Leica Geosystems on Target in Fiscal Year 2001/02
HEERBRUGG, Switzerland, June 6, 2002 - Leica Geosystems today announced that its revenues grew by 23% in Fiscal Year 2001/02, of which 21% came from acquisitions. With sales of CHF 790.2 million, and EBITDA of CHF 97.3 million, the Company met its previously announced sales and earnings estimates for the year. The Company's sales growth stems from the strong 10.9% organic growth in its core surveying business, as well as revenues from the companies it acquired during the last twelve months. The Company said that it had made significant improvements in its balance sheet over the prior quarter, generated operating cash flow of CHF 72.8 million during the year, and lowered its net borrowing position by CHF 38 million, or 14%, from a post-acquisition high in the first quarter. Leica Geosystems further announced that in the fourth quarter it had written off CHF 58 million in goodwill from its Cyra acquisition. The Company had pre-announced to the market in its Third Quarter earnings release that a write-off of a "significant" portion of this goodwill was likely. Additionally, Leica Geosystems recorded restructuring charges in the fourth quarter of CHF 4.7 million in conjunction with its "FIT-Together" initiative. Including these two non-recurring charges, the Company recorded a net loss of CHF (55.3) million, or CHF (24.67) per share, for the year. Excluding these charges, Leica Geosystems would have recorded Net Income of CHF 7.4 million, compared to a Net Loss of CHF (8.0) million in the prior year.
"Although this was a challenging year for our company, we made significant progress in many areas of our business," said Hans Hess, CEO of Leica Geosystems. "At the start of the year we realigned our business along market-segment lines, completed our strategic acquisition program with the acquisitions of ERDAS and LH Systems, and entered into numerous strategic partnerships with customers, GIS specialists, and suppliers. As a result of these actions, we are now the foremost supplier of Geomatics solutions in our industry. This year will also be remembered for the terrible events of September 11 and the subsequent recession in the United States. Although the impact of these events clearly hampered our business growth for the year, through the strength of our business model and dedication of our employees, we were able to navigate through these difficult times and feel very positive about the mid- and long-range future of our business," concluded Hess.
EBITDA of CHF 97.3 Million on par with Previous Year's Level
Despite the difficult economic environment during the second half of the fiscal year, Leica Geosystems was able to meet its revised guidance targets given in October 2001, increase sales by 23%, and generate an EBITDA of CHF 97.3 million. Including the CHF 58 million Cyra goodwill impairment charge and the CHF 4.7 million in non-recurring restructuring costs, the Company recorded a net loss for the year of CHF (55.3) million, with a loss per share of CHF (24.67). Excluding these charges, Leica Geosystems would have recorded Net Income of CHF 7.4 million (previous year: loss of CHF (8.0) million).
Better Margins, Stronger Cash Flow, and Continual Increase in Capital Efficiency
Leica Geosystems significantly improved its gross profit margins as compared to the previous year, raising margins by exactly two percentage points to 51%. The Company also made fundamental improvements in its balance sheet and cash flow during the year. Net Working Capital as a percentage of sales dropped from 23% at the end of last year to 15.9% at the end of this year. Largely through lower investments in these net assets, Leica Geosystems generated CHF 72.8 million in cash flow from its operations, an increase of over CHF 44 million over the previous year. The Company also reduced its net borrowings to CHF 230 million, or (14)%, from the post-acquisition high of CHF 268 million in the first quarter.
Increased Level of Strategically Important Research and Development Expenditures
The Company increased its expenditures on research and development during the year, with total expenditures of CHF 85.5 million, or 10.8% of sales. The Company stated that despite the weakening of the economy in the second half of the year, it remained committed to its original R&D program. Leica Geosystems launched over 22 new products during the past year, and through its comprehensive innovation program, should be set to release a raft of new products and solutions in the upcoming twelve months.
Continued Strength in Traditional Market
Leica Geosystems' Surveying and Engineering division remains the largest business division in the Company. With CHF 428.5 million in sales, this division contributed 54% to total sales and CHF 66 million of the Company's EBITDA this year. Strong organic growth in its core high-end surveying business contributed to this growth, offset in part by the protracted decline in the Company's construction activities.
Recovering Position in Laser Meter Business
In its hand-held laser meter business (DISTO(TM)), Leica Geosystems registered an 18% decline in sales. The basis for this decline is two-fold: lower OEM sales in the last three quarters of the year after the strategic decision to discontinue an exclusive distribution agreement with its previous OEM partner, and the general slowdown in the construction markets. The Company was, however, able to generate sequential growth in its sales over the last two quarters, with second semester sales increasing by 9% over the first half of the year. During the latter part of the year, Leica Geosystems concluded an important distribution agreement with Lowe's, the second largest Do-It-Yourself and builders chain in the USA. The Company reported that it had recently signed several new agreements with OEM partners for its next generation of DISTO(TM) products, the "DISTO(TM) 5". Leica Geosystems is the world market leader in the hand-held laser meter business.
Market Leader in the GIS & Mapping Sector
Through its strategic acquisition program, Leica Geosystems has become the leader in the rapidly expanding GIS & Mapping markets. For the acquisitions of the remote sensing and software firms ERDAS and LH Systems, Leica Geosystems recently received the distinguished Frost & Sullivan "Merger & Acquisitions Strategy Award 2002". The Company's GIS & Mapping division generated CHF 113 million in sales this fiscal year, exceeding expectations. The division has made continual progress in its profitability since the second quarter, and recorded EBITDA of CHF 10.5 million for the full year. The Company continues to leverage synergies from its four businesses that comprise its operations and has recently centralized its headquarters in Atlanta, Georgia.
Industrial Measurement Systems business holds ground
The Company's Industrial Measurement (IMS) business held its ground during a significant downturn in the aerospace industry. With sales of CHF 63.1 million, 1% above the previous year, the division achieved an EBITDA margin of 22.2%, the highest in the Company. Leica Geosystems' IMS business sells high-precision laser tracking systems to numerous large international institutions and major aircraft, automobile, ship, and heavy machine manufacturers. The division stands to profit in the upcoming year from large projects such as the US Joint Strike Fighter program and the Airbus A380 and A400M projects.
Good Basis for Future Development in Laser Scanning (Cyra) Business
Leica Geosystems' Cyra business grew by 70% this year, through sales of CHF 24.9 million. The tight capital investment markets in the US, however, dampened the near-term outlook in this business, resulting in the need to write off CHF 58 million of the remaining CHF 84 million in goodwill recorded at the time of acquisition. This "impairment charge" is based upon a discounted cash flow model, as determined under International Accounting Standards, and is driven primarily by lower than expected cash earnings in the short-term. Leica Geosystems' management reiterated its belief in the strategic importance of its laser scanning business, and expects that Cyra will continue to record strong growth rates in next year.
Stabilization with Special Products
Leica Geosystems' Special Products division is comprised primarily of the Company's defense technology activities, as well as its third-party component manufacturing operations. Sales in this division declined year-over-year, primarily as a result of the 75% divestment in its SwissOptics business in the first quarter, and lower sales of components to third parties. The defense-related business grew by 9% in fiscal year 2002, with strong sales coming from the United States. The division generated EBITDA of CHF18.5 million for the year.
Cost Reduction Programs Begin to Take Effect Internationally
In order to lower the Company's level of fixed costs, optimize its business processes, and fully take advantage of business synergies, in January 2002 Leica Geosystems launched its comprehensive ``Fit - together'' initiative. The Company is mid-way through this program, which to date encompasses over 30 separate projects. Leica Geosystems has eliminated 150 positions as part of this initiative, and recorded CHF 4.7 million in restructuring costs in the fourth quarter.
At the end of March 2002, the Company employed 2,887 employees, 150 lower than at the end of September, which was the highest level during the year. Geographically, 62% of the Company's workforce is located in Europe, 25% in the Americas, and 13% in Asia and other regions.
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