HEERBRUGG, Switzerland, Nov. 6, 2001 (PRIMEZONE) -- Leica Geosystems (SWX:LGSN) today reported that its results for the second quarter were in line with its revised guidance of October 2, 2001. The Company reported consolidated sales of CHF 184.2 million in the quarter, an increase of 23% over the prior year. As anticipated, EBITDA for the quarter dipped below prior year levels, coming in at CHF 20.7 million compared to the CHF 24.4 million in the prior year. Net income for the quarter was CHF 1.40 million. The Company stated that it reduced its working capital during the quarter, that it generated over CHF 25.8 million in operating cash flow and reduced its net debt by CHF 27 million during the quarter. For the six months ended September 28, 2001, the Company grew its sales by 32.5% with EBITDA increasing by 10.6% over the prior year.
Leica Geosystems generated CHF 184.2 million in sales during the second quarter, 23% higher than the second quarter of the prior year. The consolidation of the Company's four recent acquisitions had a significant impact on this growth. Sales in Leica Geosystems' traditional Surveying and Engineering division, including Laser Alignment, grew by over 17% in the second quarter, with year-to-date growth approaching 23%. As anticipated, the Company stated that its construction business had continued to slow during the quarter, impacted by the economic slowdown in the United States and Europe.
To address the issues in its construction and DISTO(TM) businesses, on October 31, 2001, the Company announced a reduction of its construction-oriented manufacturing workforce by 63 in Grand Rapids, Michigan. The Company further stated that it had also decreased its workforce in Heerbrugg by nine positions in response to the current slowing in its DISTO(TM) business. The Heerbrugg reduction is consistent with Leica Geosystems' plans to outsource the production of its fifth generation of DISTO(TM) products in the next fiscal year.
Sales in the Consumer Products Division continued to be negatively impacted by the general downturn in the construction markets. To further develop the market opportunities in this business, Leica Geosystems and its Company's current OEM partner, Hilti, agreed to develop their hand-held laser businesses separately, and have discontinued their co-operation. Leica Geosystems stated that it was exploring other strategic OEM relationships, and is currently in the final stages of contract negotiations with several OEM partners.
The Company's GIS & Mapping division, which includes the results of ERDAS and LH Systems, recorded sales of CHF 22.2 million in the quarter. The second quarter results of this division reflect the impact of delayed orders from the U.S. Government in the wake of the September 11 terrorist attacks. These orders, which amounted to approximately USD 4.0 million, were postponed due to the reallocation of monies to fund various stimulus and relief packages in the United States. The Company's New Businesses (Cyra) Division recorded CHF 5.7 million in revenues in the quarter, bringing Cyra's year-to-date sales to CHF 13.2 million. Year to date sales in this division already exceed the full year results of the prior year.
After a strong first quarter, sales in the Company's IMS division leveled off in the second quarter. Sales in this division were dampened in September, as suppliers to the aerospace industry waited for further signs from the major industry players after the general downturn in the airline industry. The Company stated that the IMS division is well diversified across the aerospace, automotive and general industrial segments, and that it currently generates around 50% of its total revenue from the aerospace industry, split roughly in half between civil and military projects.
Sales in the Company's Special Products Division, which as of the second quarter no longer includes the results of the SwissOptics third-party manufacturing business (75% divested on July 18, 2001), were roughly equal to the prior year.
Leica Geosystems recorded EBITDA of CHF 20.7 million in the second quarter, compared to the CHF 24.4 million in the prior year. Earnings before interest and taxes (EBIT) for the quarter was CHF 0.5 million, reflecting the ongoing impact of goodwill and acquisition related development cost amortization on earnings. Net income for the quarter was CHF 1.4 million, compared to the net loss of CHF (35.2) million in the prior year, mainly impacted by the CHF 49.4 million of non-recurring IPO-related financing charges. Earnings Per Share for the second quarter were CHF 0.62 per share, and CHF 0.59 on a fully diluted basis.
The Company made good progress in strengthening its balance sheet during the quarter. According to Christian Leu, CFO, "During the second quarter, we were successful in lowering our net working capital investments," stated Leu. "Through these improvements alone we were able to generate over CHF 10.0 million in cash and have further improvement opportunities in this area. In total, the Company generated CHF 25.8 million in operating cash flow in the second quarter. As a consequence of this strong cash flow performance, combined with the proceeds from the sale of SwissOptic in July, we were able to reduce our revolving debt by close to CHF 27.0 million," said Leu.
The Company also reconfirmed its latest guidance from October 2, 2001. According to Hans Hess, CEO, "In light of the weaker overall economic climate in all regions, we expect sales growth in the second half of the year to be slightly below 20%, leading to a revised sales projection for the full year of around 25%. In light of the slower growth rate in sales, we now expect EBITDA for the full year, in absolute terms, to be around last year's level of CHF 98 million," said Hess. "For the third quarter, we expect sales to grow at around 20%, with EBITDA at around prior year levels. We plan to continue with our current product and market development initiatives which we expect will have a positive impact on our business in the upcoming fiscal year," said Hess.
The Company also re-emphasized that the fundamental strength of its business and its mid-term growth potential were unchanged. The Company anticipates, however, a continued difficult economic environment in the upcoming fiscal year 2003 (April 1, 2002 - March 31, 2003) and therefore estimates that its sales growth for the upcoming fiscal year will be above 10%, with growth in EBITDA at a better rate than sales.
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