Creo Announces Fiscal Q2 Results: Sales Up 9% Versus 2002
Press release from the issuing company
VANCOUVER, British Columbia--May 7, 2003-- Creo Inc., the world leader in digital prepress solutions for the graphic arts industry, today announced its financial results for the second quarter ended March 31, 2003, reported in U.S. dollars.
For the 2003 second quarter, Creo revenue was $141.5 million, up 9 percent from $130.1 million in the 2002 second quarter and comparable with $142.8 million in the 2003 first quarter. In accordance with Canadian GAAP, Creo recorded a loss of $1.2 million or $0.02 per share this quarter compared to a loss of $17.1 million or $0.35 per share in the 2002 second quarter and net income of $1.5 million or $0.03 per share (diluted) in the previous quarter. Adjusted earnings of $2.9 million or $0.06 per share (diluted) this quarter were higher than company guidance and represent an improvement of 8 cents per share from the prior year and 1 cent per share over the last quarter.
For the six-month period ended March 31, 2003, Creo revenue was $284.2 million, an increase of 5 percent from $269.6 million in the six-month period ended March 31, 2002. The GAAP earnings were $0.3 million or $0.01 per share (diluted) for the six-month period ended March 31, 2003 compared to a loss of $22.1 million or $0.45 per share for the prior year. Adjusted earnings of $5.3 million or $0.11 per share (diluted) for the six-month period ended March 31, 2003 compared to an adjusted loss of $3.4 million or $0.07 per share in the same period in the prior year.
Adjusted earnings is a non-GAAP measure and excludes equity loss on investment, restructuring and business integration costs, the royalty arrangement with the Office of the Chief Scientist in Israel, intangible assets amortization and their tax effects. Further information on the company's adjusted results is provided in the Statement of Adjusted Earnings (Loss) and in a note later in this news release.
"Our financial performance this quarter improved significantly over last year and was comparable to the prior quarter," stated Amos Michelson, chief executive officer of Creo. "As expected, there was a seasonal reduction in our OEM business, offset by improvements in the EMEA region. Despite the general economic conditions and uncertainty in the U.S. market, we are encouraged by the positive impact of our focused effort to improve performance in Europe and Asia. This environment calls for continued attention to execution and vigilant effort to ensure that we can meet or exceed our operating goals."
Mr. Michelson continued," We reached a major milestone this quarter, when we shipped Creo's 5000th computer-to-plate system (CTP), confirming our clear leadership with over one-third of all CTP devices installed. Even in this economically challenging time, our customers have shown that by utilizing Creo systems effectively they can reduce costs, generate competitive differentiation and increase efficiency. Creo continues to execute on our strategy of delivering highly optimized solutions with compelling payback for our customers."
2003 Second-Quarter Highlights
Gross margins increased to 45 percent this quarter, up 220 basis points from the 2002 second quarter and up 80 basis points from the 2003 first quarter. The gross margin improvement in the 2003 second quarter resulted from improved product mix and increased service profitability due to higher efficiency.
Net operating expenses were $62.4 million during the 2003 second quarter compared to $58.2 million in the 2002 second quarter and $61.5 million in the prior quarter. This quarter's results include the first full quarter's expenses from Creo's new production planning software product group following the acquisition of ScenicSoft, Inc. and the effect of a return to market salaries after a one year reduction during 2002. A reconciliation of net operating expenses to GAAP operating expenses is provided at Creo's web site. Cash and cash equivalents were $62.3 million this quarter. Subsequent to the quarter-end, Creo received approximately $18.8 million from Scitex Corporation Ltd. ("Scitex") as a final payment relating to the April 2000 acquisition of the Scitex prepress business.
Cash used by operations was $0.5 million this quarter compared to cash from operations of $2.7 million in 2002 second quarter, and $7.2 million in the 2003 first quarter due to the payment of accrued annual employee benefits and reduction of trade payables.
Weighted shares outstanding (diluted) under GAAP were 49,792,478 for the three months ended March 31, 2003.
Mark Dance, chief financial officer and chief operating officer of Creo commented, "While we continue to see good performance in Europe and Asia, this quarter we did experience the slowdown in North American graphic arts capital spending that we foresaw at the beginning of the quarter and this will cut into our third quarter revenues. We are forecasting third quarter revenues to decline sequentially, although remaining above last year's level. Revenue in the fourth quarter is expected to return to the level of the first two quarters of fiscal 2003 based on the seasonal strength of our OEM business and new product offerings. We will continue to manage prudently and plan to capture further operational improvements and savings. We intend to bring net operating expenses to a run rate below $60 million by the end of the fourth fiscal quarter."
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