WAYNE, Pa., Feb. 17 /PRNewswire/ -- Safeguard Scientifics, Inc.
(NYSE:SFE), the New York Stock Exchange listed strategic information systems
company, announces operating results for the fourth quarter and year ended
December 31, 1997, the proposed merger between Coherent Communications Systems
Corporation (NASDAQ:CCSC) and Tellabs, Inc. (NASDAQ:TLAB) and the
anticipated commencement date of the DocuCorp International (DocuCorp) Rights
Offering.
Net earnings for 1997 were $21.5 million, or $.66 a share (diluted),
compared to $19.9 million, or $.61 a share (diluted), in 1996. Net earnings
for the fourth quarter of 1997 were $6.1 million, or $.19 a share (diluted),
compared to $5.8 million, or $.18 a share (diluted) in 1996. Safeguard's 1997
net sales were $1.99 billion compared to $2.06 billion in 1996. Net sales for
the three months ended December 31, 1997 were $529.6 million compared to
$589.9 million for the same period in 1996. Sales were lower in 1997 due to
the sale of Pioneer Metal Finishing and Premier Solutions during the year and
a decrease in CompuCom's product sales as CompuCom primarily focused on
increasing earnings through growth in its higher-margin services business in
1997. CompuCom's total revenues were down 9% and 2%, respectively, for the
quarter and year.
Coherent Communications, a Safeguard partnership company since 1981 and a
1994 Safeguard rights offering, has agreed to merge with Tellabs, Inc., a
$1.2 billion telecommunications equipment manufacturer. Under terms of the
agreement, shares of Tellabs common stock will be exchanged for all the
outstanding shares of Coherent. Based on the closing price of Tellabs common
stock on February 13, 1998, the transaction is valued at approximately
$670 million. Each share of Coherent is being exchanged for .72 shares of
Tellabs common stock. The transaction is expected to be accounted for as a
pooling-of-interests and to qualify as a tax-free reorganization. Safeguard
owns 4.84 million shares of Coherent. The transaction is subject to various
conditions and approval by appropriate government agencies and Coherent
stockholders. Safeguard, Coherent's largest stockholder, has agreed to vote
in favor of the transaction.
"We are extremely pleased with the continued value creation for our
shareholders through the three 1997 rights offerings and the increase in our
portfolio of public and private holdings," said Warren V. Musser, chairman and
chief executive officer, Safeguard Scientifics, Inc. "The 1997 rights
offerings of Diamond Technology Partners, ChromaVision Medical Systems and OAO
Technology Solutions to Safeguard shareholders have all been successful, up
approximately 375%, 80% and 100%, respectively, from their offering prices.
We feel very positive about the proposed merger of Coherent and Tellabs. Dan
McGinnis and his management team have done an outstanding job of growing
Coherent to be a leader in the echo canceller market. We see this merger as a
real win for Coherent and Tellabs as it brings together Coherent's expertise
in developing and selling equipment that enhances voice quality with Tellabs'
greater size and resources. We also are extremely pleased to be able to bring
the DocuCorp rights offering to our shareholders, and anticipate offering at
least two more rights offerings in 1998 as we continue to execute our value
creation strategy."
Safeguard recently announced that it anticipates that the registration
statement filed by DocuCorp for an initial public offering of approximately
6,400,000 shares of DocuCorp Common Stock through a rights offering to
Safeguard shareholders is expected to become effective on February 24, 1998.
Prospectuses and certificates evidencing the rights are expected to be mailed
to holders of record as of February 23, 1998. If the effective date is
delayed, the record date will be one business day before the new effective
date.
Public Partnership Companies Continue Their Strong Performance
Following are brief 1997 highlights of select Safeguard public partnership
companies:
-- CompuCom Systems, Inc. (NASDAQ:CMPC), a leading provider of desktop
products and network integration services, reported earnings growth
of 42% and 26% (excluding non-recurring gains) for the fourth
quarter and year, respectively. Increased profits resulted from the
company's strong service business growth, improved service
utilization and operating expense control. CompuCom's plan in 1998
is to grow both product and service revenue by gaining more share in
existing accounts through its new national consulting group, by the
formation of a strategic accounts sales organization to focus on
obtaining new national account business, and by hiring additional
sales representatives to focus on large and medium-sized accounts.
CompuCom intends to augment these sales efforts with an acquisition
strategy designed to increase its presence in targeted, high
potential geographical markets.
-- Cambridge Technology Partners (Massachusetts), Inc. (NASDAQ:CATP), a
leading consulting and systems integration firm, reported earnings
growth of 40% and 52% (excluding business combination costs) for the
fourth quarter and year, respectively. Cambridge expanded its
service offerings through advancement of its proprietary service
methodologies, including an electronic commerce and interactive
solutions methodology. At year end, 50% of its completed projects
contained an Internet or interactive component. Cambridge also
continued its successful acquisition strategy with the fourth
quarter acquisition of Peter Chadwick Holdings Limited which
significantly increased Cambridge's skills in the areas of
operations strategies and performance improvements.
-- Coherent Communications Systems Corporation (NASDAQ:CCSC), an
international provider of state-of-the-art voice enhancement
technology, reported record sales and earnings for the fourth
consecutive year since going public in 1994. Sales were up 30% and
35%, respectively, for the quarter and year, with earnings
increasing 50% and 43%, respectively, for the same periods. Sales
were especially strong in Europe, and Coherent also increased its
sales in the Asia Pacific region despite the decline other companies
have experienced in that region.
-- Diamond Technology Partners Incorporated (NASDAQ:DTPI), a management
consulting firm that develops and manages the implementation of
digital strategies, reported that its revenue and earnings increased
52% and 140%, respectively, for its third fiscal quarter ended
December 31, 1997 over the same period in 1996. Annualized revenue
per professional reached a record high $382 thousand compared with
$282 thousand for the same quarter in 1996 and 35 clients were
served during the quarter compared with 29 in 1996. In addition,
Diamond launched Context during the quarter, a new quarterly
magazine designed to help business executives understand the
opportunities and challenges presented by the digital future.
-- Sanchez Computer Associates, Inc. (NASDAQ:SCAI), a market leader in
providing integrated software solutions and services for financial
institutions worldwide, reported strong revenue growth of 77% and
60% for the fourth quarter and year, respectively, with earnings
growth of over 200% for each period. During 1997, Sanchez executed
ten contracts valued at more than $40 million with banking
organizations in eight countries.
-- OAO Technology Solutions, Inc. (NASDAQ:OAOT), a Greenbelt, MD-based
provider of information technology solutions and professional
services, completed its initial public offering through a rights
offering to Safeguard's shareholders in the fourth quarter, raising
$29.3 million in net proceeds. The company reported revenue growth
of 41% and 46% and earnings growth of 43% and 58% for the fourth
quarter and year, respectively. Also during the quarter, OAO
completed its first acquisition, acquiring certain assets of
UniHealth Investment Co. which develops and markets software for
managed care operations.
-- ChromaVision Medical Systems, Inc. (NASDAQ:CVSN), a July 1997
Safeguard rights offering, continues to make progress with its
ongoing clinical trials and development milestones. Safeguard
recently agreed to purchase 962,740 shares of ChromaVision's common
stock, representing approximately 5.6% of the company, from
Centocor, Inc. Centocor was interested in selling the shares due to
a change in its strategic direction. We feel very positive about
ChomaVision's future and believe the purchase is an excellent
investment opportunity for Safeguard.
Safeguard's Pipeline of Private Partnership Companies and Funds Continues
to Strengthen
XL Vision, Safeguard's imaging technology incubator in Sebastian, FL was
very active in the last year. ChromaVision, its first successful spin-out,
went public through a Safeguard rights offering in July 1997.
eMerge Vision Systems, Inc. (EVS), which provides rapid response
development of application specific thermal imaging solutions for major
commercial applications, was setup as a separate company by XL Vision in 1997
through a private rights offering to XL Vision's shareholders, including
Safeguard. EVS is initially focusing on the maritime, avionics, security and
animal veterinary markets and its clients include Conoco, BP Oil, Honeywell
Avionics and the German National Railroad.
In February 1998, XL Vision setup Who?Vision Systems, Inc. (Who?Vision) as
a separate company, also in a private rights offering. Who?Vision is a
personal identification company that applies unique imaging technologies to
create highly reliable, cost-effective fingerprint authentication solutions.
It began development in 1997 to commercialize breakthrough fingerprint
authentication technologies for a wide range of computer and network security
applications for corporate and consumer markets. The Who?Vision solution is
based on a pioneering fingerprint security technology called TactileSense(R).
A breakthrough in fingerprint authentication, TactileSense(R) brings together
high reliability, unmatched durability, and small size at a fraction of the
cost of existing biometric technologies. Who?Vision has already established a
contractual relationship with leading monitor maker MAG Technology Co., Ltd
(Taiwan).
Pennsylvania Early Stage Partners (PA-ESP) is the newest addition to
Safeguard's family of venture funds and private equity partnerships which now
total over $1 billion of committed capital. PA-ESP is a collaboration between
Safeguard, the Commonwealth of Pennsylvania, and the Pennsylvania Public
School Employees' Retirement System. This newest fund will focus on early
stage companies with a strong emphasis on technology that are located in or
are willing to relocate operations to Pennsylvania.
Commented Donald R. Caldwell, president and chief operating officer,
Safeguard Scientifics, Inc., "It was a great year. Even after completing
three successful rights offerings in 1997, our private company pipeline has
grown both in number and strength which positions us well to continue our
rights offering success, and with the Coherent and DocuCorp announcements,
1998 is starting off even better."
Safeguard Scientifics, Inc. is a unique partnership of entrepreneurial
companies focused on information technology markets. Safeguard has a proven
track record of bringing emerging companies to market through rights offerings
to Safeguard shareholders. Past Safeguard rights offerings include Novell,
Inc., CompuCom Systems, Inc., Cambridge Technology Partners (Massachusetts),
Inc., Coherent Communications Systems Corporation, USDATA Corporation,
Integrated Systems Consulting Group, Inc., Sanchez Computer Associates, Inc.,
Diamond Technology Partners Incorporated, ChromaVision Medical Systems, Inc.
and OAO Technology Solutions, Inc.
SAFEGUARD SCIENTIFICS, INC.
Comparative financial data
Consolidated Statements of Operations
Quarter Ended December 31 Year Ended December 31
1997 1996 1997 1996
(000's omitted, except per share data)
Product sales $461,024 $530,373 $1,724,220 $1,856,889
Service sales 68,607 59,559 261,005 205,920
Net sales $529,631 $589,932 $1,985,225 $2,062,809
Pre-tax earnings $10,180 $9,657 $35,837 $33,212
Net earnings $6,108 $5,794 $21,501 $19,927
Earnings per share
Basic $.20 $.19 $.69 $.67
Diluted $.19 $.18 $.66 $.61
Average common shares
outstanding
Basic 31,254 30,363 31,249 29,900
Diluted 31,952 31,647 31,996 31,348
Diluted earnings per share calculations adjust net earnings for the
dilutive effect of public subsidiary common stock equivalents and convertible
securities.
Condensed Consolidated Balance Sheets
December 31, December 31,
1997 1996
(000's omitted)
Receivables less allowances (a) $187,385 $399,403
Inventories 198,053 234,543
Other current assets 11,841 20,120
Investments and notes receivable 206,146 143,882
Other assets 111,116 138,122
$714,541 $936,070
Current liabilities $169,278 $308,536
Long-term debt (a) 127,089 252,725
Other liabilities 120,223 103,667
Convertible subordinated notes 90,881 102,131
Shareholders' equity 207,070 169,011
$714,541 $936,070
(a) December 31, 1997 numbers reflect the effect of $175 million in off-
balance-sheet financing. |
