Sames Reports 94% Increase in Fourth Quarter Operating Income

Projects 85% Increase in Operating Income for 2000

Sames Corp. announced its results for the fourth quarter and the year ended November 30, 1999. Operating income climbed to $3.1 million in the fourth quarter of fiscal 1999, as compared to $1.6 million in the fourth quarter of fiscal 1998. The increase in operating income reflects the timing of completion of large automotive paint shop installations as well as the effects of cost containment programs and lower cost of goods resulting from the use of better purchasing methods.

Fourth quarter sales were $27.8 million, as compared to $36.9 million in 1998. The decrease in sales was primarily driven by fewer large automotive paint shop installations as well as a decrease in the value of the French franc versus the U.S. dollar.

Fiscal 1999 pretax income from continuing operations was $4.6 million, as compared to a loss of $5.8 million in fiscal 1998. Sales decreased to $93 million versus $122 million in fiscal 1998. Had the value of the French franc remained constant, sales would have been $95 million.

The company reported a net loss of $1.8 million for fiscal 1999, which includes losses from discontinued operations of $4.9 million. In fiscal 1998, the company reported a net loss of $13.6 million, which included litigation settlement costs of $10.7 million ($6.2 million, net of tax benefits) and losses from discontinued operations of $10.4 million.

Arnold H. Dratt, President and Chief Executive Officer, said, "While our sales were affected by a decline in the French franc against the US dollar, as well as customer-requested delays in the start of several new major automotive contracts which had the effect of increasing our year-end backlog, we believe we have successfully reorganized our global operating units so that they are fully aligned with our stockholders' interests. In order to support our aggressive cost reduction programs at our primary manufacturing and assembly location in Grenoble, France, we decided to pay the retirement costs associated with early retirements and added a number of key senior executives to our staff."

"While our business on a quarter to quarter comparison can fluctuate due to large automotive contracts, which makes it difficult to predict quarterly activity as contracts are advanced, it should be noted that fourth quarter 1998 was affected by non-recurring legal costs associated with the settlement of a patent infringement case, and in the fourth quarter of 1999, the costs of these retirements increased our SG&A expenses. Notwithstanding these items, we are clearly containing costs and improving margins," Dratt said.

Projects 85% Increase in Operating Income in 2000

"We expect operating income from continuing operations to exceed $8 million for 2000," Dratt said. He cited an increase in backlog at fiscal year end to $23.7 million from $18.8 million in 1998 as a further indication of the Company's strong prospects for profitable growth in 2000. Dratt noted that the backlog at Sames S.A., its primary manufacturing and assembly subsidiary, had almost doubled to $21.4 million from $11.6 million. Progress Cited in Negotiations with Distribution Partners

Sames also announced progress in continuing negotiations for manufacturing and distribution alliances with partners in North America and Japan for its general industry products. Dratt noted that general industry was a target growth market for the Company in both those markets. In North America, Sames has selected JBI, L.P., a leading manufacturer of paint spray booths, which will both manufacture Sames powder booths and support the marketing of Sames general industry products to a distributor network enhanced by JBI's existing distributors. The completion of the JBI agreements is expected within 30 days.

Supporting this program is a new customer demonstration center at Sames N.A.'s Livonia, Michigan headquarters, which will include two state-of-the-art powder booths. The customer demonstration center will highlight Sames liquid electrostatic and powder applicators, including automatic and manual equipment in a 6,000 square foot area. JBI was selected to provide the booths and build out the space at Livonia on a turnkey basis. The center is expected to open in less than sixty days.

Sames Japan is in talks with Iwata Corp., which would be a major distributor for its general industry products in Japan. Iwata Corporation is the leading distributor of powder spray products for the general industry market in Japan.

As part of its strategy to penetrate the Japanese automotive market, Sames has developed a breakthrough product that applies waterborne and solvent borne paint on car bodies with a dramatic reduction in paint waste as colors are changed. The product is slated for competitive testing next month with a global automotive manufacturer and has a market opportunity of more than $100 million in sales over five years.

For more in Sames, check out the interview with Arnold Dratt at Sames Corp.CEO Wants to be Viewed as Tech Firm