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Océ reports improved resultsTuesday, July 06, 2010 Press release from the issuing company Highlights second quarter: Comments by Rokus van Iperen, Chairman of the Board of Executive Directors: Océ realized revenues of € 676 million, exactly the same amount as last year. We significantly increased our EBIT, excluding certain Canon related one-off items. This improvement reflected the better utilization of the supply centers as well as our action program related to approximately 2000 job reductions in 2009 and 2010. As already anticipated in the first quarter earnings release, Océ absorbed substantial one-off items in the second quarter, following completion of the offer by Canon. These one-off items amounted to € 103 million on reported net income and €48 million on free cash flow. The second quarter was marked by the successful completion of the transaction with Canon on 9 March 2010. In the second half of 2010, our compelling combination is expected to show the first commercial results via cross-selling of Canon products in Océ channels and vice versa." Combination Canon and Océ In the second quarter Océ prepared the introduction of Canon hardware and software products. Océ is training sales and service forces on For the Wide Format business, a joint project has started to determine the cross sales opportunities in which both Canon and Océ can deliver a stronger portfolio of Wide Format products to their respective customers. Canon will also sell selected Océ high volume products in certain of their markets and channels. As a first result of the product development cooperation Océ showed at the IPEX 2010 fair the Canon imagePRESS C7000 connected to Océ PRISMAprepare prepress software. Reactions on IPEX from customers, industry analysts and press on the new combination were very positive. Océ Group results second quarter 2010 Revenues Our share of color continues to grow and now accounts for 33% of revenues, up from 30% in the same period last year. Non-recurring revenues amounted to € 189 million, an increase of 2%. The organic decline was 1%. Recurring revenues amounted to € 487 million, a decrease of 1%. The organic decrease was 2%. Savings program Gross margin and operating income Normalized operating expenses amounted to 35.4% (2009: 37.2%), thanks to the savings program. In constant currencies operating expenses declined by € 16 million. Compared to the second quarter of 2009, this includes a € 3 million release as a result of final settlement of share-based compensation. Net R&D capitalization amounted to € 11 million which is € 5 million lower compared to the second quarter of 2009 (€ 16 million). On balance, normalized operating income amounted to € 20 million (2009: – € 12 million). Operating income amounted to € 20 million (2009: – € 12 million). Finance expenses and net income On balance, net income was € 7 million (2009: – € 14 million). Earnings per ordinary share for net income attributable to shareholders was € 0.07 (2009: – € 0.18). Balance sheet and RoCE The aforementioned balance sheet and Net Capital Employed amounts include the Canon related oneoff items. Free cash flow The cash flow from investing activities was – € 22 million (2009: – € 27 million). One-off items The gross margin includes a total of € 16 million one-off costs following Océ's decision to depreciate tooling and inventories due to changes in the product portfolio from certain OEM suppliers to Canon. The one-offs recorded under operating expenses amounted in total to € 27 million due to the fact that Océ impaired intangible assets related to supply contracts with certain OEM suppliers as well as to the future harmonization of Océ IT systems with Canon. Additionally, Océ incurred advisory fees related to the Canon transaction. Océ, through Canon Inc., has refinanced both the multicurrency revolving credit facilities and the United States Private Placements. The total one-off finance expenses related to the refinancing amount to € 40 million. The refinancing by Canon does not include financial covenants or commitment fees and is at more favourable interest margins than the aforementioned facilities. The positive effect from the refinancing is not included in the abovementioned one-off items and will be visible in finance expenses from the third quarter onwards. The income tax effect of in total € 20 million results from the abovementioned items and from changes in the valuation of tax assets and liabilities. For example, as a consequence of the change of control, some of the tax assets in Germany and the United States were (partially) forfeited due to local tax laws. For the second quarter the total effect of one-off items on reported net income amounted to –€ 103 million resulting in a cash flow effect of in total –€ 48 million. In the second quarter the cash flow effect from the one-off items related mainly to finance expenses as a result of the refinancing. These expenses were recorded in cash flow from operating activities such as changes in trade and other liabilities and interest paid. SBUs results second quarter Digital Document Systems (DDS) Non-recurring revenues amounted to € 122 million. Organically, revenues declined by 4%. Recurring revenues amounted to € 252 million. Organically, revenues declined by 3%. The market deterioration resulted in lower print volumes and subsequently lower revenues in Office and black & white continuous feed. DDS grew its revenues in production cutsheet and continuous feed color. Normalized operating income amounted to € 3 million (2009: – € 18 million). EBIT improvement was realized thanks to cost savings and better utilization in the Venlo and Poing supply centers. Wide Format Printing Systems (WFPS) Revenues in WFPS amounted to € 185 million. Organically, revenues were in line with the prior year. The share of color increased to 47% (2009: 45%) for example as result of the newly-introduced Océ ColorWave 300 and Océ CS2400 color systems for the Technical Documentation market. To further strengthen its color portfolio for the wide format Graphics Art market, Océ launched in June the high-speed Océ Arizona 550 XT flatbed printer which has double the speed of the Océ Arizona 350 XT system. Non-recurring revenues amounted to € 67 million. Organically, revenues increased by 7% Recurring revenues amounted to € 118 million. Organically, recurring revenues declined by 3%. Normalized operating income was € 12 million (2009: € 2 million) thanks to cost savings and better utilization of the Venlo supply center. Océ Business Services (OBS) Normalized operating income amounted to € 5 million (2009: € 4 million). The improvement in operating income is the result of improving gross margin and tight operational expense management. Outlook Canon and Océ will continue to work towards creating the best combination in the printing industry. The priorities for 2010 remain unchanged and encompass the growth through cross-selling opportunities, the co-operation in technology and product development and the preparation of the next steps in integration. In the second half of 2010, we expect the first commercial results via cross-selling of Canon products in Océ channels and vice versa. Océ anticipated substantial one-off items following completion of the offer by Canon. The largest part of these one-off items is included in this second quarter earnings release. Keys to terminology: Organic growth: the development of the results after adjustment for exchange rate effects and the impact of substantial acquisitions or disposals. Recurring revenues: revenues from services, inks, toners, media, rentals, interest and business services. RoCE: Return on Capital Employed: operating income on an annual basis after normalized taxes (20%) as a percentage of average Net Capital Employed (total assets excluding cash and cash equivalents, less noninterest bearing liabilities adjusted for derivatives). Wide Format printing: wide format printing (bigger than A3).
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