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UNOVA Sees Progress in Q3, But More Hurdles Remain

UNOVA Sees Progress in Q3, But More Hurdles Remain By Carlos Martinez Staff Reporter Like many in the tech sector, Woodland Hills-based automation and data collections systems maker UNOVA Inc. took it on the chin during the third quarter. The $1.8 billion company, with holdings in industrial automation systems and automated data systems, posted a $250.7 million loss (or $4.39 per diluted share) on sales of $358.9 million. That compares with a $7.3 million loss (or $0.13 per diluted share) on sales of $439.5 million for the same quarter in 2000. Most of that loss was attributable to goodwill charges for acquisitions made several years ago, and some of UNOVA’s divisions even generated a profit. But with a number of its businesses in sectors that have been hardest hit by the economic downturn and mounting debt, analysts say the company still has a long way to go to return to health. “It’s a matter of not being able to turn things around which makes investors worry,” said William Potter, an analyst with ABN AMRO. The longer the company continues to sustain losses, the more difficult it will be to rebound, Potter said. “There are good signs coming from the company, but it’s going to be a rough fourth quarter,” he said. The third quarter of 2001 marks the fourth consecutive quarter of losses for the company. UNOVA’s debt has grown to $272 million from $259.2 million in the second quarter. UNOVA’s stock price has reflected its performance, recently returning to the $4 range in which it traded a year ago, after several peaks and valleys that saw shares rise to $6.88 and drop to a low of $2.15 over the 52-week period. On Nov. 23, the stock closed at $4.38. UNOVA officials declined to be interviewed. But they said in a statement that they were encouraged by the quarterly results. The company’s loss, they said, was due mostly to $237 million in goodwill charges for the 1998 acquisitions of Amtech Corp.’s Transportation Systems Group and the R & B; Tool Co. Without the charges, UNOVA would have posted a loss of $1 million, a dramatic improvement over the same quarter last year, they said. “We are pleased with these improved operating results, given lower revenues and the uncertain macro-economic environment,” said UNOVA CEO Larry D. Brady. In a statement announcing the company’s third-quarter results, Brady also said that UNOVA plans to continue its cost reduction program. UNOVA’s businesses include Automated Data Systems, which houses its Intermec Technologies unit and Industrial Automation Systems, comprised of a group of companies involved in body welding and assembly products, machine tools and other manufacturing products and systems. Hardest hit was Automated Data Systems, which lost $11.3 million in the third quarter on revenues of $142.9 million. That compared with a loss of $21.9 million on revenues of $161.9 million a year earlier. The Industrial Automation Systems unit saw its net income rise slightly to $16.9 from $15.4 million in the comparable period last year. Revenues for the division fell to $216 million, from $277.6 million in the earlier period. The increase was due largely to one of the IAS divisions, Integrated Production Systems, which posted an operating profit of $18.5 million on revenues of $167.6 million, compared to an operating profit of $16.6 million on revenues of $213.7 million a year ago. The improvements in its manufacturing sector in part reflect an ongoing program of consolidation and cost reduction in its Everett, Wash. manufacturing facility, Brady said. The company said plans underway should help to generate further improvements. The Intermec Technologies unit, which develops data collection systems for business, won new retail customers including Wal-Mart Stores Inc., J.C. Penney Co. Inc., Dillard’s, Liz Clairborne, Blockbuster Inc. and Chadwick’s, the company said. Intermec also launched a new partner program intended to help cross-sell its mobile communications products. “We’re hoping to see some better numbers and overall growth next year, but it’s tough to make progress in this economy,” said Potter, who rates the company a “hold.” Others, like analyst Walter S. Liptak of McDonald Investments, said the company is making the right moves, but is hampered by declining orders and the sudden decline in the aerospace market which supports its metal manufacturing and assembly operations.

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