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PrimeSource Reports Earnings, Lower Sales From Canopy, Film

Press release from the issuing company

PENNSAUKEN, N.J.-Aug. 2, 2001--PrimeSource Corporation, the leading distributor and digital workflow integrator to the printing and publishing industry, today announced results for the second quarter and first six months of 2001. Second-quarter sales were $121.1 million compared to $135.7 million for last year's second quarter. Net income for the second quarter, excluding one-time charges and the Company's share of the operating loss incurred by Canopy, LLC, was $1.1 million or $.18 per diluted share, versus $1.4 million, or $.22 per diluted share, for the same period in 2000. The Company recorded a one-time, after-tax charge of $459,000, or $.07 per diluted share, reflecting a reduction in the workforce in every area of its operations, as well as for the consolidation of several facilities. The Company's loss from Canopy, LLC, was $636,000, or $.10 per diluted share, for the second quarter. Including the one-time charge and the net loss from Canopy, net income was $28,000. For the first six months of 2001, sales were $250.4 million compared to $277.2 million for last year's first half. Net income, excluding the one-time charge and the net loss from Canopy, was $2.54 million, or $.40 per diluted share, versus $2.76 million, or $.43 per diluted share for the first half of 2000. Including the one-time charge of $459,000, or $.07 per diluted share and the six-month loss from Canopy of $1.3 million, or $.20 per diluted share, net income was $804,000, or $.13 per diluted share. James F. Mullan, chairman, president and chief executive officer, said, "Our sales results reflected weak industry conditions, particularly in capital equipment. Film sales continue to be adversely affected by the ongoing transition to digital technology, as well as by reduced print demand. Canopy's results continue to be well below our expectations.'' Mr. Mullan stressed, "We have made difficult decisions as a result of the ongoing economic downturn in our industry that will result in a cost structure that better reflects the current level of our business. The one-time, pre-tax charge of $780,000 should result in approximately $4 million in annualized savings over the next 12 months.'' Mr. Mullan continued, "Cash generated by operating activities was $12.7 million, reflecting our $10 million reduction in total debt since year-end 2000. Over the last 30 months, we have reduced debt by 43% or $34 million. We also have improved gross margins, controlled our overhead costs and reduced interest expense through working capital management.'' Mr. Mullan concluded, "PrimeSource's primary business, in spite of industry sluggishness and transitions in technology, continues to be resilient. We are aggressively managing all areas of our business and look forward to improved operating results over the next several quarters. We are now in a position to take full advantage of an economic upturn.'' Finally, the Board of Directors today declared a regular quarterly cash dividend of $.0475 per share. The dividend is payable on September 4, 2001 to shareholders of record as of the close of business on August 16, 2001.