Barco continues to generate positive operating cash flow in mixed market conditions

Kortrijk, Belgium, 21 October 2009 - Barco (Euronext: BAR; Reuters: BARBt.BR; Bloomberg: BAR BB) today announced results for the three and nine-month periods ended 30 September, 2009. ¹

With sales of 148 million euro and EBITDA at 9.7 million euro (or 6.6%) for the quarter, Barco's results materialized roughly in line with expectations. Mr Eric Van Zele, Barco's President & CEO, referred to some rather mixed market conditions to comment on the company's third quarter performance. On the one hand, results were favorably impacted by continued strong performance in the medical imaging division and unprecedented demand for digital cinema projectors, while on the other hand Barco continued to suffer from severe softness in the events and out-of-home media markets, particularly in Europe and North America. Other Barco divisions performed more or less in line with expectations.

Barco's third quarter order intake of 153 million euro was 15.3% lower than in the prior year but nevertheless up 9% from the previous quarter. Incoming orders for digital cinema projectors nearly tripled in the quarter not counting the effect of any longer term frame agreements. Also the Medical Imaging division booked a very good order intake (+ 23% quarter-on-quarter). On the other hand orders declined sharply (by more than 40%) in the events segment of the Media & Entertainment division and were also somewhat weaker than expected in the traffic & surveillance segment (- 20% quarter-on-quarter) of the Security & Monitoring division. Year-on-year Barco's order book remained level and stood at 342.4 million euro at the end of 3Q09.

From a regional perspective orders in the APAC region grew by 21.3% quarter-on-quarter while incoming orders in the EMEA region (Europe, Middle East and Africa) declined by 19.6% quarter-on-quarter. In the Americas order intake declined by 28.9%.

Barco's gross profit continued to be depressed at merely 29.6% of revenues as a result of substantial warranty and obsolescence charges in addition to some margin erosion caused by ongoing efforts to sell off excess inventories at much reduced prices in the events and out-of-home media business units. Also ramp up costs to boost manufacturing capacity in digital cinema did weigh on the company's 3Q09 profitability, while shipments of digital cinema projectors in 3Q09 remained roughly at the same level as in 2Q09.

EBITDA for the quarter was nevertheless quite encouraging at 9.7 million euro or 6.6% of revenues as a result of solid cost controls (-17% quarter-on-quarter) and Barco generated 5.9 million euro of free cash despite negative EBIT of 3.3 million euro.

Concerning the outlook for Barco's results in 4Q09 Mr Van Zele said that business conditions in the events and out-of-home media markets are not anticipated to improve soon. Nevertheless he remained cautiously optimistic as strong growth in digital cinema will give a boost to revenues and help to alleviate profitability issues in the Media & Entertainment division. On the full year results he continued: “Operationally the signs bode well for a solid 4Q09. Nevertheless we must anticipate further weakness in the events and out-of-home media markets and hence continue to implement measures to restore profitability and establish healthy levels of working capital, even if this were to push us below the EBIT break even line for the full year. As long as we continue to generate good cash flow and can report steady progress in our growth segments, we are on the right track.”



CONSOLIDATED RESULTS FOR THE QUARTER


Third quarter 2009 financial highlights on the basis of continuing operations:

• Order book at the end of September 2009 was 342.4 million euro. This is about the same level as at the end of September 2008 when the order book was 343.5 million euro. Order intake for the quarter decreased by 15.3% to 153.0 million euro.

• Sales of 148.0 million euro, down 16.7% quarter-on-quarter.

• Gross profit declined by 23.5% to 43.9 million euro from 57.3 million euro the previous year. Gross profit margin was 29.6%. In 3Q08 it was 32.2% and in 2Q09 it was 28.5%.

• EBITDA was 9.7 million euro compared to 13.0 million euro in 3Q08.

• EBIT was minus 3.3 million euro versus minus 1.7 million euro before restructuring in 3Q08. Negative EBIT was mainly due to the events and out-of-home media markets.

• Net income including income from discontinued business was minus 3.0 million euro. In 3Q08 it was 32.6 million euro. Excluding net income from discontinued business (BarcoVision) net income in 3Q08 was minus 3.5 million euro.

• Net earnings per share were minus 0.25 euro compared to 2.73 euro in 3Q08.

• Free cash flow at the end of the quarter was 5.9 million euro positive compared to minus 11.9 million euro the year before.


Third quarter 2009 financial highlights on the basis of continuing operations:

in € million	3Q 2009	3Q 2008	Variance 3Q09/3QO8
Order book	342.4	343.5	(0.3%)
Orders	153.0	180.6	(15.3%)
Sales	148.0	177.7	(16.7%)
Gross Profit	43.9	57.3	(23.4%)
EBITDA before restructuring	9.7	13.0	(25.4%)
EBITDA %	6.6%	7.3%
EBITDA after restructuring	9.7	9.7	0%
EBIT*	(3.3)	(1.7)
Net income from continuing operations	(2.9)	(3.5)
Net income from discontinued operations	-	36.1
Net income attributable to the equity holder**	(3.0)	32.6
NET EPS (in euro)	(0.25)	2.73
Free Cash Flow	5.9	(11.9)

* 3Q08 EBIT after restructuring was minus 4.9 million euro on the basis of continuing operations



9 months 2009 financial highlights on the basis of continuing operations:

in € million	YTD 2009	YTD 2008	Variance YTD 09/YTD O8
Order book	342.4	343.5	(0.3%)
Orders	451.7	558.7	(19.2%)
Sales	457.5	517.4	(11.6%)
Gross Profit	129.8	178.8	(27.4%)
EBITDA before restructuring	25.3	53.8	(53.0%)
EBITDA %	5.5%	10.4%
EBITDA after restructuring	25.3	49.0	(48.3%)
EBIT*	(14.9)	10.9
Net income from continuing operations	(13.3)	4.2
Net income from discontinued operations	4.2	39.5
Net income attributable to the equity holder	(9.1)	43.7
NET EPS (in euro)	(0.76)	3.67
Free Cash Flow	55.0	(10.7)

* YTD 2008 EBIT after restructuring was 6.1 million euro on the basis of continued operations


The following financial data are based on “continuing operations”


Sales and Order Intake

Sales for the quarter were 148.0 million euro, a 16.7% year-on-year decrease. The medical and digital cinema markets continued to perform strongly and so did the defense market. However, ongoing weakness in the events and out-of-home media markets continued to have a net negative impact on total sales for the quarter.

Sales to Europe, Middle East and Africa represented 46.4% of consolidated sales, while 32.0% of sales were realized in the Americas and 21.6% in Asia Pacific. The latter region performed very well with an increase in sales of 11.2% year-on-year. Order intake for that region increased by 21.3%. Sales as well as order intake in both other regions decreased compared to 3Q08.

Order intake in 3Q09 was 153.0 million euro, a decrease of 15.3% compared to the same quarter the year before. Order intake remained good in the medical and avionics markets. With a growth in order intake of 24.7 million euro (excluding frame agreements) the digital cinema market performed very strongly.

The order book at the end of the quarter was 342.4 million euro or 0.3% lower than at the end of 3Q08.


Evolution order book

	3Q09	2Q09	1Q09	4Q08	3Q08	2Q08
Order book	342.4	336.7	366.5	351.3	343.5	331.2

Gross Profit

Gross profit decreased year-on-year by 23.5% to 43.9 million euro. Gross profit margin at 29.6% compared to 32.2% in the year ago quarter and 28.5% in 2Q09. Cost savings in operations were to a large extent offset by the sell-off of slow moving products and inventory write-offs, primarily in the events segment.


EBIT

EBITDA was 9.7 million euro compared to 13.0 million euro the year before. EBIT was minus 3.3 million euro, a marginal decline of 1.6 million compared to 3Q08, despite a drop in sales of 29.7 million euro. This decline was due to the poor results in the events and out-of-home media markets.

Research & development expenses decreased year-on-year from 19.8 million euro to 14.9 million euro, or from 11.2% to 10.1% of sales. Sales & Marketing expenses decreased from 28.1 million euro to 23.1 million euro, respectively 15.8% and 15.6% of sales. General & administration decreased in absolute numbers from 11.9 million euro or 6.7% of sales to 10.3 million euro or 7.0% of sales.

Other operating income was 1.2 million euro. 3Q08 had other operating income of 0.8 million euro.


Income Taxes

In 3Q09 there was a positive tax impact of 0.7 million euro. In 3Q08 the positive tax impact amounted to 2.8 million euro.


Net Income

Net income for the quarter decreased to minus 3.0 million euro from 32.6 million euro for 3Q08. These amounts include the net income from discontinued operations. Excluding this net income from discontinued operations, net income from continuing operations in 3Q08 was minus 3.5 million euro. Net margin for the quarter was minus 2.0% from 18.3% the year before, including net income from discontinued operations.

Net earnings per ordinary share (EPS) were minus 0.25 euro, down from 2.73 euro in 3Q08. Fully diluted net earnings per share decreased to minus 0.24 euro from 2.57 euro.



DIVISIONAL RESULTS FOR 3Q09


Media & Entertainment division

Order intake and sales in the Media & Entertainment division both declined 21% compared to the same quarter the year before. For the events and the out-of-home media market this is in line with the market trend which does not yet point at a fast recovery of these markets. Sales and order intake in the digital cinema market almost tripled year-on-year. 3Q09 sales for the division were 61.9 million euro.

The order book at the end of September was 82.3 million euro, up 6.3% from the year before. This is fully due to the impressive growth of the order book in digital cinema, which fully offset the decline in the other two markets of the division.

Gross profit margins for the events and out-of-home media markets continued at depressed levels due to exceptional items, among which the sell-off of slow moving products and the write-off on inventory. On the other hand gross profit margin in digital cinema remained strong. Divisional EBIT for 3Q09 was at minus 6.0 million euro compared to 0.3 million euro in 3Q08. EBIT was very good in digital cinema, but this could not fully compensate for the loss in both other markets.


Security & Monitoring division

Sales in the Security & Monitoring division were 42.5 million euro, a decline of 21.4% quarter-on-quarter, due to the weak performance in the civil segment. This clearly indicates that civil markets are more affected by the economic downturn as apposed to defense markets.

Order intake for the division was down 25.2% quarter-on-quarter, mainly due to the traffic & surveillance market where nevertheless some slow recovery might be anticipated. Quite some projects have been delayed for now but are expected to materialize at a later stage. In the defense market the order funnel remains healthy with good order intake in the United States but also increasingly so in other countries.

The order book at the end of the quarter was 134.4 million euro, up 2.7% quarter-on-quarter. This increase is mainly due to the defense market.

Gross profit margin improved compared to 3Q08. Despite a drop of more than 20% in sales, EBIT for the division was on a break even level (0.1 million euro) compared to EBIT of minus 1.5 million euro in 3Q08, as lower margins were compensated by strong reductions in operating expenses.


Medical Imaging division

With a decline quarter-on-quarter of 2.6% to 28.3 million euro sales at the Medical division remained at a high level. Order intake however, increased by 23.3% quarter-on-quarter. It is clear that business momentum in the EMEA and APAC regions remains strong, while North America is slowly catching up again.

The order book at the end of the quarter was 46.8 million euro, an increase of 19.7% compared year-on-year.

Gross profit margin was at the same level as the year before, 41% of sales. EBIT margin was strong at 14.3%, partly because of good management of operating expenses.


Avionics & Simulation division

Sales in the Avionics & Simulation division were 16.9 million euro, down 6.8% quarter-on-quarter. The increase in the simulation market was not sufficient to compensate for the decline in the avionics market, which is suffering from delays in shipments. As for incoming orders the avionics market is doing very well compared to the same period of 2008, while in simulation a shift can be seen of a number of projects into 2010. This is particularly the case in virtual & augmented reality markets like oil & gas and the automotive industry. Total decrease in order intake for the division was 21%.

The order book at the end of September 2009 was 80.2 million euro, a drop of 19.0% year-on-year.

Gross profit margin continues to be strong in both markets. EBIT for the division was minus 1.5 million euro compared to minus 2.6 million euro the year before. EBIT was positive in the simulation segment. In the avionics segment on the other hand EBIT was down quarter-on-quarter due to the lower sales volume. Cost savings continue to be focused on, resulting in substantially reduced operating expenses in the avionics segment.


BALANCE SHEET

At the end of September 2009 Barco had a net cash position of 42.3 million euro, compared to a net debt position of 32.8 million euro on 31 December 2008 and a net cash position of 36.9 million euro on 30 June 2009. Barco did not buy back any of its own shares in the first nine months of 2009 ². On 30 September 2009 trade receivables were at 116.7 million euro, down 5.5 million euro compared to 30 June 2009. End September DSO was 71 days, down from 87 days the year before, a reduction of 18%. Inventory was at 158.2 million euro, a decrease of 2.1% compared to 161.6 million euro end June 2009. Inventory turns improved from 2.1 at the end of 3Q08 to 3.0 at the end of 3Q09. Trade payables were 60.7 million euro, up 7.3 million euro from end June 2009. Capex for 3Q09, excluding capitalized R & D, was 1.6 million euro. For the first 9 months of the year capex was 3.4 million euro.



OUTLOOK FOR 2009

The following statements are forward looking and actual results may differ materially.

Management does not anticipate business conditions in the events and out-of-home media market to improve soon. Nevertheless it remains cautiously optimistic as strong growth in digital cinema will give a boost to revenues and help to alleviate profitability issues in the Media & Entertainment division. For the full year results management believes that operationally the signs bode well for a solid 4Q09. Nevertheless it anticipates further weakness in the events and out-of-home media markets. Therefore it will continue to implement measures to restore profitability and establish healthy levels of working capital, even if this were to push results below the EBIT break even line for the full year. Management states that as long as Barco continues to generate good cash flow and can report steady progress in its growth segments, the company is on the right track.



CONFERENCE CALL

Barco will host a conference call with investors and analysts on 21 October, 2009 at 4:30 p.m. CET (10:30 a.m. EST), to discuss the results for the quarter. Eric van Zele, CEO, Dirk De Man, CFO and JP Tanghe, IRO will host the call.

An audio cast of this conference call will be available on the Company's website: www.barco.com at 8:00 p.m. Brussels time (2:00 p.m. EST).



ABOUT BARCO

Barco, a global technology company, designs and develops visualization products for a variety of professional markets. Barco has its own facilities for Sales & Marketing, Customer Support, R & D and Manufacturing in Europe, North America and Asia Pacific.
Barco (NYSE Euronext Brussels: BAR) is headquartered in Belgium and is present in more than 90 countries with about 3300 employees worldwide.

For more information and the full report “9 month period ended 30 September, 2009”, please visit the Company's website at www.barco.com

---

¹ Following IFRS rules comparison must be made on the basis of “continuing operations”. This means that the results of the medical advanced visualization activities of the business unit Voxar are shown as a separate line (“results from discontinued operations”) and added to the net results of the continuing operations. All financial data appearing further in this announcement will be based on “continuing operations”, unless otherwise indicated. Barco divested Voxar to Toshiba Medical Systems Corporation, Tokyo, Japan, in 1Q09.

² The company now owns 737,963 of its own shares or 5.82% before dilution. The buy-back program started in 2003.

 

For more information, please contact