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Applied Graphics Technologies Reports 2Q Results, Revenue Down 19%

Wednesday, August 15, 2001

Press release from the issuing company

NEW YORK, Aug. 14 - Applied Graphics Technologies, Inc., the country's largest provider of outsourced digital media asset management services, today reported results for the three and six months ended June 30, 2001. "We continue to be disappointed by the adverse impact the economy has had on our operations in 2001, particularly the softness in the advertising market,'' said Joe Vecchiolla, Chief Operating Officer and Chief Financial Officer of AGT. "In order to counter these macroeconomic forces, we are continuing with our integration efforts and cost-cutting measures, and are encouraged by the fact that, notwithstanding the state of the economy, we have recently attracted a number of major corporations as new customers. We do believe, however, that faced with the prospect that the overall economy, and the advertising market in particular, will not rebound until sometime in 2002, we will need to be particularly diligent in assessing and operating our business. Our recent bank deal will give us the opportunity to devote our full attention to our business and to evaluate any changes that may be necessary,'' concluded Mr. Vecchiolla. The Company's revenues in the second quarter of 2001 decreased by 19.7% to $118.1 million, as compared to revenues of $147.0 million in the same quarter of 2000. This decrease resulted primarily from the adverse impact the economy in general, and the softening advertising market in particular, had on the Company's prepress and creative services operations, primarily in the Midwest. The Company also experienced an anticipated reduction in revenues from the sale of its photographic laboratory and digital portrait systems businesses and the closing of one of its Atlanta prepress facilities, the results of which are included in the 2000 period. Gross profit was $35.9 million in the 2001 quarter, as compared to $50.4 million in the second quarter of 2000. Gross profit as a percentage of revenue decreased to 30.4% in the 2001 quarter from 34.3% in the 2000 quarter due primarily to lower margins at the Company's Midwest operations resulting from the aforementioned decrease in revenues. In accordance with accounting standards, the Company was required to reclassify its publishing business previously reported as a discontinued operation to "Net assets held for sale'' at June 30, 2001. Accordingly, the Company reversed the estimated loss on disposal of the publishing business, recognizing income from discontinued operations of $98.7 million and recognizing a related impairment charge of $97.8 million. Since the impairment charge is included as a component of the operating loss in the 2001 period, the Company had an operating loss of $102.8 million in the 2001 quarter, as compared to operating income of $4.6 million in the 2000 quarter. In addition to the aforementioned impairment charge, the operating loss in the second quarter of 2001 includes a restructuring charge of $1.2 million and a loss on disposal of equipment of $1.9 million primarily related to the Company's consolidation and integration efforts in the Midwest. The operating loss in the 2000 period includes a restructuring charge of $0.6 million and impairment charges of $1.2 million. The Company incurred a loss from continuing operations of $106.1 million in the 2001 quarter as compared to a loss of $1.7 million in the 2000 quarter. For the second quarter of 2001, the Company had a net loss of $7.4 million as compared to a net loss of $98.6 million for the same period of 2000, which included a loss from discontinued operations of $96.9 million. That $96.9 million loss primarily related to the estimated loss on disposal of the publishing business that was reversed in the 2001 period. The Company's revenues in the first six months of 2001 decreased by 19.4% to $234.8 million, as compared to revenues of $291.3 million in the same period of 2000. Gross profit was $70.9 million in the 2001 period, as compared to $97.4 million in the 2000 period. Gross profit as a percentage of revenue decreased to 30.2% in the first six months of 2001 from 33.4% in the 2000 period. The decrease in revenues and gross profit in the first six months of 2001 were the result of the same factors that adversely impacted the second quarter of 2001 as described above. The Company had an operating loss of $106.8 million in the first six months of 2001, as compared to operating income of $7.2 million in the 2000 period. In addition to the aforementioned impairment charge of $97.8 million, the operating loss in 2001 includes a restructuring charge of $1.2 million and a loss on disposal of equipment of $2.0 million primarily related to the Company's consolidation and integration efforts in the Midwest. Operating income in 2000 is net of a restructuring charge of $0.6 million and impairment charges of $1.2 million. The Company incurred a loss from continuing operations of $114.7 million in the first six months of 2001 as compared to a loss of $9.1 million in the 2000 period. For the first six months of 2001, the Company had a net loss of $16.0 million as compared to a net loss of $107.5 million in the 2000 period, which included a loss from discontinued operations of $98.4 million. Prior period share and per-share amounts have been adjusted for the effects of the Company's two-for-five reverse stock split on December 5, 2000.

 

 

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