Applied Graphics Technologies Reports Q2 Revenue $105.9 Million
Thursday, August 15, 2002
NEW YORK, Aug. 14 -- Applied Graphics Technologies, Inc., today reported results for the six and three months ended June 30, 2002. "We continue to experience revenue shortfalls as compared to 2001 as a result of the continuing slump in the advertising market," said Joe Vecchiolla, President and Chief Operating Officer of AGT. "The overall economy in general, and the advertising market in particular, remains soft. Our operational integration and cost cutting efforts, however, enabled us to continue to improve our profitability and gross margins. "During the second quarter of 2002, we completed the integration of our operations in Chicago and the metropolitan New York region," continued Mr. Vecchiolla. "We also initiated action in July 2002 to integrate our operations in Grand Rapids and Battle Creek. Completion of these integration efforts will further streamline our operations and provide us with a greater opportunity to realize the maximum benefit of any economic recovery in future periods. "As we recently disclosed in our Forms 8-K filed with the SEC, in July 2002 we initiated a tender offer to acquire all of our outstanding subordinated notes for an aggregate purchase price of $3 million," continued Mr. Vecchiolla. "The tender offer is another step in our efforts to achieve an overall restructuring of our debt. We continue to be in discussions with our senior lenders in an effort to extend the term of our existing credit facility, which matures in April 2003," concluded Mr. Vecchiolla. The Company's revenues in the second quarter of 2002 totaling $105.9 million were $12.9 million, or 10.9%, lower than the comparable quarter of 2001. This decrease resulted primarily from the relative softness in the advertising market in the second quarter of 2002 as compared to the prior year, which had an adverse effect on the Company's operations servicing advertising agencies and magazine publishers. Gross profit was $34.6 million in the 2002 quarter, as compared to $35.9 million in the 2001 quarter, but as a percentage of revenue increased to 32.7% in the 2002 quarter from 30.2% in the 2001 quarter. This increase in gross margin was due primarily to the benefits realized from the Company's cost cutting and integration efforts that offset the adverse impact of the aforementioned decrease in revenues. The Company had operating income before amortization and other charges of $4.5 million in the 2002 quarter, as compared to $1.5 million in the 2001 quarter. Operating income of $2.8 million in the second quarter of 2002 includes an impairment charge of $1.4 million related to a contingent payment made for a prior period acquisition. The Company's revenues for the six months ended June 30, 2002, of $204.5 million decreased $32.1 million, or 13.6%, from the comparable period in 2001. This decrease resulted primarily from the same factors that adversely impacted the second quarter of 2002. Gross profit was $65.5 million in the 2002 period, as compared to $70.9 million in the 2001 period, but as a percentage of revenue increased to 32.0% from 30.0%. The Company had operating income before amortization and other charges of $4.8 million in the 2002 period as compared to 2001. Operating income of $3.1 million in the first half of 2002 includes an impairment charge of $1.4 million related to a contingent payment made for a prior period acquisition. The net loss of $340.6 million in the first half of 2002 includes an impairment charge of $327.9 million related to the Company's goodwill. The impairment charge was incurred upon the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," and is reported as a cumulative effect of a change in accounting principle. The net loss also includes a loss from discontinued operations of $5.8 million related to Portal Publications Ltd., the Company's publishing business, that was sold in April 2002.