MARKHAM, ON, Nov. 10 -- PLM Group today reported its financial results for the three months ended September 30th, 2005 - including a non-cash reduction in the carrying value of goodwill (see management commentary below) related to prior year acquisitions in the amount of $2.9 million (10 cents per share). After giving effect to the non cash reduction in the carrying value of goodwill, the Company reported a net loss of 11 cents per share (basic and diluted), compared to net earnings of 2 cents (basic and diluted) in the third quarter of 2004. The Company also continued to aggressively reduce debt - by $1.7 million during the quarter. Prior to the reduction in the carrying value of goodwill, the net loss of the company for the quarter was $194,000 (0 cents per share basic and diluted) compared to a net profit during the same quarter last year of $676,000 (2 cents per share basic and diluted). This decline results primarily from increased depreciation ($426,000) and an increase in selling and administrative costs ($257,000). Third Quarter Financial Highlights - Sales for the quarter were $27.1 million compared to $29.2 million year ago due to difficult market conditions and ongoing pricing pressure. - Gross margin was $7.7 million (28.6%), compared to $8.4 million (28.6%) a year ago, as the Company sustained margins by focusing on value-added assignments. - Selling, general and administrative expense increased 6% to $5.1 million from $4.8 million in the same period a year ago reflecting higher costs to support the development of new business and general wage increases. - Pre tax loss before interest, sale of capital assets and foreign exchange was $2.5 million, compared to pre-tax earnings of $1.6 million a year ago. The loss reflected the $2.9 million reduction in the carrying value of goodwill and a 21% increase in depreciation and amortization expense primarily related to the acquisition of a large format sheet fed press in the fall of 2004. - Interest expense of $0.4 million was $0.04 million lower than a year ago due to reduced borrowings. - Net loss was $3.1 million compared to net earnings of $0.7 million the third quarter of 2004. - Cash flow from operations continued to be strong at $2.9 million. As a result of the repayment of $1.7 million in long term debt during the quarter, the long-term debt to equity ratio improved to 35:65 at September 30, 2005 compared to 39:61 at December 31, 2004. Share Buyback During the third quarter, the Company repurchased for cancellation 546,700 common shares at an average price of $.98 under a normal course issuer bid launched June 27, 2005. The Company has the ability to repurchase and cancel up to 1,400,000 common shares at market prices during the year ended June 26, 2006. Nine Month Financial Highlights - Sales for the first nine months of 2005 were $84.5 million compared to $84.2 million. - Gross profit and margin were unchanged at $25.0 million (29.6% margin), compared to a year ago. - Selling, general and administrative expense increased 6.7% to $15.9 million from $14.9 million in the same period a year ago reflecting higher costs to support new business development and servicing. - Pre tax loss before interest, sale of capital assets and foreign exchange was $0.7 million, compared to pre tax earnings of $4.5 million in the corresponding nine months of 2004 reflecting the aforementioned write down in the carrying value of goodwill and a 25% increase in depreciation and amortization expense. - Interest expense was unchanged at $1.3 million in both the first nine months of 2005 and 2004. - Net loss was $2.5 million (-9 cents, basic and diluted) compared to net earnings of $1.9 million (7 cents basic, 6 cents diluted) a year ago. - Net income before the reduction in the carrying value of goodwill was $.4 million (1 cent per share basic and diluted). Management Commentary In commenting on the goodwill write down, Peter Bradley, Executive Vice President and CFO said: "Under the requirements recently issued by the Canadian Institute of Chartered Accountants, companies are required to evaluate goodwill recorded on their balance sheets on an annual basis to ascertain if there has been an impairment in the value of the goodwill. If so, the value of the impairment is to be reflected as an operating cost in the operating statement during the period when the impairment is first recognized. During the third quarter, PLM completed a review of the value of the goodwill recorded on prior year acquisitions and has reduced the carrying value of goodwill as a result. This charge is not tax deductible at this time and therefore no offsetting tax recovery has been recorded in the income statement. While this is disappointing, we continue to believe that these operations are important components of our value proposition going forward and are strategic assets that help to make us more competitive." "PLM's results to date this year are disappointing, particularly considering our track record of profitability coming into the period, but understandable given the state of the printing industry," said Barry N. Pike, Chairman and CEO. "While an operating loss is never acceptable, the fact is, this has been an extraordinarily difficult year for the industry overall and PLM continues to deliver complex, value-added assignments on an integrated basis. In periods like this, we believe it's important to stay focused on the fundamentals - giving great service, building new and existing customer relationships and improving our balance sheet - and this is what we've done." Said David Stuart, President and COO: "Year to date, we have managed to keep consolidated sales slightly ahead of 2004 levels, despite intense pricing pressure in the market caused by over-capacity. In this market, even a modest sales increase is an accomplishment. So too is the fact that we've kept sales close to last year, despite not receiving the expected benefit of the third quarter ramp up in volumes traditionally caused by fall marketing programs. A lack of customer promotions meant that sales were weak across the board in the most recent quarter. Printing sales were off 7% compared to last year's third quarter, while pre-media and large format digital printing sales were 10% lower." Outlook PLM expects the printing industry to remain intensely competitive for the remainder of 2005, making it difficult, short term, to achieve normal levels of growth and profitability. "While we are being very aggressive in pursuing new value-added assignments, and we're carefully controlling our expenses, market conditions will continue to negatively affect profitability in the fourth quarter," said Mr. Pike. "However, we believe that PLM will emerge from this downturn as a stronger and even more capable company." "To ensure this happens," said Mr. Stuart, "we are focused on improving the internal performance of all of our operations. This includes acquired businesses, which have been recently reorganized. We are now acquiring new, more productive equipment in specific segments of these operations and all told, we believe these steps will provide the basis for strong growth in the future."