UNOVA Reports First Quarter Results
23 April 1999
UNOVA Reports First Quarter Results
BEVERLY HILLS, Calif.--April 22, 1999--UNOVA, Inc. today announced results for the first quarter of 1999, with revenues for the three-month period growing to $493.4 million, compared to $333.4 million in the same quarter a year ago.This year's first quarter results from operations included revenues of the Company's Cincinnati Machine division, which was acquired in October 1998.
As expected, earnings per share (EPS) of $0.06 were below last year's first quarter EPS of $0.14.
"The anticipated earnings decline in the first quarter was a result of several factors: greater interest expense due to increased debt levels as a result of acquisitions, higher levels of product introduction costs, and operating expenses related to the implementation of a new enterprise resource planning (ERP) system at our Intermec Technologies' headquarters and main production facility," said Alton J. Brann, Chairman and CEO of UNOVA. "While some of the ERP transition costs will carry over into the second quarter, the affected operations have achieved month-to-month improvements and have begun to recover from the manufacturing delays experienced earlier in the quarter.
"Now, as we begin to streamline manufacturing scheduling and customer deliveries, we can concentrate on cost reductions, improved support of our direct and indirect distribution organizations, and on more aggressive sales efforts," continued Brann.
The first quarter also saw early progress on Intermec's new radio frequency identification (RFID) technology, which has the potential to become an important growth driver for the ADS segment over the next two to three years. Initial products were introduced for use in pilot installations and an important distribution alliance was signed.
"In our Industrial Automation Systems (IAS) segment, we experienced another good bookings quarter by our automotive industry-oriented divisions, which allowed us to maintain our segment backlog," added Brann. "IAS results in the first quarter were impacted by product introduction expenses in Europe, the inclusion of Cincinnati Machine, and customer project changes on major North American programs during the fourth quarter of 1998. Progress on these programs has stabilized and they are now advancing at their planned rate for this year."
Automated Data Systems (ADS)
ADS revenues of $208.0 million, compared to $186.9 million in the same quarter a year ago, were slightly lower than expected as the startup of the new ERP system at Intermec's main manufacturing facility caused production scheduling problems, impacting segment profitability. Operating profits therefore declined to $7.7 million in the first quarter of 1999 from the $11.6 million reported in the comparable 1998 quarter. As manufacturing output and scheduling continue to stabilize, Intermec will be able to concentrate on its cost structure and top-line growth.
A separate sales organization was established in February for Intermec's Identification Systems Division. The organization is expected to add incremental revenues as it begins to sell the Company's printers, scanners and media supplies as "point products" to customers who do not need complete automated data collection (ADC) solutions.
Market acceptance of the Company's ADC solutions remained positive and major product introductions, slated to begin in the second quarter, should further enhance the segment's competitive position. Many of these new products will be presented to the Company's channel partners at a large customer/partner conference this month.
During the quarter Intermec introduced its first generation of RFID products to the ADC market. The Company also signed an alliance agreement with Sensormatic Electronics to develop smart, integrated electronic security and RFID systems. Sensormatic will market this technology to its global electronic article surveillance (EAS) markets throughout the retail industry.
First RFID product sets for pilot installations will be delivered by mid-year, including tags, readers, software and support. As the only company in the market offering complete RFID solutions, Intermec enables customers to seamlessly integrate this new technology with their ADC and wireless network installations. While these developments will not immediately result in significant revenues and profits, they further establish UNOVA as a leading competitor in the emerging RFID technology market.
Early in the quarter, Intermec co-hosted a software conference in cooperation with Microsoft to introduce customers, Value Added Resellers (VARs) and systems integrators to Intermec's new generation of Windows(R) CE-based wireless mobile computers. The sold-out conference attracted more than 300 participants, many of whom plan to accelerate applications software developments for Intermec's new platform. This should allow Intermec's channel partners to immediately offer applications for multiple industries as the new products are rolled out in the second and third quarters of this year.
Industrial Automation Systems (IAS)
The IAS segment reported revenues of $285.4 million and operating profit of $13.9 million for the first three months of 1999. This compares to $146.5 million in revenues and $11.1 million operating profit for the same period a year ago. Profit margins in the 1999 first quarter were impacted by the performance of Cincinnati Machine, which was included in this year's quarterly results; delays on a number of major projects in North America caused by late customer changes in the fourth quarter of 1998; and by launch expenses of a new product line at the Company's German division.
Even excluding `Cincinnati', revenues for the quarter increased by more than 30 percent as the Company began to benefit from its strong backlog position in the manufacturing systems business with the automotive industry. The segment's outlook for systems business remains solid and the automotive-oriented divisions continue to experience strong bookings, primarily from their North American customers. However, the market environment for the stand-alone machine tool activities of Cincinnati Machine has significantly weakened since the Company acquired those operations in fall of 1998, a trend that has accelerated during the first quarter of 1999. As a result, management no longer expects `Cincinnati' to be accretive to the Company's consolidated earnings this year. Cincinnati Machine's management is right-sizing its operations and introducing lean manufacturing methods to significantly reduce break-even points.
Bookings of many smaller systems orders in the first quarter of this year helped to maintain IAS backlog near the year-end record level of approximately $700 million. Based on the potential of current simultaneous engineering programs at the machining systems divisions, it is expected that the order mix will shift toward larger project contracts later this year, solidifying the segment outlook for the year 2000.
Headquartered in Southern California, UNOVA is a $2 billion industrial technologies company. It has global leadership positions in manufacturing systems and machine tools for the automotive, aerospace and general metalworking industries and for automated data collection, mobile computing, wireless network and radio frequency identification systems for industrial, distribution, transportation, logistics and government applications.
Certain forward-looking statements in this release (as defined by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934) relate to matters that are not historical facts. They include, but are not limited to, statements about the demand for the Company's products and services, the Company's ability to profitably exploit new technologies acquired or developed, and the Company's ability to realize its intentions with respect to the future performance of operations being acquired. Such forward-looking statements involve and are dependent upon certain risks and uncertainties. These include, but are not limited to, the following which are beyond the Company's control: the presence of competitors with greater financial and other resources; technological changes and developments; regulatory uncertainties; worldwide political stability and economic conditions; operating risks associated with international activities; the risk that the Company's due diligence procedures may have failed to reveal undisclosed material information concerning acquired operations; and other risks and uncertainties described more fully in the Company's filings with the Securities and Exchange Commission.
--------------------
NEW HEADQUARTERS' ADDRESS - EFFECTIVE MAY 10, 1999:
21900 Burbank Boulevard
Woodland Hills, CA 91367-7418
(818) 992-3000 (phone)
(818) 992-2848 (fax)
e-mail: invest@unova.com
http://www.unova.com
--------------------
The Corporation is hosting a conference call
Friday, April 23, at 9:30 a.m. (EDT),
6:30 a.m. (PDT) to discuss First Quarter results.
To participate, please call (310) 888-2583
for call-in instructions.
--------------------
UNOVA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Preliminary)
Three Months Ended March 31, 1999 and 1998
(thousands of dollars, except per share amounts)
Three Months Three Months
Ended Ended
March 31, March 31,
1999 1998
------------ -------------
Sales and Service Revenues $ 493,400 $ 333,405
------------ -------------
Costs and Expenses
Cost of sales 352,309 218,299
Selling, general and administrative 109,668 85,746
Depreciation and amortization 16,583 11,640
Interest, net 9,082 4,437
------------ -------------
Total Costs and Expenses 487,642 320,122
------------ -------------
Earnings before Taxes on Income 5,758 13,283
Taxes on Income (2,303) (5,526)
------------- -------------
Net Earnings $ 3,455 $ 7,757
============ =============
Basic and Diluted Earnings per Share $ 0.06 $ 0.14
============ =============
Shares Used in Computing
Basic Earnings per Share 54,943,091 54,510,193
Shares Used in Computing
Diluted Earnings per Share 54,943,988 54,512,124
UNOVA, INC.
CONSOLIDATED BALANCE SHEETS
(Preliminary)
(thousands of dollars)
March 31, December 31,
1999 1998
----------- ------------
Assets
Current Assets
Cash and cash equivalents $ 14,502 $ 17,708
Accounts receivable, net 666,220 662,885
Inventories, net of progress billings 333,719 336,005
Deferred tax assets 145,780 141,773
Other current assets 20,350 21,129
----------- -----------
Total Current Assets 1,180,571 1,179,500
Property, Plant and Equipment, Net 286,049 286,171
Goodwill and Other Intangibles, Net 396,027 400,164
Other Assets 120,476 113,381
----------- -----------
Total Assets $1,983,123 $1,979,216
=========== ===========
Liabilities and Shareholders' Investment
Current Liabilities
Accounts payable and accrued expenses $ 391,352 $ 456,812
Payroll and related expenses 87,292 93,199
Notes payable and current
portion of long-term obligations 303,329 237,276
----------- -----------
Total Current Liabilities 781,973 787,287
----------- -----------
Long-term Obligations 366,396 366,487
----------- -----------
Deferred Taxes and
Other Long-term Liabilities 133,896 124,017
----------- -----------
Shareholders' Investment
Common stock 549 549
Additional paid-in capital 645,143 645,054
Retained earnings 65,127 61,672
Accumulated other comprehensive
income - cumulative currency
translation adjustment (9,961) (5,850)
----------- -----------
Total Shareholders' Investment 700,858 701,425
----------- -----------
Total Liabilities and
Shareholders' Investment $1,983,123 $1,979,216
=========== ===========
UNOVA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Preliminary)
Three Months Ended March 31, 1999
(thousands of dollars)
Cash and Cash Equivalents at Beginning of Period $ 17,708
----------
Cash Flows from Operating Activities:
Net earnings 3,455
Adjustments to reconcile net
earnings to net cash used in
operating activities:
Depreciation and amortization 16,583
Changes in working capital
and other operating activities (74,585)
----------
Net Cash Used in Operating Activities (54,547)
----------
Cash Flows from Investing Activities:
Capital expenditures (14,836)
Other investing activities 216
----------
Net Cash Used in Investing Activities (14,620)
----------
Cash Flows from Financing Activities:
Net increase in borrowings 65,916
Other financing activities 45
----------
Net Cash Provided by Financing Activities 65,961
----------
Resulting in Decrease in Cash and Cash Equivalents (3,206)
----------
Cash and Cash Equivalents at End of Period $ 14,502
==========