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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
Date of Report: March 5, 1999
BAAN COMPANY N.V.
Baron van Nagellstraat 89
3770 AC Barneveld
The Netherlands
and
11911 Freedom Drive, Suite 300
Reston, Virginia USA 20190
(Addresses 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 the 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 12g3-2(b):
82- N.A.
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BAAN COMPANY N.V.
FORM 6-K
Baan Company N.V., a corporation incorporated under the laws of the
Netherlands ("Baan Company"), issued a press release dated March 2, 1999 (the
"Press Release") announcing the following principal events: (1) results for its
fiscal year ended December 31, 1998; (2) the status of the Company's previously
announced restructuring plan; and (3) the nomination of five new members to Baan
Company's Supervisory Board of Directors.
The Press Release is attached as Exhibit 99.1 to this Report on Form 6-K
and is incorporated by reference herein. The foregoing summary of the Press
Release is qualified in its entirety by reference to the Press Release.
Any statements contained in the Press Release that are not historical
facts are forward-looking statements. In particular, statements using the words
"will," "plans," "expects," "believes," "anticipates," or like terms are by
their nature predictions based upon current plans, expectations, estimates, and
assumptions. These statements are subject to a number of risks and uncertainties
that could significantly affect outcomes, which may differ materially from the
expectations, estimates, or assumptions expressed in or implied by any such
forward-looking statements. Specific risks applicable to such forward-looking
statements include risks associated with the failure to conclude any proposed
agreement and/or changing conditions in the marketplace. Other risks and
uncertainties associated with the businesses of Baan Company may be reviewed in
Baan Company's public filings, including Baan Company's Report on Form 6-K for
its fiscal quarter ended June 30, 1998 and Baan Company's Report on Form 20-F
for 1997. Those documents are publicly on file with the U.S.
Securities and Exchange Commission.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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<S> <C>
99.1 Press Release of Baan Company N.V. March 2, 1999.
</TABLE>
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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.
BAAN COMPANY N.V.
By: /s/ Robert Goudie
-------------------------------------
Robert Goudie
Senior Vice President, General
Counsel and Secretary to the Board of
Directors
Date: March 4, 1999
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -------------------------------------------------------
<S> <C>
99.1 Press Release of Baan Company N.V. dated March 2, 1999.
</TABLE>
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EXHIBIT 99.1
Press Release
1. PROGRESS ON RESTRUCTURING AND 1988 YEAR END RESULTS
The Baan Company Completes Key Elements of Its
Restructuring and Reports Year-End 1998 Results
Announces Five New Nominations to Supervisory Board
BARNEVELD, The Netherlands and RESTON, Va., March 2 -- Baan Company N.V. (ASE:
BAAN; Nasdaq: BAANF) today announced substantial progress on its restructuring
program, financial results for the fourth quarter and year ended December 31,
1998, and new nominations to its Supervisory Board.
This past year was a challenging year for the enterprise resource planning (ERP)
industry and Baan Company. The Company first saw the beginnings of a slowdown in
growth attributable to Year 2000 (Y2K) issues, reduced capital spending,
increased competition, and uncertain global economic conditions in the third
quarter. It then began the process of restructuring the Company to respond to
these industry changes. "We enter 1999 having completed the basic elements of
our ambitious restructuring program in less than 100 days; having taken
significant steps to solidify our cash position and improve the predictability
of our business model; and announcing today five experienced and talented
nominees to our Supervisory Board of Directors," said Tom Tinsley, Baan Company
Chairman and CEO. "In short, we think we have put the pieces in place to
stabilize the business and drive us forward into the Year 2000."
Significant Progress on Restructuring
"Given the uncertain outlook for enterprise application software over the next
year, we felt it was important to take a conservative approach, focusing our
resources on our customers and core application areas including manufacturing,
financials, supply chain and front office. We restructured to maintain
investment in research and development and customer service," said Mary Coleman,
President of Baan Company. "We made a significant and aggressive push to
complete the main elements of the restructuring in the fourth quarter so we
could enter 1999 with the bulk of these changes behind us."
Key elements of the restructuring program now completed include:
* A 20% reduction in the Company's cost of revenues and recurring
operating expense levels compared to the third quarter 1998. Cost
savings include a reduction in the worldwide headcount of
approximately 1,000; closing or consolidating 50 offices; and
completing the sale of 10 subsidiaries that primarily provided sales,
service and support to non-core markets. Certain of the benefits of
the restructuring program will not be realized until the second
quarter 1999.
* Completion of the acquisition of Baan Midmarket Solutions (BMS) from
Vanenburg Ventures. Baan Company now has improved control and clarity
in the important indirect distribution channel. Beginning in the first
quarter 1999, this transaction effectively eliminates related party
license revenue.
* Baan Company exited the fourth quarter with $206 million in cash
including $75 million raised through an equity investment by Fletcher
International (with an option for up to an additional $150 million).
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The Company also significantly increased deferred revenues (revenue
paid and received from contracts that have been signed, but which is
deferred for recognition purposes to a future date under U.S.
accounting rules) to $168 million, over five times the $33 million
balance at the end of 1997.
* Consolidation of subsidiary operations into functional organizations
to eliminate duplication and provide more consistent focus, and
customer service and support. Baan Company integrated the Aurum, CODA
and Supply Chain organizations to unify the sales, marketing,
development, service, support and G&A functions. The CAPS Logistics
division is in the process of being consolidated fully into the
Company.
"Employees worldwide demonstrated extraordinary commitment by teaming together
to take the difficult and aggressive steps required to stabilize Baan's
business. This sets the stage for restoring revenue growth and profitability. We
are very proud of the caliber of our people and congratulate them on this
accomplishment," said Coleman. "We believe we are ready to meet the short-term
challenges without additional restructuring-related headcount reductions. And
the current balance sheet puts us in a good position to participate in the
long-term attractiveness of the enterprise applications market."
Fourth Quarter and Year-End 1998 Results
Reported net revenues for the fourth quarter 1998 were $131 million and the net
loss was ($295) million or ($1.45) per diluted share. Non-recurring (or
one-time) charges related to the restructuring or indirect channel inventory
during the quarter account for ($255) million of the operating loss:
* $140 million for loss on disposal of subsidiaries and other assets,
asset write-downs, and restructuring and other charges;
* $59 million for specific restructuring-related allowances and
reserves; and
* $56 million against revenue to clear the indirect channel of existing
inventory (all but $5 million of which has already been collected by
the Company). Excluding this adjustment, net revenue for the quarter
would have been $187 million.
The net loss for the quarter was $45 million higher than the preliminary
estimate reported on January 20, 1999. "Since our preliminary announcement, the
consensus among industry and financial analysts, as well as other ERP vendors,
is that prospects for the ERP market in 1999 has worsened," said Tinsley.
"Consequently, management believes an even more cautious approach with respect
to our balance sheet by including additional reserves and allowances is
prudent." Net revenues for the year 1998 were $736 million. Net loss for the
year was ($315) million or ($1.59) loss per diluted share. Non-recurring charges
account for ($270) million of the operating loss for the year.
"Obviously 1998 was a difficult year for Baan Company," said Tinsley. "But I
think a little perspective is in order. Excluding the non-recurring charges
described above, the Company had a loss from operations of $62 million in 1998.
Two-thirds of that amount is the Q1 revenue deferred principally in connection
with changing our business practices to implement the new U.S. SOP 97-2
accounting rules. The remainder is principally the potential sales lost or
delayed in the last weeks of Q3 as the industry slowdown first manifested
itself. Since then, we have taken the steps necessary to stabilize the business
and participate in what everyone believes will be a healthy sector once we turn
the corner on the Year 2000."
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Other Accomplishments During 1998
Other accomplishments by Baan Company during the year include:
* Signed approximately 1,800 contracts with customers, 1,300 of which
were with new customers.
* Expanded the install base from 2,800 to 6,300 customers (including
customers added as a result of acquisitions).
* Announced and shipped the BaanSeries product family. This
next-generation architecture represents more than $100 million in
research and development investment.
* Announced and shipped the new Web-base architecture and FrontOffice
suite of products including the BaanSales and BaanConfiguration
products.
* Announced and shipped the new Supply Chain planning products.
* Acquired CODA to enhance the product line in Corporate Financials.
* Acquired CAPS Logistics to complement its suite of Supply Chain
products.
* Introduced the new BESA software-licensing model, an innovative
approach to improve the predictability and manageability of enterprise
software licensing.
Outlook
Consensus among industry analysts is that strong growth potential exists for the
enterprise applications software industry in the Year 2000, but that 1999 will
be a difficult year for the industry. Analysts expect a continued slowing of
demand due in part to customer concerns over Year 2000 issues, increased
competition, and uncertainty over global economic conditions that will likely
continue throughout 1999. Recently a number of other enterprise application
software vendors have warned of slowing market conditions. Baan Company expects
that it will continue to be negatively impacted by these trends during 1999.
Supervisory Board Nominations
The company also announced that five accomplished executives have been nominated
to join the Baan Company Supervisory Board as new members (known under
Netherlands regulations as the Raad van Commissarissen, equivalent to the U.S.
external Board of Directors). Shareholders will be asked to approve these
nominations at an extraordinary general meeting, scheduled for March 18, 1999:
* John W. Barter -- Former Executive Vice President and CFO,
AlliedSignal, Inc. Barter brings tremendous financial expertise at
leading technology companies.
* Henk van den Breemen -- Former Chief of Defense Staff, Dutch Armed
Forces (retired). General van den Breemen brings considerable
expertise in management restructuring issues with large organizations
and expertise in aerospace and defense.
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* Pierre Jean Everaert -- Former CEO of Koninklijke Ahold and former
member of the board of management of Philips Electronics N.V. Everaert
brings a rich knowledge of global marketing and sales strategy. Mr.
Everaert is also likely to be nominated as Board Chairman.
* Joop P.M. Janssen -- Chairman of the Board of Managing Directors of
Heijmans, N.V., and a supervisory board member of Lathouwers Beheer
B.V. Janssen brings special expertise in the midmarket and a strong
financial background.
* Koichi Nishimura -- Chairman of the Board, President and CEO of
Solectron Corporation. Dr. Nishimura brings technology leadership
experience centered on global manufacturing operations.
"With today's Supervisory Board announcement, the pieces for the new Baan
Company continue to be put in place," said David Hodgson, current Chairman of
the Baan Company Supervisory Board. "The caliber of people who have accepted
these nominations is a strong statement about the vitality of the Company. Their
vision and expertise undoubtedly will add critical value to the Company's
operations, and the new Board is an excellent balance of European and North
American executives."
Existing members of the Supervisory Board are William O. Grabe, David C.
Hodgson, and J.C. (Hans) Wortmann.
Additional biographical information on the nominees is attached and is also
available on the Baan Company web site at www.baan.com.
About Baan Company
Founded in 1978, Baan Company (ASE: BAAN; Nasdaq: BAANF) is a leading global
provider of enterprise business software. Baan Company's comprehensive portfolio
of best-in-class, component-based applications for front office, corporate
office, and back office automation are in use at approximately 12,000 customer
sites worldwide. Baan Company's products reduce complexity, improve core
business processes, are faster to implement and use, are more flexible than our
competitors' in adapting to business changes, and optimize the management of
information throughout the entire value chain.
Baan Company has dual headquarters in Barneveld, The Netherlands and Reston,
Virginia, USA and can be found on the World Wide Web at www.baan.com.
Statements in this press release using the words "believes," "expects,"
"anticipates," and the like are forward-looking statements within the meaning of
the Securities Exchange Act of 1934, as amended, and as such are subject to a
number of risks and uncertainties that could significantly affect outcomes.
Actual outcomes, therefore, may differ materially from the expectations,
estimates, or assumptions expressed in or implied by any such statements.
Typical risks and uncertainties may be reviewed in the Baan Company's public
filings on file with the U.S. Securities and Exchange Commission (including its
most recent Form 20-F and 6-K).
"Baan" is a registered trademark of Baan Company, and any trade, product, or
service name referenced in this release using the name "Baan" is a trademark
and/or property of Baan Company. All other company, product, and service names
may be trademarks of their respective owners.
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Biographical Information on the New Nominees and Existing Baan Supervisory Board
Members
John W. Barter (age 52): Before his recent retirement from Allied Signal, Mr.
Barter served as Executive Vice President of AlliedSignal, Inc. and President of
AlliedSignal Automotive, and prior to that as Senior Vice President and CFO. Mr.
Barter is a member of the board of directors of BMC Software, Inc.,
Louisiana-Pacific Corporation, Iomega Corporation and Kestrel Solutions, Inc.
and is chairman of the Board of Trustees of the Spring Hill College. Among other
expertise, Mr. Barter brings to Baan tremendous assets in regard to financial
expertise at leading technology companies.
General Henk van den Breemen (age 57): Henk Van den Breemen is the decorated
former Chief of Defense Staff of the Dutch Armed Forces. Mr. van den Breemen
climbed the ranks from Lieutenant in the Marine Corps to his last position as
Chief of the Defense Staff -- the first General of the Marine Corps to assume
that role. In his career Mr. van den Breemen has represented the Netherlands in
international panels like NATO, WEU and CSCE and was able to transform the Dutch
Armed Forces into one of the most advanced and well-equipped Armed Forces in the
world, while carrying out significant down-sizing operations and supporting
peace operations at the same time. Mr. van den Breemen currently is employed by
the Company as General Advisor to the Boards of Supervisory and Managing
Directors. Among other expertise, Mr. van den Breemen brings to Baan
considerable expertise in leadership management and restructuring issues with
large organizations and expertise in aerospace and defense.
Pierre J. Everaert (age 59): Pierre Jean Everaert has 15 years of executive
experience: at Goodyear; at General Biscuits S.A. (Paris, France), where he was
Vice Chairman; Ahold USA Inc. as CEO; and Koninklijke Ahold N.V. (Zaandam, The
Netherlands) as President and CEO. In 1992, Mr. Everaert joined the board of
management of Philips Electronics N.V. in the Netherlands, and also served as
Chairman of the Board of Philips North America Corporation. In 1996, he formed
his own company, E C Consult B.V., which provides advice to companies on
corporate governance, advanced marketing, and e-commerce. Mr. Everaert is also
currently professor at the University of Gent, Belgium, is a director of
Interbrew, Louvain, Belgium and a member of the board of several privately held
companies. Among other expertise, Mr. Everaert brings to Baan a rich knowledge
of global marketing and sales strategy.
William O. Grabe (age 61): William O. Grabe became a Supervisory Director of the
Company in May 1995 and served as Chairman of the Board of Supervisory Directors
until April 1996. Mr. Grabe has been a Managing Member of General Atlantic
Partners LLP or a general partner of its predecessor partnership since April
1992. From 1984 until March 1992, Mr. Grabe was a Corporate Vice President at
IBM. Mr. Grabe is also a director of Gartner Group, Inc., a provider of
information technology research and analysis; LHS Group Inc., a billing and
customer care software for wireless communication provider; Compuware
Corporation, a software and services company; TDS GmbH, an IT consulting and
services company; and several other companies in the computer software and
services industry, including companies in which General Atlantic Partners LLP or
one of its affiliates is an investor.
David C. Hodgson (age 42): David C. Hodgson became a Supervisory Director of the
Company in May 1995 and was appointed Chairman of the Board of Supervisory
Directors in May 1998. Mr. Hodgson has been a Managing Member of General
Atlantic Partners LLP, or a general partner of its predecessor partnership since
its formation in 1989. Mr. Hodgson also serves as a director of Exact Holdings
B.V., a provider of financial accounting software applications; ProBusiness
Services, Inc., a provider of payroll processing and employee administrative
services for large employers; and several other companies in the computer
software and services industry, including companies in which General Atlantic
Partners LLP or one of its affiliates is an investor.
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Joop P.M. Janssen (age 56): Joop Janssen's experience includes career stints at
KPMG Accountants, Lathouwers Beheer B.V., and ING Bank. He currently serves as
chairman of the Board of Directors of the AEX stock listed construction company,
Heijmans N.V., where he is responsible for strategic planning, finance & control
and heads several divisions of Heijmans. Mr. Janssen is supervisory board member
of Lathouwers Beheer B.V. and several other privately held companies in the
Netherlands. He also serves as a member of the Amsterdam Exchanges' (AEX)
advisory body. Among other expertise, Mr. Janssen brings to Baan expertise in
the midmarket project industry and a strong financial background.
Koichi Nishimura (age 59): After an extensive career at IBM Corporation, Dr.
Koichi Nishimura currently directs Solectron Corporation's worldwide operations
as its Chairman of the Board, President, and CEO. He has led the company to
twice win the prestigious Malcolm Baldrige National Quality Award. Dr. Nishimura
is past chairman of the board of the Silicon Valley Manufacturing Group and
continues to serve on the boards of Merix Corporation and the Sante Fe
Institute. Dr. Nishimura is a senior member of the Institute of Electrical and
Electronics Engineers and the Society of Manufacturing Engineers. Among other
expertise, Dr. Nishimura brings to Baan executive technology leadership
experience centered around global operations.
J.C. (Hans) Wortmann (age 48): Hans Wortmann became a Supervisory Director of
the Company in May 1995. Since 1989, Mr. Wortmann is a Professor at the School
of Technology Management of the Technical University of Eindhoven in The
Netherlands. He also provides consulting services to Baan Development B.V. in
the area of overall product architecture.
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BAAN COMPANY N.V.
CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS December 31, 1998 December 31, 1997
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<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 205,751 $ 111,417
Short-term marketable securities 1,080 104,847
Trade accounts receivable, net 252,129 226,798
Income taxes receivable 45,045 0
Due from related parties 0 42,765
Other current assets 67,032 47,680
TOTAL CURRENT ASSETS 571,037 533,507
Property and equipment, at cost 129,267 91,143
Less accumulated depreciation (66,569) (39,137)
Net property and equipment 62,698 52,006
Software development costs, net 78,319 49,424
Intangible assets, net 52,644 41,085
Other non current assets 52,156 35,599
Deferred tax asset 0 10,788
TOTAL ASSETS $ 816,854 $ 722,409
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings from banks $ 523 $ 1,730
Accounts payable 74,508 59,729
Due to related parties 8,703 0
Income taxes payable 43,441 52,468
Accrued and other current liabilities 170,058 80,267
Deferred revenue 149,933 29,872
TOTAL CURRENT LIABILITIES 447,166 224,066
Long-term debt 191,013 200,718
Other long-term liabilities 4,084 4,305
Long-term deferred revenue 17,831 2,855
SHAREHOLDERS' EQUITY
Common stock and additional paid-in-capital 393,599 180,933
(Accumulated deficit) retained earnings (235,261) 116,224
Accumulated translation adjustment (1,578) (6,692)
TOTAL SHAREHOLDERS' EQUITY 156,760 290,465
TOTAL LIABILITIES AND $ 816,854 $ 722,409
SHAREHOLDERS' EQUITY
</TABLE>
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BAAN COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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<CAPTION>
Three Months Ended Year Ended
December 31, December 31,
1998 1997 1998 1997
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Net revenues:
License revenue $ 48,942 $ 101,549 $ 285,778 $ 367,101
License revenue from related
parties (23,334) 39,654 50,600 66,325
Total license revenue 25,608 141,203 336,378 433,426
Maintenance and service revenue 105,523 74,399 399,271 246,170
Total net revenues 131,131 215,602 735,649 679,596
Cost of revenues:
Cost of license revenue 9,781 11,483 30,741 31,212
Cost of maintenance and service revenue 82,523 58,190 302,063 189,871
Total cost of revenues 92,304 69,673 332,804 221,083
Gross profit 38,827 145,929 402,845 458,513
Operating and
non-recurring expenses:
Sales and marketing 89,796 58,369 273,638 184,703
Research and development 38,894 25,092 151,369 90,849
General and administrative 75,266 17,141 155,007 60,074
Asset write-downs 27,299 2,050 37,005 3,393
Loss on disposals of assets 58,030 0 58,030 0
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<TABLE>
<S> <C> <C> <C> <C>
Restructuring and other charges 55,172 400 59,866 8,675
Total operating and
non-recurring expenses 344,457 103,052 734,915 347,694
Income (loss) from operations (305,630) 42,877 (332,070) 110,819
Net interest income (expense), net (3,188) (16) (3,122) 2,691
Income (loss) before income taxes (308,818) 42,861 (335,192) 113,510
Provision (benefit) for
income taxes (14,099) 13,716 (20,000) 36,354
Net income (loss) $(294,719) $ 29,145 $(315,192) $ 77,156
Net income (loss) per share:
Basic $ (1.45) $ 0.15 $ (1.59) $ 0.40
Diluted $ (1.45) $ 0.14 $ (1.59) $ 0.37
Shares used in computing per share amounts:
Basic 203,135 192,454 198,519 190,842
Diluted 203,135 208,890 198,519 206,071
</TABLE>
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