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Safeguard Scientifics Announces 1999 First Quarter Results
PR Newswire - April 21, 1999 08:04
WAYNE, Pa., April 21 /PRNewswire/ -- Safeguard Scientifics, Inc. today issued the following release:
Safeguard Scientifics, Inc. (NYSE: SFE), a developer and operator of information technology companies, particularly those associated with the growing use of the Internet, announces operating results for the first quarter ended March 31, 1999.
Net earnings for the first quarter of 1999 were $24.1 million, or $0.71 a share (diluted), compared to $5.1 million, or $0.15 a share (diluted), in 1998. The significant earnings increase reflects gains in 1999 of $32.2 million (net of tax) related to the company's holdings in Tellabs. Net sales for the three months ended March 31, 1999, were $499.9 million compared to $441.9 million for the same period in 1998.
Michael W. Miles, senior vice president and CFO, commented, "The results for the quarter were again favorably impacted by gains related to our Tellabs holdings, partially offset by our share of the losses reported by CompuCom and several other equity holdings. As we mentioned in February, we expect to see more volatility in our earnings as we continue to increase our holdings of Internet companies."
"This has been a very exciting time for the Safeguard family," said Pete Musser, chairman and CEO of Safeguard Scientifics, Inc. "Several of our companies in the Internet space have positioned themselves for IPOs in 1999, including Internet Capital Group, Digital Stampede (formerly known as eMerge Vision Systems), and US Interactive among others. We have begun to execute our new investment strategy with three new companies added -- aligne, Inc., 4anything.com, and Extant. Our stock price increased dramatically from $27.44 per share as of December 31, 1998, to $73.50 per share on April 20, 1999. We also strengthened our management team with the appointment of Harry Wallaesa as president and COO, Michael Bolton as senior vice president, and the promotion of Jerry Johnson to executive vice president."
New IPO Program
We have been developing a new program for delivering IPOs to our shareholders, called subscription rights offerings, that we believe is a better model in the current IPO market where significant institutional ownership is important for after-market support. Under this new program, shareholders will still be able to participate in the initial public offerings of selected Safeguard partnership companies. Although we are still working on finalizing the program, we want to discuss a few key terms we expect to be different from the usual rights offering process.
-- Our goal is to negotiate with the underwriters of each offering to make
a minimum of 20-25% of the offering available to Safeguard
shareholders.
-- Under the historical rights offering process, Safeguard shareholders
received one right for every five Safeguard shares. Under the new
program, we expect Safeguard shareholders to receive fewer rights per
Safeguard share. Also, the minimum number of shares to be purchased
in order to participate in the offering will likely increase,
therefore Safeguard shareholders would need a greater amount of
Safeguard shares to participate.
-- In addition, under the subscription rights offering process, the
offering price probably will be significantly higher than the
traditional rights offering price of $5 and will not be known until
pricing occurs on the effective date of the initial public offering.
-- Finally, the time periods for making a decision to subscribe will have
to be shortened.
Within the next several weeks we will be sending more information about the subscription rights offering process to our shareholders so they have a sufficient opportunity to familiarize themselves with this new program. We will also post all pertinent information on our Web site, www.safeguard.com, when all the details have been finalized.
Selected Public Partnership Company Developments
The following are selected developments at certain public partnership companies. -- CompuCom (Nasdaq: CMPC) reported revenues of $493 million, up 13% over the first quarter of 1998. However, the company reported a loss of $.05 per share which is mainly attributable to industry-wide weak product demand and lower gross product margins. CompuCom also announced the merger of its majority owned subsidiary, ClientLink, with E-Certify Corporation, an Internet security services company. E-Certify will provide secure infrastructure solutions and the development and deployment of next generation secure services for the Internet. -- Cambridge Technology Partners (Nasdaq: CATP) reported revenue for the first quarter of $151.4 million compared to $142.2 million in 1998, and net earnings of $.12 per share (diluted) compared to $.20 per share in the first quarter of 1998. The company also announced a re-alignment to retain and redeploy its employees in its higher growth e-business service segments. -- DocuCorp International (Nasdaq: DOCC) announced that Safeguard purchased approximately 1.7 million shares or 9% of DocuCorp stock from a major shareholder for $3.75 per share. This purchase brings our ownership interest in DocuCorp to approximately 18% on a fully diluted basis. -- Sanchez Computer Associates, Inc. (Nasdaq: SCAI) announced an acquisition of a data center which will be integrated into Sanchez's new Internet service strategy. The new service offering called, e-PROFILE.com, is an e-banking platform which enables its bank customers to get online quickly and easily.
Significant Corporate and Private Partnership Company Developments
Safeguard added to its exciting private partnership companies by completing three new investments in the first quarter 1999. The following are highlights at several of the private partnership companies.
-- 4anything.com has established a branded network of over 600 guided
community portals offering a whole new way to use the Net through
direct access to the best of content, interaction, and commerce.
4anything has over 1,800 additional domain names starting with the
number "4" and a topic or city of high interest to consumers.
4anything is preparing for an upcoming marketing campaign which is
scheduled to launch in May. This will provide more exposure to the
specific features of the site such as community portals and links to
the best content on the Web.
-- Digital Stampede is a company that has developed a unique vision and
platform for business-to-business eCommerce. The company has
implemented an eCommerce engine for the cattle industry (a
$152 billion segment of the U.S. economy) and an online cattle
auction, which are already generating rapid revenue growth. The
combination of the size of the industry and a practiced integrated(TM)
Web site with value-added disintermediation positions Digital Stampede
as a leading business-to-business eCommerce company. Digital Stampede
is a spin-out of XL Vision, Safeguard's technology incubator.
-- Extant is a provider of a voice and data network to enable Competitive
Local Exchange Carriers and Internet Service Providers to exchange
traffic seamlessly and efficiently. Extant is operational in seven
cities and expects to be in 17 cities by June and 24 cities by the end
of the year.
Commented Pete Musser, "Safeguard is in the midst of a great deal of exciting Internet activity. We are very well positioned with the additions to our management team, the strength of our private company pipeline, and the quality of the deal flow we are seeing in our areas of focus. We also believe the new subscription rights offering process will benefit our shareholders and partnership companies in this market."
About Safeguard
Safeguard Scientifics, Inc. (www.safeguard.com) develops and operates rapidly growing information technology companies that together form a community of shared resources with a strategic emphasis in eCommerce, enterprise applications, and network infrastructure, all of which are expected to benefit from the growing use of the Internet as a fundamental business tool. A long-term partner, Safeguard works closely with its partnership companies providing numerous operational and management services to build value in preparation for public rights offerings and beyond. The Company's partnership companies include privately held companies and public companies. Safeguard also assists in managing and working with several venture capital funds.
Safeguard Scientifics, Inc. Comparative financial data
Consolidated Statements of Operations
Quarter Ended March 31,
1999 1998
(000's omitted, except per share data)
Product sales $425,467 $379,271
Service sales 74,418 62,627
Net sales $499,885 $441,898
Pre-tax earnings $37,151 $8,433
Net earnings $24,148 $5,060
Earnings per share
Basic $0.76 $0.16
Diluted $0.71 $0.15
Average common shares outstanding
Basic 31,751 31,714
Diluted 34,852 32,403
Diluted earnings per share calculations adjust net earnings for the dilutive effect of public investee common stock equivalents and convertible securities.
The Company's convertible subordinated notes were dilutive for the quarter ended March 31, 1999, but were anti-dilutive for the same period in 1998.
Condensed Consolidated Balance Sheets
March 31, December 31,
1999 1998
(unaudited)
(000's omitted)
Receivables less allowances $235,879 $296,093
Inventories 132,398 138,551
Short-term investments 164,924 143,103
Other current assets 18,804 11,263
Investments and notes receivable 346,215 308,518
Other assets 147,888 171,162
$1,046,108 $1,068,690
Current liabilities $311,245 $337,019
Long-term debt 180,216 205,044
Other liabilities 106,517 112,423
Convertible subordinated notes 71,345 71,345
Shareholders' equity 376,785 342,859
$1,046,108 $1,068,690
SOURCE Safeguard Scientifics, Inc.
/CONTACT: Michael W. Miles or Sandi Murtland of Safeguard Scientifics,
888-733-1200, or Investor, Jody Burfening of Lippert/Heilshorn & Assoc.,
212-838-3777, for Safeguard Scientifics/
/Web site: safeguard.com
(SFE)
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