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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUERS
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of October, 1998
Elsag Bailey Process Automation N.V.
------------------------------------
(Translation of registrant's name into English)
Schiphol Boulevard 157, 1118 BG Luchthaven Schiphol,
The Netherlands
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(Address of principal executive offices)
[Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F].
Form 20-F X Form 40-F
-----
[Indicate by check mark whether the registrant by furnishing
information contained in this Form is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934.]
Yes No X
----
[If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g-2(b)] Not Applicable.
Exhibit Index: Page 4
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Elsag Bailey Process Automation N.V., a Netherlands corporation (the
"Company"), hereby furnishes the following document pursuant to Rule 13a-16 or
15d-16 of the Securities Exchange Act of 1934:
1. A press release of the Company dated October 28, 1998, announcing the
Company's third quarter 1998 results.
The following paragraphs or portions thereof of the above filed press
release shall be deemed to be incorporated by reference in the Company's
Prospectus dated June 28, 1996, included in its Registration Statement No.
333-4770 and to be a part thereof from the date hereof:
The first through eleventh (1st - 11th) paragraphs; and
The fourteenth (14th) paragraph.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ELSAG BAILEY PROCESS AUTOMATION N.V.
By: /s/Vincenzo Cannatelli
----------------------------
Name: Vincenzo Cannatelli
Title: Managing Director and
Chief Executive Officer
Date: October 30, 1998
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EXHIBIT INDEX
Exhibit Sequentially
Numbered Page
-------------
Exhibit 1 - A press release of the Company dated October 28, 1998,
announcing the Company's third quarter 1998 results. 5
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[Letterhead of Elsag Bailey Automation]
FOR IMMEDIATE RELEASE
Contact: Brad A. Hoffman
Director, Group Communications
(440) 585-3809
ELSAG BAILEY PROCESS AUTOMATION N.V. REPORTS
THIRD QUARTER 1998 RESULTS
Amsterdam, the Netherlands (October 28, 1998) - Elsag Bailey Process
Automation N.V. (NYSE:EBY) today announced financial results for the third
quarter ending September 25, 1998.
OPERATING RESULTS
Net income recorded by Elsag Bailey in the third quarter, applicable to common
shareholders, was $9.5 million or $0.25 per share, assuming conversion of the
preferred shares. This compares to $6.4 million or $0.17 per share in the
third quarter 1997, before restructuring charges and assuming conversion of
the preferred shares.
Bookings were $406 million this quarter, which compares to bookings of $317
million one year ago. Revenues were $360 million this quarter, compared to
revenues of $365 million in the third quarter of 1997. Currency translation
did not have an impact on the quarterly comparison of bookings and revenues,
while divestitures negatively impacted both bookings and revenues by
approximately $6 million. Bookings continue to show double digit growth,
driven in the quarter by the Systems business unit and by electric utility
market. Bookings grew in the Middle East, Central and Eastern Europe and, to a
lesser extent, in the Americas. After the fourth consecutive quarter reporting
a book to bill ratio above 1, backlog increased to $863 million at the end of
September from $792 million at the end of June.
Gross Margin increased from 33.6% in the previous quarter to 34.4%, equivalent
to the margin reported in the third quarter of 1997. Continued price pressure
within a challenging competitive environment was still affecting profit during
the quarter.
The Company's operating profit continued to benefit from the consolidated
reduction of selling, general, and administrative (SG&A) expenses and the
continuing consolidation of R&D activities and spending, while also benefiting
in the quarter from third party R&D funding. SG&A expenses this quarter were
$82.2 million or 22.8 percent of revenues, compared to $87.5 million or 24.0
percent of revenues, before restructuring charges taken in the third quarter
of 1997. During the quarter the Company reported as SG&A certain additional
legal expenses associated with ongoing litigation and the release of excess
restructuring reserves, each amounting to approximately $1 million.
Operating margin, before amortization, was 7.9 percent, up from 5.4 percent
one year ago. Earnings before interest, taxes, depreciation, and amortization
(EBITDA), including a $1 million gain related to the sale of a
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non-operating investment in Germany, were $38.1 million, as compared to $29.8
million before restructuring charges in the same quarter one year ago.
Net debt was $663.5 million as of September 25, compared to $680.4 million one
year ago and to $591.1 million as of June 25, 1998. Exchange rate fluctuations
resulted in increasing net debt by approximately $23 million from June to
September 1998. The increase in net debt at the end of the third quarter is
due primarily to inflated working capital as a result of the high level of
activity experienced late in the quarter.
NINE-MONTH SUMMARY
For the nine months ending September 25, 1998, Elsag Bailey's net income
applicable to common shareholders, before restructuring charges, was $29.7
million, compared to $22.0 million in the first nine months of 1997. Earnings
per share, before non-recurring charges and assuming conversion of the
preferred shares, were $0.78, compared to $0.58 in the same period last year.
Restructuring charges taken during 1998 were $10.3 million before tax, and
$6.9 million after tax. After the restructuring charges and dividends on
preferred shares, net income applicable to common shareholders, was $11.0
million or $0.38 per share, calculated on 29,201,981 shares. This compares to
a net loss of $2.8 million or $0.10 per share, on the same basis last year.
Bookings were $1,190 million in the first nine months of 1998, compared to
$1,068 million in the same period last year. Revenues were $1,064 million,
compared to $1,113 million last year. Currency translation negatively impacted
bookings and revenues in the first nine months of 1998 by approximately three
percent. Adjusting for the effects of currency translation and the sale of
non-core businesses, in a year-on-year comparison, bookings for the first nine
months increased by $167 million or 16 percent.
Operating income, before amortization and restructuring charges, was $72.5
million or 6.8 percent, compared to $64.1 million or 5.8 percent in 1997.
Mr. Vincenzo Cannatelli, Managing Director and Chief Executive Officer,
commented on the Company's third quarter performance, stating, "We are very
pleased with the continued positive trend demonstrated by this quarter's
results, reinforcing our belief that the restructuring and cost-improvement
actions taken over the past three years have been well directed. Our
aggressive efforts to improve profitability have translated to enhanced
results both at the operating income and pre-tax levels and, most importantly,
to improved earnings per share. We have achieved further reductions in SG&A
spending; due in part to the restructuring actions of recent years and to
ongoing cost-improvement initiatives such as our global sourcing program.
"We are especially pleased with Elsag Bailey's continued strong bookings
performance and its effect on the Company's backlog, which has now increased
for four consecutive quarters. This bookings performance comes during a period
of continued economic challenge in a number of key markets, and amidst a
well-publicized sale process involving the Company. The continued confidence
of our customers, highlighted by a series of major orders announced during the
quarter, is very gratifying. These bookings successes span the full range of
systems, instrumentation, and analytical product lines. Geographically, we are
especially pleased by the response of customers in Germany, Europe, and the
Middle East, and by the steadiness of our position in North America and Asia."
In a major recent action, the Company entered into a definitive agreement, on
October 14, 1998, with an affiliate of Asea Brown Boveri Ltd. (ABB), under
which ABB has offered to acquire Elsag Bailey Process Automation N.V. Pursuant
to this offer, the Company reported on October 20 that ABB Transportation
Participations B.V. has begun its tender offer for all outstanding common
shares of the Company at US$39.30
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per common share, and for all 5-1/2% preferred securities issued by the Elsag
Bailey Financing Trust at US$61.21 per preferred security. Each of the
Supervisory Board and the Management Board of the Company has determined that
this offer is fair to, and in the best interests of, shareholders of the
Company and its other constituencies, and has recommended that the
shareholders accept the offer and tender their shares accordingly. The tender
offer is dependent, among other conditions, on a minimum of 75% of the fully
diluted share capital of the Company being validly tendered and not withdrawn,
and on certain regulatory approvals. The tender offer expires at midnight on
November 17, 1998 unless ABB extends the period of time during which the
tender offer is open.
Commenting on the acquisition agreement, Mr. Cannatelli stated, "We are very
pleased by this commitment of business partnership from a quality industry
leader such as ABB Group. We have worked hard to position Elsag Bailey as a
leader in process automation, and we believe this marriage will bring
significant benefits to our company, our customers, and our industry as a
whole. We are very pleased with the excellent value which this transaction
represents for our shareholders, and we are committed to consummating the sale
in the most timely fashion permitted by the regulatory process. I am very
grateful to our shareholders for their patience and their support during the
sale process, and throughout the tenure of Elsag Bailey Process Automation."
One of the world's leading process automation companies, Elsag Bailey Process
Automation N.V., incorporated in the Netherlands, has grown revenues to more
than $1.5 billion by aggressively expanding its global markets and
technologies. The Company employs some 11,000 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, and other industrial 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
[email protected].
This document contains forward-looking statements subject to the safe harbor
created by the Securities Litigation Reform Act of 1995. These include,
without limitation, the statements related to Elsag Bailey's sale process and
the definitive agreement entered into with ABB, and the conditions to closing
of ABB's tender offer, outlook for the remainder of the year, the success of
ongoing cost improvement and profitability initiatives, SG&A expenses,
operating performance, earnings, results and liquidity needs, anticipated
conditions in its markets, including investments by customers in the Company's
product area; the effect of foreign currency fluctuations relative to the U.S.
dollar, the ability of the Company to successfully and in a timely fashion
complete its 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 31, 1997.
***
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Elsag Bailey Process Automation N.V.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
For the quarter ended For the nine months ended
--------------------- -------------------------
September 25, September 25,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 359,920 $ 365,388 $ 1,064,272 $ 1,113,407
Cost of sales 236,000 240,347 705,942 733,439
------------ ------------ ------------ ------------
Gross profit 123,920 125,041 358,330 379,968
Selling, general and administrative expenses 82,045 87,572 247,499 277,324
Research, development and engineering expenses 13,244 18,942 44,529 58,013
Amortization of intangibles 7,925 10,284 21,927 29,493
------------ ------------ ------------ ------------
Operating income 20,706 8,243 44,375 15,138
Interest expense 10,422 8,988 27,993 26,472
Other income (1,646) (896) (15,163) (8,929)
------------ ------------ ------------ ------------
Income (loss) before income taxes, minority interest
and extraordinary item 11,930 151 31,545 (2,405)
Income tax expense (benefit) 2,769 (9,908) 6,889 (10,343)
Minority interest in net income (loss) of subsidiaries (266) (397) (304) (1,058)
Minority interest - dividends on preferred securities 3,999 3,999 11,773 11,773
------------ ------------ ------------ ------------
Income (loss) before extraordinary item 5,428 6,457 13,187 (2,777)
Extraordinary item - write-off deferred financing costs -- -- (2,167) --
------------ ------------ ------------ ------------
Net income (loss) $ 5,428 $ 6,457 $ 11,020 $ (2,777)
============ ============ ============ ============
Net income (loss) per share:
Basic $ 0.19 $ 0.22 $ 0.38 $ (0.10)
============ ============ ============ ============
Diluted $ 0.18 $ 0.22 $ 0.37 $ (0.10)
============ ============ ============ ============
Assuming conversion of the preferred shares (1) $ 0.25 $ 0.27 $ 0.60 $ 0.24
============ ============ ============ ============
Weighted average number of shares outstanding:
Basic 29,201,981 29,201,981 29,201,981 29,201,981
============ ============ ============ ============
Diluted 29,543,000 29,224,000 29,465,000 29,206,000
============ ============ ============ ============
Assuming conversion of the preferred shares (1) 38,140,000 38,140,000 38,140,000 38,140,000
============ ============ ============ ============
</TABLE>
The way in which the income statement is impacted by non-recurring charges is
outlined below. These charges are associated with restructuring, both in 1998
and 1997.
<TABLE>
<CAPTION>
Non-recurring charges
---------------------
For the quarter ended For the nine months ended
September 25, September 25, September 25, September 25,
------------- ------------- ------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cost of sales $ -- $ 650 $ 4,344 $ 8,611
--------
Selling, general and administrative expenses -- 248 2,284 8,245
Research, development and engineering expenses -- 362 56 3,022
Other expenses -- -- 306 --
-------- -------- -------- --------
Loss before income taxes, minority interest and -- 1,260 6,990 19,878
extraordinary item
Income tax (benefit) 26 (5,289) (2,238) (6,848)
-------- -------- -------- --------
Net loss/(income) related to non-recurring charges $ 26 $ (4,029) $ 4,752 $ 13,030
======== ======== ======== ========
</TABLE>
The above expenses are for severance expenses and the restructuring of
Hartmann & Braun.
(1) Preferred shares are anti-dilutive in all periods.
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Elsag Bailey Process Automation N.V.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
September 25, December 31,
------------- ------------
1998 1997
---- ----
<S> <C> <C>
Cash and cash equivalents $ 12,781 $ 15,179
Accounts receivable 325,021 326,630
Costs in excess of billings on uncompleted contracts 202,335 147,571
Inventory 282,613 263,069
Other current assets 96,641 89,519
Other assets 1,127,673 1,096,185
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Total assets $2,047,064 $1,938,153
========== ==========
Notes payable $ 34,890 $ 58,628
Current maturities of long-term debt 622,418 39,107
Billings in excess of costs on uncompleted contracts 56,295 56,996
Other current liabilities 478,773 463,375
Long-term debt 18,820 520,968
Other liabilities 328,386 303,818
Minority equity 8,450 9,208
Minority equity - company obligated preferred securities of
grantor trust 282,947 279,067
Total shareholders' equity 216,085 206,986
---------- ----------
Total liabilities and shareholders' equity $2,047,064 $1,938,153
========== ==========
</TABLE>
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