz Wolf Klinz (born on 13 September 1941 in Wien) is a German politician and Member of the European Parliament with the Free Democratic Party of Germany, part of the Alliance of Liberals and Democrats for Europe and sits on the European Parliament's Committee on Economic and Monetary , Group Vice President, has broadened his role for a newly defined Central/Eastern Europe region, to include Germany, Switzerland, Austria, and Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. . The remainder of Europe, Africa, and the Middle East has also been organized under Area Vice Presidents to further integrate these regions and pursue the Company's objectives to improve profitability. In discussing the outlook for 1998, Mr. Cannatelli concluded, "We expect that our actions to reduce costs and the continued focus on new technologies and new products will improve our profitability in 1998, despite a continued weak energy market in Germany, and unfavorable exchange rates at least during the first part of the year. In spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite recent concerns about the Asian markets, so far the balance of our business in China and Japan leads us overall to be less exposed to the economy in the region, although we might experience some delays in a few major projects. Our management team is fully committed (Law) committed to prison for trial, in distinction from being detained for examination. See also: Fully to shareholder value creation through increased profitability, cash flow, and long-term growth. The award of several big contracts to some of our business units in the past few months has increased our confidence in a positive outlook for Elsag Bailey in 1998." One of the world's leading process automation companies, Elsag Bailey Process Automation N.V., incorporated in the Netherlands, has nearly tripled its revenues in three years by aggressively expanding its global markets through approximately 11,500 employees in over 30 countries. Elsag Bailey's computer and electrical products--control systems, instrumentation products, and analytical devices--keep its customers on the cutting edge of productivity. Elsag Bailey's global customers are among the leading names in the process industries including electric utilities, oil and gas, chemicals and pharmaceuticals, pulp and paper, water and wastewater, metals and ceramics ceramics (sərăm`ĭks), materials made of nonmetallic minerals that have been permanently hardened by firing at a high temperature, or objects made of such materials. , and other high tech companies. For copies of additional press releases or quarterly reports, call Elsag Bailey's Fax-on-Demand service at 1-888-329-2311, or visit the Company's web site at www.ebpa.com. Requests for information can also be made via e-mail at investorinfo@bailey.com. This document contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. subject to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. created by the Securities Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. Reform Act of 1995. These include, without limitation, the statements related to Elsag Bailey's expected earnings, results and liquidity needs, anticipated conditions in its markets, the effect of foreign currency fluctuations relative to the U.S. dollar, the effect and success of new system and product introductions, the ability of the Company to successfully and timely complete its integration plans and major projects, the ability of the Company to generate cash, secure adequate financing, reduce debt and grow, improve profitability and shareholder value, and any other statements concerning matters that are not historical facts. Actual results and performance could differ materially from those expressed in or implied by these forward-looking statements as a result of a number of known and unknown risks. These and other risks and uncertainties affecting Elsag Bailey are discussed in greater detail in Elsag Bailey's Form 20-F filed with the United States Securities and Exchange Commission for the year ended December 1996. -0-
Elsag Bailey Process Automation N.V.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(Amounts in thousands, except share data)
For the quarter ended For the twelve months ended
___________________________ ___________________________
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
___________ ____________ __________ __________
Revenues $ 399,830 $ 427,464 $1,513,237 $1,606,100
Cost of
sales 274,947 279,644 1,008,386 1,148,840
___________ ____________ __________ __________
Gross profit 124,883 147,820 504,851 457,260
Selling,
general and
administrative
expenses 105,630 107,120 382,954 413,214
Research,
development
and
engineering
expenses 22,093 22,360 80,107 141,335
Amortization
of intangibles 47,103 10,816 76,596 80,396
Royalty income
affiliates --- (1,965) --- (7,117)
__________ ___________ _________ _________
Operating
income (loss) (49,943) 9,489 (34,806) (170,568)
Interest
expense 10,233 10,846 36,705 37,341
Other
(income) (5,720) (6,556) (14,650) (10,877)
__________ ___________ _________ _________
Income
(loss) before
income taxes,
minority
interest and
extraordinary
item (54,456) 5,199 (56,861) (197,032)
Income tax
(benefit) (28,376) (3,845) (38,719) (66,528)
Minority
interest in
net income
of subsidiaries 207 118 (850) ---
Minority
interest -
dividends
on preferred
securities 4,221 4,345 15,994 16,084
__________ ___________ ___________ _________
Income (loss)
before
extraordinary
item (30,508) 4,581 (33,286) (146,588)
Extraordinary
item -
write-off
deferred
financing costs --- --- --- (718)
__________ ___________ ___________ __________
Net income
(loss) $ (30,508) $ 4,581 $ (33,286) $ (147,306)
___________ ___________ ___________ __________
___________ ___________ ___________ __________
Net income
(loss) per
share:
Basic $ (1.04) $ 0.16 $ (1.14) $ (5.28)
____________ ___________ ___________ __________
____________ ___________ ___________ __________
Assuming
conversion
of the
preferred
shares (1) $ (0.69) $ 0.24 $ (0.45) $ (3.56)
____________ ___________ ___________ _________
____________ ___________ ___________ _________
Weighted
average
number of
shares
outstanding:
Basic 29,201,981 27,886,000 29,201,981 27,886,000
____________ ___________ ___________ __________
____________ ___________ ___________ __________
Assuming
conversion
of the
preferred
shares (1) 38,140,000 36,840,000 38,140,000 36,840,000
____________ ___________ ___________ ___________
____________ ___________ ___________ ___________
The way in which the income statement is impacted by non-recurring
charges taken this quarter is specifically outlined below. These
charges are associated with restructuring in 1997, the acquisitions
of Hartmann & Braun and the Italian Licensee in 1996, and related
expenses:
Non-recurring charges
_____________________
For the quarter ended For the twelve months ended
_______________________ ___________________________
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
________ ________ ________ ________
Cost of sales $ 11,853 $ 3,740 $ 20,464 $128,723
Selling, general
and administrative
expenses 7,073 13,045 15,318 27,511
Research, development
and engineering
expenses 2,377 1,475 5,399 63,143
Amortization of
intangibles 38,246 354 38,246 38,351
Other expenses --- 79 --- 759
________ ________ ________ ________
Loss before income
taxes, minority
interest and
extraordinary item $ 59,549 $ 18,693 $ 79,427 $258,487
________ ________ ________ ________
________ ________ ________ ________
The non-recurring charges for the full year and fourth quarter 1997
are for employee severance expenses, the integration of Hartmann &
Braun, and the write-off of intangibles ($38,246). The fourth quarter
1996 charges of $18,693 include employee related costs, closure of
facilities, and the write-off of intangibles. The twelve months 1996
charges of $258,487 include employee related costs, closure of
facilities, inventory step-up ($108,592), the write-off of in-process
research and development ($56,752), and the write-off of intangibles
($38,351).
(1) Preferred shares are anti-dilutive.
Elsag Bailey Process Automation N.V.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Amounts in thousands)
December 31, 1997 December 31, 1996
_________________ _________________
Cash and cash equivalents $ 15,179 $ 21,241
Accounts receivable 326,630 404,535
Costs in excess of billings
on uncompleted contracts 147,571 169,006
Inventory 263,069 289,492
Other assets 1,185,704 1,300,420
__________ __________
Total assets $1,938,153 $2,184,694
__________ __________
__________ __________
Total bank indebtedness (1) $ 618,703 $ 701,959
Billings in excess of costs on
uncompleted contracts 56,996 93,431
Other liabilities 767,193 841,124
Minority equity 9,208 10,586
Minority equity - obligated
preferred securities of
grantor trust 279,067 278,858
Total shareholders' equity 206,986 258,736
__________ __________
Total liabilities and
shareholders' equity $1,938,153 $2,184,694
__________ __________
__________ __________
(1) As of March 3, the Total Bank Indebtedness classification is
as follows:
Notes payable $ 58,628 $ 40,001
Current maturity of
long-term debt 39,107 82,886
Long-term debt 520,968 579,072
__________ __________
$ 618,703 $ 701,959
The credit agreements with Bank of America and Cofiri (February 28, 1998) include change of control provisions, which might result in increasing the current maturity of long-term debt as of December 31, 1997 to $545.1 million in the event a change in control becomes probable; in any event these facilities become current at March 25, 1998 by their very terms. CONTACT: Elsag Bailey Process Automation Christopher M. Farage, Ph.D. 440/585-8675 |
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