VANCOUVER, British Columbia--May 4, 2005-- Creo Inc. today announced its financial results for the 2005 fiscal second quarter ended March 31, 2005, reported in U.S. dollars.
Revenue in the second quarter of 2005 was $164.0 million, an increase of 3.8 percent from $158.1 million in the second quarter of 2004 as a result of the growth in consumables revenue and the strength of the euro and yen compared to the U.S. dollar.
The company reported a net loss of $4.1 million or 7 cents per share for the second quarter of 2005 due to a higher than usual financial loss of 4 cents per share from the impact of foreign currency on net monetary assets and lower gross profit. The net loss in the second quarter of 2005 also includes 2 cents per share of restructuring and intangible asset amortization. This compares to net earnings of $2.0 million or 4 cents per diluted share for the second quarter of 2004 which includes 2 cents per diluted share of restructuring and intangible asset amortization offset by a foreign currency gain on net monetary assets of 2 cents per diluted share.
Gross margin in the second quarter of 2005 was 37.8 percent, compared to 42.0 percent in the second quarter of 2004. Shifts in product mix with the increase in thermal plate revenue, lower equipment margins, and the strengthened Canadian dollar compared to the U.S. dollar contributed to the decline in gross margin this quarter.
Total operating expenses of $67.0 million for the second quarter of 2005 increased compared to $63.9 million in the second quarter of 2004. The increase in operating expenses was largely due to the impact of foreign currency on net monetary assets as well as the appreciation of the Canadian dollar, euro and Israeli shekel compared to the U.S. dollar.
Cash used by operations was $8.3 million reflecting increased inventory investment in the thermal plate business, seasonal increases in vendor payments and the payment of annual benefits to North American employees. Cash inflows from the proceeds of stock option exercises by employees of $9.4 million were more than offset by the early repayment of the royalty arrangement liability to the Chief Scientist of Israel of $11.0 million. Cash on hand at quarter end was $68.8 million compared to $82.6 million as at September 30, 2004. Weighted shares outstanding (diluted) were 57,458,721 for the second quarter of 2005.
In light of the pending transaction with Eastman Kodak Company announced on January 31 and the uncertainty of its impact on operations, Creo will not be providing guidance for the third quarter of 2005. The proposed arrangement transaction with Kodak has been approved by the Creo board and has received requisite shareholder and court approval, and is subject to customary closing conditions including regulatory approvals.
On March 29, Creo and Kodak received a "no-action" letter from the Canadian Competition Bureau, indicating that the transaction will not be impeded under the Canadian Competition Act. On April 6, Kodak received approval for the transaction under the Investment Canada Act. On April 21, Creo was granted regulatory approval in connection with the transaction in Israel and on May 3 approval was received in the European Union. Creo and Kodak continue to work toward obtaining regulatory approvals in the United States and South Africa and completing the transaction in the summer of 2005.
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