VANCOUVER, BRITISH COLUMBIA--Feb. 4, 2002--Creo Products Inc. today announced financial results for the three months ended December 31, 2001, reported in U.S. dollars. For the first quarter of 2002, Creo recorded revenues of $139.5 million compared to $143.2 million in the fourth quarter of 2001. Adjusted loss for the first quarter of 2002 was $2.3 million or $0.05 per share (diluted). This compares to an adjusted loss of $5.7 million or $0.12 per share (diluted) for the last quarter. The adjusted results exclude restructuring, business integration costs, goodwill and other intangible assets amortization, and one-time write-downs. "This quarter we achieved a $3.4 million improvement in our bottom line over last quarter. We are pleased to see that cost control measures have improved our results despite the continued weakness in the economy,'' stated Amos Michelson, chief executive officer of Creo. "The continued economic uncertainty is apparent in the results reported today. However, we see indications of increased sales activity that we expect to be reflected in our revenues, provided the U.S. economy continues on the path for growth in the second half of this calendar year.'' Mr. Michelson continued, "We have implemented strategic initiatives to reduce expenses through deliberate cost reduction measures and increase revenue through focused R&D efforts. During the quarter we continued to focus on making the latest digital prepress technology accessible for mid-sized and smaller printers through our line of entry-level products and consumable partnerships. We believe that Creo continues to be in a good position to take advantage of the inevitable digitization of the graphic arts market.'' Highlights * In January 2002, Creo launched Six Degrees software - a new product for the creative desktop, which dramatically improves the way content creators and creative professionals work with their projects -- at the MacWorld Conference and Expo held in San Francisco. Six Degrees was awarded the prestigious "MacWorld Best of Show Award.'' The Best of Show Awards are presented to the most exciting hardware and software products featured at the four-day MacWorld exhibit. Creo plans to begin sales of the product at MacWorld New York in July 2002, and European-language versions will follow in September. * Creo also launched its new graphic look and web site at MacWorld, consolidating all business activities and subsidiaries worldwide under a single name and logo: Creo. * Net operating expenses were reduced by approximately $5.6 million due to cost reduction programs and reduction in activity. * Gross margins remained stable at 41 percent. * Accounts receivable and other receivables were reduced by $13.6 million or approximately 8 percent. * Inventory decreased from $99.4 million last quarter to $93.6 million this quarter. "We focused our collection efforts, and were able to reduce days sales outstanding to 80 days this quarter from 88 days last quarter,'' stated Mike Graydon, chief financial officer of Creo. "Creo closed the quarter in a strong financial position with a cash balance of approximately $57 million.'' For the first quarter of 2002, Creo achieved revenues of $139.5 million compared to $170.4 million in the first quarter of 2001. Adjusted loss for the first quarter of 2002 was $2.3 million or $0.05 per share (diluted). This compares to adjusted earnings of $10.0 million or $0.20 per share (diluted) for the same period a year ago. Under U.S. GAAP, Creo recorded a loss of $5.4 million or $0.11 per share (diluted) for the first fiscal quarter, and under Canadian GAAP, the company reported a loss of $5.0 million or $0.10 per share (diluted). 2002 Outlook "The economic climate continues to be challenging,'' commented Mr. Graydon. "We expect revenue for our second quarter of 2002 to be moderately lower than for the first quarter and our bottom line to show some continued improvement.'' Subsequent Events Subsequent to the quarter end, in January 2002, Creo extended $23.6 million of secured long-term debt to printCafe, Inc., an important strategic partner for Creo. The Creo Networked Graphic Production initiative is leading the graphic arts industry into a fully digitized world. This solution leverages existing prepress solutions to link production and business systems from the creative desktop to the delivery of the finished product. By integrating content production workflows from Creo with print management systems from printCafe, customers can take advantage of a fully integrated production environment. Also in January 2002, Creo entered into an agreement for the early repayment of royalties to the Government of Israel relating to grants received for research and development. Pursuant to the agreement, Creo will pay approximately $21.5 million over the next five years in lieu of future royalty obligations. This amount, adjusted for amounts previously accrued, will be reflected as a one-time charge of approximately $15 million to the income statement in the second quarter of 2002. The agreement will allow Creo to qualify for a recently announced program that allows for royalty-free grants to offset future R&D. Management Changes Mark Dance was appointed chief financial officer effective April 30, 2002. Mr. Dance remains a director of the company and chief operating officer. Mr. Dance was most recently the President of the Creo graphic arts division, a position that will be filled by Judi Hess, who currently holds the position of Corporate VP, Printing Workflow Systems. Mr. Dance will replace Michael Graydon who will continue with Creo in an advisory role.