Exhibit (k)
Baan Company Announcement
Date: 18/07/00
To: All Baan Employees
From: Pierre Everaert
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Baan Releases 1999 Audited Accounts
Dear Colleagues
After markets closed yesterday, we issued our audited annual accounts for 1999:
our 1999 U.S. Annual Report on Form 20-F was filed with the U.S. Securities and
Exchange Commission and our 1999 Dutch Statutory Accounts have been made
available for shareholder inspection (the latter, as per Dutch law, remains
subject to shareholder approval). Both documents are available on the Company
Web site at www.baan.com, and the 20-F is also available on the SEC's on-line
EDGAR service.
In short, the annual accounts confirm what we have been saying: Baan remains in
a very challenging environment and it remains management's strong view that the
best path forward for the Company is the proposed acquisition by Invensys.
1999 Accounts
Net revenues for the year were $619 million, compared to net revenues of $736
million for 1998. License revenue for 1999 was $193 million, as compared with
$336 million for 1998. Maintenance and service revenue was $426 million, as
compared to $399 million for 1998.
These revenue numbers are slightly less than the numbers we reported in our
unaudited February 3, 2000 year-end earnings announcement. Reason: until a
company's audited accounts are issued, they remain "open" and events subsequent
to year-end can influence certain of the accounting, such as revenue
recognition. So, for example, if we entered into a license contract in Q4 99
that required full payment within 5 months of contracting (assuming other
revenue recognition factors were in place), we properly recognized that revenue
in Q4. But, if at the time we issue our accounts now in July that revenue
remains uncollected, then the originally recognized revenue must be reversed in
our audited accounts. That is an example of the kind of adjustments we have
taken. It will not come as a surprise to anyone - given this environment where
customers have adopted a "wait and see" attitude about our viability and the
Invensys offer - that we have not yet been able to collect on certain contracts
from 1999, which is why we have taken the adjustments.
I would note that, while certain customer disputes about deliverables have
required some adjustments, it is principally the passage of time in this
difficult environment we are in that has put pressure on our revenue number and
the collectability of our receivables. For some perspective, the total revenue
adjustments were $16 million, which represents 2.5% of the $635M revenue total
we announced February 3.
Nonetheless, given the slight shareholder equity we posted at year end of
positive $9M, even the limited net adjustments we took were enough to move us
into negative shareholder equity of ($7.8M). Moving into negative equity at this
point does not change things very much. We had already announced that we will
close Q2 in a negative equity position, and the AEX - which requires its listed
K-1
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companies to maintain positive shareholder equity -- has said we will be placed
under "special listing conditions" unless the Invensys offer closes in the near
future. That remains true.
The Invensys Offer
But the accounts outline even more fundamental reasons why we think the Invensys
offer is the best way to secure our future. Given the current climate we are
operating in, the downward pressure that is creating on our revenue numbers (we
are heading for our 8th successive quarter of operational losses), the fact that
we will need to fundamentally restructure the business if we are to survive as
an independent company, and the challenges we will have in securing financing
for that restructuring and to otherwise keep the business running, the accounts
correctly state that there is significant uncertainty about our ability to
continue as an independent going concern.
At its core, the issue for us right now is customer confidence. Our world-class
technology continues to get us in the door, but viability concerns are kicking
us out the door as fast as it opens. That issue would not be solved by lining up
additional financing (assuming we could). We need a strong strategic partner to
take the viability issue away, restore customer confidence, and return us to a
more normal business cycle. That is why your Management and Supervisory Boards
continue to unanimously support the Invensys offer, and why we are working so
hard to try to convince those shareholders who have not yet tendered their
shares to do so.
As to that, you know that Invensys has extended the offer through July 25. As of
July 14, Invensys owned or had received tendered shares equaling approximately
60% of the Company's shares. But the Offer Agreement between us requires that
95% of our shares must be tendered, or Invensys reserves the right to terminate
the offer. We hope that the information we will be making available this week -
and we expect to issue a Q2 pre-release later this week in addition to this
release of our audited accounts so that shareholders have the most up to date
information we have in making their decision -- will help further set forth why
we believe Invensys is the right solution.
* * *
A copy of today's press release is available on our Web site, and I would
encourage you to read it. Thank you for your patience and support as we have
moved through the offer period. Hopefully we are coming to what will be a
successful conclusion for our shareholders, customers, and you, our employees.
Kind Regards
Pierre Everaert
Interim CEO
K-2
