VANCOUVER, British Columbia--Feb. 6, 2003-- Creo Inc. today announced financial results for the first quarter ended December 31, 2002, reported in U.S. dollars. For the fiscal 2003 first quarter, Creo revenue was $142.8 million, an increase of 3 percent from $138.4 million in the fourth quarter of fiscal 2002. Compared to the first quarter of 2002, revenue was up 2 percent from $139.5 million. Adjusted earnings were $2.4 million or $0.05 per share (diluted) compared to $2.8 million or $0.06 per share (diluted) in the previous quarter, and improved by $4.7 million over the adjusted loss of $2.3 million or $0.05 per share (diluted) reported in the 2002 first quarter. Under Canadian GAAP, Creo recorded earnings of $1.5 million or $0.03 per share (diluted) this quarter. Weighted shares outstanding (diluted) under Canadian GAAP were 50,267,797 for the period. The adjusted results for the 2003 first quarter exclude business integration costs, intangible asset amortization, and equity loss on investment. Further information on adjusted results is provided later in a note to this news release. "Creo reported its third sequential quarter of revenue growth. We saw improved performance in Europe and Asia this quarter and continued strength in our OEM business," stated Amos Michelson, chief executive officer of Creo. "Our balance sheet is healthy, and our cash position strong. However, the state of the global economy and the pace of recovery in the U.S. continue to concern us, and we are managing our business based on a prolonged recovery in graphic arts capital spending." 2003 First-Quarter Highlights * Gross margins remained constant at 44.2 percent this quarter compared to the previous quarter and improved by 280 basis points from 41.4 percent in the 2002 first quarter. * Net operating expenses excluding other income were $61.5 million during the 2003 first quarter, compared to $59.7 million in the previous quarter and $61.4 million in the 2002 first quarter. This quarter marks the first quarter of integration of the operations of ScenicSoft, Inc. * Cash from operations was $7.2 million this quarter compared to $14.4 million the previous quarter and $3.0 million in the 2002 first quarter. Free cash flow, defined as cash from operations less net capital expenditures, was $2.7 million this quarter. * Cash and cash equivalents were $69.9 million this quarter, reflecting $4.7 million paid as part of the ScenicSoft acquisition, compared to $70.7 million last quarter and $57.6 million in the 2002 first quarter. "In the current climate, we are focusing on growth markets and improving our sales execution. Consequently, we are seeing good results in both the newspaper and digital printing markets," Mr. Michelson continued. "In December we renewed our strategic agreement with Xerox for the supply of color servers for current and future Xerox high-speed digital printers. This agreement strengthens our long-term partnership, and recognizes Creo as a 'strategic vendor' to Xerox. We have also made significant inroads in the newspaper market. We signed a contract with NEC Engineering for the development and distribution of computer-to-plate (CTP) systems for the Japanese newspaper market and have already installed the first system. We are enjoying strong sales in the newspaper markets worldwide having come from a standing start less than two years ago. To date we have sold 107 newspaper CTP devices around the world." Outlook For the second quarter ending March 31, 2003, Creo expects revenue between $141 and $145 million. Gross margins are expected to be stable and net operating expenses (excluding other income) for the second quarter are expected to be between $63 and $64 million. As a result Creo is forecasting adjusted earnings per share (diluted) between $0.01 and $0.05 for the second fiscal quarter. These forecasts do not take into consideration the effect of a purchase of shares in Printcafe Software, Inc. announced subsequent to the quarter end. "Creo will continue to manage its business conservatively given the uncertain economic climate around the world," commented Mark Dance, chief financial officer and chief operating officer of Creo. "As we previously stated, we expect an increase in operating expenses in the second fiscal quarter, since restoring salaries after one year of reduced cash compensation. However, we will reduce operating expenses in the subsequent quarters, and expect our net operating expenses to decline to below $62 million by the fourth fiscal quarter. This should allow us to continue to improve our profitability despite the uncertain economic climate." Mr. Dance concluded, "As part of our commitment to enhancing our financial disclosure, this quarter Creo is providing segmented revenue by economic region, as well as our statement of cash flows. In addition we have adopted the new disclosure standards for the accounting treatment of stock-based compensation. As a result, in our quarterly report we will disclose the impact of our stock option plan as if we had expensed the fair value of the options under Canadian GAAP. We are also in compliance with the corporate governance guidelines of the Toronto Stock Exchange and the Nasdaq Stock Market and are committed to being a leading company in this regard."