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Esaote Announces First Half Results

Esaote Group approves the 1997 semi-annual report - consolidated sales to 136 billion lire (US$78.6 million) - income before taxes equal to 7.5 billion lire (US$4.3 million) - new products' launch - agreement for a supply of medical devices in Argentina.

GENOA, Italy, Sept. 18 /PRNewswire/ -- The Board of Directors of Esaote SpA (OTC: ESA IM; Milan Ex: ESA), at the meeting held today, approved the consolidated balance sheet as of June 30, 1997.

For the first six months of 1997 ended June 30, 1997, consolidated sales amounted to 136.0 billion lire, in comparison to 135.1 billion for the same period last year (+0.6%). International sales, equal to 71.7 billion lire in the first half of 1997, represented 52.7% of total consolidated sales in comparison with 73.7 billion lire (54.5% of consolidated sales) in the corresponding period of 1996.

Sales in Italy recorded a positive increase of 4.6%, starting from 61.4 billion lire in the first half of 1996 to reach 64.3 billion lire in the same period of 1997.

Esaote Group's international sales suffered the situation of some markets (in particular European countries and Russia), that in the first half of 1997, were characterized by a persistent stagnation of demand due to the controlling of health costs.

The launch of the Chinese subsidiary has been particularly positive. In only three months Esaote China Ltd. has reached very good results in net sales and profits.

For the first six months of 1997, gross operating income amounted to 14.5 billion lire, in comparison with 18.5 billion lire in the first six months of 1996. The reduction in the gross operating income was due to an increase of distributed products and turnkey supplies on consolidated sales.

Income before taxes decreased from 10.5 billion lire in the first half of 1996 to 7.5 billion lire in the same period last year. For the first six months of 1997, net income before minority interests amounted to 4.0 billion lire, in comparison with 5.5 billion lire in the same period of 1996. Net income after minority interests in the first half of 1997 amounted to 3.6 billion lire, in comparison with 5.5 billion lire in the same period of 1996.

Prof. Carlo Castellano, Chairman and CEO of Esaote SpA stated: "1997 is a year of consolidation and transition for Esaote. We are involved in widening research and development, marketing strategies and the sales network and production in order to support the launch of new products. During the last several weeks we launched the AU5 Harmonic for Ultrasound, Artoscan M for dedicated MRI, and the Archimed for Cardiology."

"As we stated at the Bear Stearns Health Care Conference in New York recently," Prof. Castellano added, "we expect that our new products and the undertaken actions, will allow us to consolidate our competitive position in the coming years. In ultrasound -- the company's core business -- with AU5 Harmonic, we are going to strengthen our position as the leading European manufacturer and among the international leaders in our market."

AU5 Harmonic, recently launched at the VIII World Congress of the World Federation for Ultrasound in Medicine and Biology in Buenos Aires, is the first multidisciplinary ultrasound system which, in its standard configuration, allows the user to optimize ultrasound diagnostic examinations through the use of contrast agents.

Artoscan M -- the new dedicated MRI system, besides allowing its installation in small places, offers images of a better quality in a shorter average time.

Archimed is the new range of EKG product, presented at the European Congress of Cardiology in Stockholm at the end of August. Lined up with the more advanced market trends, Archimed proposes electrocardiographer as an element of a cardiology informatic network, in order to make the management of data and patients' case histories more efficient.

During the first half of 1997 Esaote further strengthened research and development, incurring expenses equal to 11.2 billion lire, in comparison with 10.1 billion lire in the same period last year. As a consequence, in the first half 1997, research and development costs as a percent of proprietary products sales grew to 11.0% from 8.7% in the first half 1996.

Esaote's product renewal plan, which characterized the first six months of 1997, reflected in an increase of the working capital, which, as of June 30, 1997 is equal to 136.7 billion lire, in comparison with 123.5 billion lire as of December 31, 1996. The Company expects this increase to be temporary and bound to be reduced when the products enter the market.

As of June 30, 1997 shareholders' equity amounted to 114.3 billion lire (in comparison with 112.4 billion lire as of December 31, 1996 and with 105.7 billion lire as of June 30, 1996) with a net financial debt of 43.3 billion lire (33.4 billion lire as of December 31, 1996 and 51.7 billion lire as of June 30, 1996). As of June 30, 1997, net financial debt to equity ratio was equal to 0.4, while as of June 30, 1996, the same ratio was 0.5.

The persisting stagnation in some markets, (particularly Germany and Russia), together with a lowering of the sales prices, in 1997 has put strong pressure on the industry. Despite the high expenses in R&D, marketing and the strengthening of sales network and production faced for the launch of new products, Esaote believe as well that, also in 1997, will be able to obtained satisfactory results both in turnover growth and profit.

Esaote's Board of Directors informs that an agreement between Esaote and the Provincia de Misiones in Argentina has been signed for a turnkey supply of hospital systems equal to 6.5 million dollars. The modalities and timing of this supply are being settled.

The Esaote Group is a world leader in the non-invasive diagnostic medical equipment market, and the leading European manufacturer of ultrasound systems. Esaote's net sales for 1996 were 275 billion lire with net income of 11.2 billion lire. Additional information about Esaote and its products may be obtained from the Company's web site, .

                               ESAOTE GROUP
                       Consolidated Balance Sheets
                        (millions of Italian lire)

                                        June 30,    December 31,    June 30,
                                          1997           1996         1996
  Cash and bank deposits                 7,058       16,685         9,162
  Trade receivables, net of allowance  169,985      169,776       152,164
  Other receivables                      4,302        4,503         8,019
  Inventories                           90,696       69,775        73,522
  Deferred income taxes                  2,610        2,030         2,552
  Prepaid expenses                       2,909        1,989         1,541

  Total current assets                 277,560      264,758       246,960

  Investments in affiliates and
    other companies                      1,092          241           550
  Securities held as collateral          1,000        1,000         2,313
  Plant and equipment, net              25,476       26,271        26,398
  Goodwill, net                          5,642        6,349         7,907
  Other assets                           6,566        6,542         7,509

  TOTAL ASSETS                         317,336      305,161       291,637


  Short-term borrowings due to ban      31,599       20,531        16,960
  Short-term debt due to other lenders      --          888            41
  Current portion of long-term debt      6,770       15,658        12,600
  Trade payables                        83,359       72,698        63,764
  Employee compensation and relate      11,898       11,708        12,352
  Sales commissions payable             11,457       12,236        11,331
  Income taxes payable, net                786          353            89
  Other payables                        18,545       22,813        14,824
  Accrued liabilities                    7,606        4,761         6,105

  Total current liabilities            172,020      161,646       138,066

  Debenture loan held by employees         836          836           836
  Long-term debt                        11,120       12,137        30,473
  Liability for termination indemnities 16,170       15,519        14,555
  Warranty reserve                       2,866        2,602         2,018

  TOTAL LIABILITIES                    203,012      192,740       185,948

  Share Capital                         45,445       45,445        45,030
  Other reserves                        49,256       44,581        43,958
  Minority interests                     1,121           --            --
  Retained earnings at beginning of year14,916       11,232        11,232
  Net income for the period              3,586       11,163         5,469
  TOTAL SHAREHOLDERS' EQUITY           114,324      112,421       105,689

    SHAREHOLDERS' EQUITY               317,336      305,161       291,637

The above data, approved by the Board of Directors and not verified by the Board of Statutory Auditors, will receive a negative assurance by Reconta Ernst & Young, as provided for by the recent requirements of Consob.

                       ESAOTE SPA AND SUBSIDIARIES
                      Consolidated Income Statements
                        (millions of Italian lire)

                               First Half      First Half
                                     1997            1996          1996

  Net Sales                       136,013         135,132        75,054
  Other Income                      3,007           1,985         4,103
  TOTAL REVENUES                  139,020         137,122        79,157

  Costs and Expenses:

  materials                        74,953          49,494       107,274
  services                         32,098          29,359        64,961
  personnel                        35,548          34,922        64,867
  other                             2,498           2,386         4,849
  net increase (decrease) in
   inventories                   (20,554)           2,454         1,471
  TOTAL COSTS AND EXPENSES        124,543         118,612        43,422

  GROSS OPERATING INCOME           14,477          18,507        35,735
  Depreciation and amortization     5,561           5,160        10,641

  NET OPERATING INCOME              8,916          13,347        25,094

  Net financial charges             1,911           4,570         6,466

   EXTRAORDINARY                    7,005           8,777        18,628

  Net extraordinary (income)/ losses(463)          (1,365)          (840)

  INCOME BEFORE INCOME TAXES        7,468          10,142        19,468

  Income taxes                      3,464           4,673         8,305

  TOTAL NET INCOME                  4,004           5,469        11,163

  Minority Interests                  418              --            --

  NET INCOME                        3,586           5,469        11,163

The above data, approved by the Board of Directors and not verified by the Board of Statutory Auditors, will receive a negative assurance by Reconta Ernst & Young, as provided for by the recent requirements of Consob.

-0- 09/18/97

Source: Esaote Group

CONTACT: Pietro Amoretti of Esaote S.p.A., 011-39-10-6547-334 or; or Anne McBride of The Anne McBride Company,
212-983-1702 or

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