MARKHAM, ON, Aug. 15 - PLM Group today reported net earnings of $1.2 million (4 cents per share basic and diluted) for the three months ended June 30, 2002. Included in net earnings was a $1.3 million (4 cents per share) income tax recovery attributable to its remaining operations in Cincinnati, Ohio. Net earnings for the second quarter of 2001 (as previously restated to conform to new CICA recommendations for foreign currency translation) were $0.9 million (3 cents per share basic and diluted). Prior to giving effect to this restatement of foreign exchange, the Company earned $0.2 million in the second quarter of 2001 or 1 cent per share. To be consistent with the current year's presentation, the Company has reclassified its 2001 results to segregate the contribution made by a divested operation - a Cincinnati-based packaging and fulfillment operation, sold effective January 1, 2002. At the time of divestiture, PLM America had operating losses available to offset future operating income in the amount of $3.7 million. Since that time, the remaining operations in Cincinnati have generated a continuing income stream. In accordance with GAAP, PLM has recognized the estimated income tax savings that will occur as a result of applying the accumulated losses of PLM America against this income stream. Based on the estimated ongoing effective tax rate of PLM America, this savings is estimated to be $1.4 million. Excluding this recovery, the Company posted a net loss from continuing operations of $0.04 million (0 cents per share). At $22.5 million, consolidated sales were off 10% from a record $25.1 million in the second quarter of 2001, due to the challenging nature of the commercial print market in Canada. Losses for the quarter were minimized through a combination of better efficiencies and operational enhancements. "From an operational perspective, the second quarter came in as predicted with soft demand throughout the industry and aggressive pricing, both of which impacted the Company's operating margin," said Barry Pike, PLM Chairman and Chief Executive Officer. Second Quarter Financial Results - The Company's web sales were flat in the second quarter compared to the second quarter of 2001, while sheet fed, imaging and direct mail all experienced lower volumes versus a year ago due to the economic environment. - At 29.0%, gross margin continued to be adversely affected by competitive pricing pressures and lower sales. Gross margin in the second quarter of 2001 was 30.3%. - EBITDA was $2.5 million (11.3% of sales) versus $3.3 million (13.1% of sales) in the same period a year ago. - At $4.0 million, compared to $4.3 million in the comparable quarter, selling and administrative expenses were marginally lower as the Company continued to aggressively manage its costs. Six Month and Period End Performance - Sales for the six months ended June 30, 2002 were $48.8 million versus $56.3 million in the corresponding period of 2001 due primarily to weaker market conditions and the previously reported merger of two clients which resulted in the discontinuation of one printing project which contributed to first quarter sales a year ago. - Gross margin was 28.5% versus 29.8% a year earlier, while selling and administrative expenses were flat year-over-year at $8.0 million. - EBITDA was $5.9 million (12.0% of sales), versus $8.7 million (15.5% of sales), reflecting lower sales and the competitive environment. - Net earnings were $1.9 million (7 cents basic and diluted) versus $1.2 million (4 cents basic and diluted) a year earlier. Results a year ago were restated to include a foreign exchange loss of $0.2 million or 1 cent per share. Results this year include an estimated savings of $1.4 million (4 cents per share) related to income tax losses of PLM America, as previously indicated. - PLM reduced long-term debt at June 30, 2002 to $18.7 million from $22.3 million at December 31, 2001 as part of its ongoing plan to further strengthen its balance sheet. At June 30, 2002, PLM's long-term debt to equity ratio was 48:52, significantly better than 55:45 at June 30, 2001. - Current ratio was 1.14:1 versus 1.08:1 at December 31, 2001. - The Company had $3.9 million in cash on hand versus $0.5 million at December 31, 2002. "PLM continues to make excellent progress in strengthening its balance sheet," said Peter Bradley, PLM Executive Vice President and CFO. "Since year-end, we have reduced long-term debt by almost $4 million. As well, positive cash flow has enabled us to increase cash on hand, which we will use to retire a $3.5 million debenture due to be repaid at the end of August. At the same time, we have continued to invest in our business to keep PLM at the forefront of printing technology. Over the course of the first half of 2002, capital expenditures have totaled $1.1 million - completely in line with our budget." Share Buyback As previously reported, PLM received Toronto Stock Exchange approval to repurchase - at current market prices - and cancel up to 1,375,000 of its common shares, representing approximately 5% of the 28,662,309 issued and outstanding common shares of PLM, as of February 25, 2002. The purchases will terminate on or before February 27, 2003. At June 30, 2002 the Company had repurchased 139,500 common shares and during July, 2002 repurchased an additional 148,000 shares. The average price of the re-purchased shares was 80 cents. Business Commentary "We expected the second quarter of 2002 to be the weakest quarter of the year," said Mr. Pike, "and yet PLM still managed to minimize losses as a result of continuing improvements on an operating basis. In the context of very difficult markets, that's a good accomplishment. What's even better is that we are maintaining our strong client connections and have continued to build deeper alliances with existing clients and some notable new customers. Our goal going forward is to translate customer interest in printing solutions into tangible sales, while also maintaining our focus on cost efficiency." Said David Stuart, PLM President and Chief Operating Officer: "In the past six months, PLM has become a much stronger and more efficient company. We've divested our Cincinnati operation, which was a drain on our core business, and restructured our operations to improve performance. But these are not the only steps we're taking to improve. In the second half of 2002, we expect to see internal improvements in a number of areas. These are not glamorous initiatives, but they will result in better performance for PLM, its customers and shareholders." Outlook Management believes the second half of 2002 will conform to traditional business patterns, meaning an improvement in sales volumes versus the first half of the year and the potential for better earnings. "Our outlook for the second half of 2002 has not changed since we last reported," said Mr. Pike. "We continue to be cautiously optimistic about PLM's prospects. Our enthusiasm is tempered somewhat because of the economic situation in the United States, which could spill over into our core Canadian markets. However, on the positive side, we should benefit from clients' seasonal fall and Christmas marketing programs. In fact, based on quotation activity this summer, there appears to be a fair amount of print work ready to hit the Canadian market, and this bodes well for the third and fourth quarters." About PLM Group PLM Group Ltd. is one of Canada's largest commercial printers providing single source web and sheet-fed print, visual, graphics and display services to leading companies in a number of industries, including financial services, automotive, pharmaceutical, healthcare and communications. Visit the Company's web site at www.plmgroup.com