Creo Announces 2001 Results, To Continue Cost Cutting Measures
Press release from the issuing company
VANCOUVER, B.C.--Nov. 19, 2001--Creo Products Inc. today announced financial results for the three months and fiscal year ended September 30, 2001, reported in U.S. dollars.
For the fourth fiscal quarter of 2001, Creo achieved revenues of $143.2 million compared to $173.3 million in the fourth quarter of 2000. Adjusted loss for the fourth quarter was $5.7 million or $0.12 per share (diluted). This compares to adjusted earnings of $16.0 million or $0.32 per share (diluted) for the same period a year ago. For the fiscal year ending September 30, 2001, Creo achieved revenues of $656.5 million, an increase of 45 percent, compared to $453.3 million in the fiscal year ending September 30, 2000. This increase was primarily the result of the company's April 2000 acquisition of the prepress division of Scitex Corporation Ltd. Adjusted earnings for Creo were $27.1 million or $0.54 per share (diluted) for the fiscal year ending September 30, 2001 compared to adjusted earnings of $41.9 million or $0.97 per share (diluted) for the same period a year ago. Adjusted results exclude the effects of severance costs, business integration costs, the amortization of goodwill and intangibles, and one-time write-downs.
"This year we achieved the largest sales in our history,'' stated Amos Michelson, chief executive officer of Creo. "We also aligned our worldwide product and regional leadership team, released the Lotem(TM) Quantum into full production and launched new initiatives in the packaging and newspaper markets. However, we are not immune to the challenging economic environment, and as a result we are continuing to take actions not only to reduce expenses, but also to build our leadership position.''
Mr. Michelson continued, "Recognizing that an economic recovery is not likely anytime before the second half of calendar 2002, Creo has expanded its cost-savings program. When combined with the cost savings measures implemented in August, these new measures will allow us tocontinue to invest in direct sales and service capability and sustain our new product initiatives. New cost cutting measures include a worldwide reduction in salary and benefits, which will be offset by stock options to be issued and priced in July 2002. In addition, we will be consolidating certain manufacturing operations and restructuring some operational management roles as we implement our ERP system this year.''
Creo will be restructuring its employee stock option incentive plan by allowing employees to voluntarily cancel their unvested options and to surrender their vested options in exchange for new options to be issued and priced in July 2002 at ratios between approximately 1.5:1 to 3:1. Senior management will be reducing their salary and benefits for offsetting stock options as part of the cost reduction, however along with directors will not be able to exchange their existing options under the stock option incentive plan. The proposed option allocation together with the restructuring of the option plan will not increase the number of issued and outstanding options.
"On the product front, we are continuing to pursue our growth strategy of driving the digitization of the graphic arts business,''stated Mr. Michelson. "Our consumables partnerships, entry-level CTP solutions and the Networked Graphic Production initiative are being rolled out as planned, and we look forward to significant new developments on these fronts throughout the coming year. In addition, we intend to consolidate our corporate image and product marketing under the Creo brand. This single strong brand will span all our business activity - from our current activities in the graphic arts, to developments in new markets - and is linked with our corporate performance via our stock ticker symbol. In January 2002, in conjunction with an important new product announcement at Macworld, we will retire the CreoScitex brand and introduce the new Creo.''
* Consumables partnerships build vendor and customer relationships by bundling equipment with competitively priced consumables including thermal plates, films and proofing media.
* Entry-level CTP solutions expand Creo's available market by targeting a new range of mid-size and smaller printers with a range of entry-level products that combine Creo's reputation for quality and reliability with lower inherent cost and economies of scale.
* The Networked Graphic Production initiative leverages existing Creo prepress solutions to link production and business systems from the creative desktop to the delivery of the finished product.
* Accounts receivable and other receivables were reduced by $44.0 million or 21 percent in fiscal 2001, including a reduction of $15.7 million this quarter.
* Inventory decreased by $41.6 million or 29 percent in fiscal 2001, including a reduction of $4.7 million this quarter.
"We made significant reductions in the receivable and inventory balances this fiscal year resulting in an increase of $15 million in our cash position. Creo achieved real operational reductions of accounts receivable by 15 percent and inventories by 17 percent this year,'' stated Mike Graydon, Creo's chief financial officer. "Creo remains in a strong financial position with a cash balance of over $60 million.''
"We are clearly the leader in digital prepress,'' commented Mr. Michelson. "We continue to be in a good position to weather this downturn with the strongest product offering, recurring revenue from service and consumables, and a proven capability to deliver value by making our customers more successful.''
"Although the economic climate continues to be challenging and uncertainty persists,'' commented Mr. Graydon, "Creo expects results for our first quarter 2002 to be in line with or somewhat better than the previous quarter.''
Fourth Quarter Charges
As announced on August 2, Creo reduced its workforce by approximately 200 positions, affecting about 5 percent of its total workforce. Creo took a pre-tax restructuring charge of $4.1 million or $2.7 million after tax in the fourth quarter of this fiscal year, covering all of the planned headcount reduction.
As announced on October 11, one-time charges in the fourth quarter include $9.6 million (after tax) of accounts receivable, obsolete inventory and other assets; $265.7 million of goodwill and other intangibles; $70.5 million of investments; and $9.0 million of future tax assets.
Under U.S. GAAP, Creo recorded a loss of $351.4 million or $7.17 per share (diluted) for the fourth fiscal quarter, and under Canadian GAAP, the company reported a loss of $381.9 million or $7.79 per share (diluted). For the fiscal year ending September 30, 2001, Creo reported a loss of $380.9 million or $7.86 per share (diluted) under U.S. GAAP, or a loss of $414.8 million or $8.56 per share (diluted) under Canadian GAAP.
During the fourth quarter Creo made reporting changes for all periods presented, including a reclassification of cost of sales, research and development, general and administration, and sales and marketing expenses, to standardize accounting treatment across the company.
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