VANCOUVER, British Columbia--Aug. 7, 2002--Creo Inc. today announced financial results for the quarter ended June 30, 2002, reported in U.S. dollars. For the third fiscal quarter of 2002, Creo recorded revenues of $131.8 million compared to $130.1 million in the second fiscal quarter of 2002. Adjusted earnings for the third fiscal quarter of 2002 were $0.6 million or $0.01 per share (diluted) compared to an adjusted loss of $1.0 million or $0.02 per share (diluted) for the last quarter. This compares to revenue of $170.0 million and adjusted earnings of $10.0 million or $0.20 per share (diluted) for the same period a year ago. The adjusted results for the 2002 third quarter exclude restructuring and business integration costs, equity loss on investments, the amortization of intangible assets and their tax effects. Under Canadian GAAP, the company reported a loss of $2.8 million or $0.06 per share (diluted) this quarter. In accordance with U.S. GAAP, Creo recorded a loss of $3.2 million or $0.06 per share (diluted) for the third fiscal quarter. Weighted shares outstanding (diluted) under U.S. and Canadian GAAP were 49,741,701 for the period. "This quarter Creo returned to profitability on an adjusted basis and we strengthened our balance sheet. The improved earnings are due to better gross margins from increased product sales and higher investment income. Our revenue also increased slightly, primarily due to the positive effects of foreign currency exchange," stated Amos Michelson, chief executive officer of Creo. "Our North America business has been improving steadily throughout the year and we attained good results in Asia. We did experience some instability in the European market, but this was offset by the strengthening Euro." For the nine months ended June 30, 2002, Creo achieved revenues of $401.4 million, compared to $513.3 million in the nine months ended June 30, 2001. Adjusted loss for Creo was $2.7 million or $0.06 per share (diluted) for the nine months ended June 30, 2002 excluding restructuring costs, business integration costs, equity loss on investments, royalty payments, the amortization of intangible assets and their tax effects. This compares to adjusted income of $32.8 million or $0.65 per share (diluted) for the same period a year ago. In accordance with Canadian GAAP, the company recorded a loss of $24.9 million or $0.50 per share (diluted) for the nine months ended June 30, 2002 and under U.S. GAAP, Creo reported a loss of $36.8 million or $0.74 per share (diluted). Mr. Michelson continued, "We are building upon our strategy for the small to mid-size printers by combining entry-level products, consumables bundling capability and leasing packages. While graphic arts capital spending has slowed this year, the competitive advantage of computer-to-plate systems and digital workflow is reinforced every day through the success of our customers." Highlights * Gross margins increased to 44.5 percent this quarter from 42.8 percent last quarter due to an increase in product sales. * Cash and cash equivalents improved by $29.6 million to a balance of $62.9 million for the third quarter from $33.3 million in the second quarter, reflecting cash from operations of $21.2 million, debt repayment from Printcafe (net of investments) of $11.7 million, and foreign exchange and other effects of $1.7 million, offset by capital expenditures of $5.0 million. * Creo introduced a new leasing program to customers in Europe. The company plans to expand third-party financing to other areas of the world where Creo does business. With this new leasing capability European customers can now combine their purchases of Creo prepress equipment into a single monthly lease payment as North American customers have done since 1999. * In June, Creo signed a multi-million dollar agreement with DuPont Imaging Technologies to develop equipment for a newDuPont thermal color filter system to be used for manufacturing color filter components used in liquid crystal displays (LCDs). * Creo signed a multiyear contract with Koenig & Bauer AG (KBA) for on-press thermal imaging technology. KBA agreed to have Creo as its exclusive supplier of thermal imaging heads for its 74 Karat digital offset press. Under the new agreement, Creo will also develop software and hardware for future applications in the digital printing market and provide technical support for KBA, the world's third-largest manufacturer of printing presses. "This quarter we increased our cash balance by $29.6 million, primarily due to improved accounts receivable collections, the one-time repayment of half of the Printcafe debt, and the timing of customer prepayments," commented Mark Dance, chief financial officer and chief operating officer of Creo. "Operationally, accounts receivables decreased $5.5 million, offset by the strengthening Euro and deferred revenue increased by $7.4 million." Outlook For the fourth quarter ending September 30, 2002, Creo expects revenue between $132 and $136 million, and the company expects adjusted earnings per share between $0.01 and $0.03. Net operating expenses (excluding other income) for the fourth quarter are expected to be between $59 and $61 million. "While we remain cautious about the second half of this calendar year, we see Europe stabilizing while Asia appears steady and the North American market is showing a slow upward trend," Mr. Dance concluded. "Barring a renewed slowdown in the global economy, we expect our results to improve as new products come to market and as capital spending in the graphic arts market recovers."