Creo Records 9% Revenue Increase in Q4, Xerox Partnership Noted
Press release from the issuing company
BURNABY, British Columbia--Nov. 13, 2003-- Creo announced its financial results for the fiscal year and fourth quarter ended September 30, 2003, reported in U.S. dollars.
For the 2003 fourth quarter, revenue was $150.3 million, up 9 percent from $138.4 million in the same quarter last year and up 5 percent from $143.5 million in the prior quarter. During the fourth quarter of 2003, Creo recorded GAAP net earnings of $2.4 million or 5 cents per diluted share compared to net earnings of $0.6 million or 1 cent per diluted share in the 2002 fourth quarter and $2.8 million or 5 cents per diluted share in the prior quarter. Adjusted earnings were $3.6 million or 7 cents per diluted share in the 2003 fourth quarter compared to $2.8 million or 6 cents per diluted share in the 2002 fourth quarter and $3.6 million or 7 cents per diluted share in the prior quarter.
For the year ended September 30, 2003, revenue was $578.0 million, an increase of 7 percent from $539.9 million for the same period in 2002. Also for the year ended September 30, 2003, GAAP earnings were $5.5 million or 11 cents per diluted share compared to a loss of $24.3 million or 49 cents per share for the same period in 2002. Adjusted earnings were $12.5 million or 25 cents per diluted share in fiscal 2003, compared to adjusted earnings of $0.1 million or breakeven per diluted share for the same period in 2002.
Adjusted earnings is a non-GAAP measure. For the 2003 fourth quarter and year-end it excludes restructuring and business integration costs, intangible assets amortization and their tax effects and in the 2003 fiscal year equity loss on investment. Further information and a full reconciliation are provided in the GAAP Earnings (Loss) Reconciliation and in a note later in this news release.
"Creo closed its fiscal year with the highest quarterly revenue in over two years, while recording annual growth in both revenue and profitability. In the fourth quarter, our results reflected the seasonal strength of our digital printing business with Xerox, as well as improved sales in the Americas and continued growth in Asia-Pacific," said Amos Michelson, chief executive officer of Creo. "For the fiscal year, revenue in Europe, Middle East, and Africa (EMEA) and Asia-Pacific was well above last year, due to improved sales as well as foreign currency gains. Our campaign to expand the market for our computer-to-plate solutions and penetrate the commercial market of small to mid-sized printers gained traction through the year against tough competition. As planned, our consumables bundling strategy has helped maintain our gross margins in the Americas. We intend to capitalize on the recent launch of Creo's digital printing plate to strengthen margins and to build our market share in all regions. Creo can now provide complete solutions, including our own plates and proofing materials, for all sizes of printers."
Mr. Michelson continued, "We aim to increase the recurring portion of our revenue from digital media as we expand sales of plates, proofing ink and paper. Our key priorities for the next year are to continue to penetrate our targeted growth markets and regions, focus on growth products, roll out our digital media strategy worldwide, and control costs to achieve our operating goals."
Gross margin was 44.1 percent this quarter, down from 44.2 percent in the 2002 fourth quarter and down from 45.2 percent in the prior quarter. Gross margin for fiscal 2003 was 44.6 percent, up 140 basis points from 43.2 percent in fiscal 2002.
Net operating expenses were $62.8 million this quarter including $1.2 million in severance costs in EMEA due to restructuring activities compared to $59.7 million in the 2002 fourth quarter and $62.9 million in the prior quarter. Net operating expenses were $249.7 million in fiscal 2003 compared to $238.5 million in fiscal 2002.
Cash and cash equivalents at September 30, 2003 were $59.0 million, compared to $70.7 million in the prior year's quarter and $77.2 million in the prior quarter. In the 2003 fourth quarter, Creo repaid the balance of short-term debt of approximately $15.1 million owed by Creo Japan Inc.
Subsequent to the quarter-end Creo received $22.1 million from the sale of our equity holding in Printcafe Software, Inc. and collection of the outstanding loan to Printcafe.
Mark Dance, chief financial officer and chief operating officer of Creo, stated, "We are encouraged by our progress this fiscal year. We have executed well and have returned the company to profitability despite a challenging competitive climate and exchange rate pressure on our costs. Our balance sheet has strengthened. During the fourth quarter we paid off the outstanding debt in Japan and then added $22.1 million from Printcafe to our cash balance subsequent to quarter-end."
Weighted shares outstanding (diluted) under GAAP were 50,677,041 for the three months ended September 30, 2003 and 50,520,203 for the year ended September 30, 2003.
"We expect revenue in our first fiscal quarter to be similar to that of the fourth quarter, as strength in EMEA, Asia-Pacific and our digital printing business with Xerox is likely to be offset by a temporary lag in the Americas," commented Mr. Dance. "Our growth next year will be driven by the execution of our digital media strategy, and we will continue to adjust our cost structure to improve our competitiveness and to respond to currency exchange fluctuations."
For the fiscal first quarter ending December 31, 2003, Creo expects revenue between $148 million and $153 million. The company is forecasting GAAP earnings per diluted share between 19 and 25 cents for the 2004 fiscal first quarter. The guidance for the 2004 fiscal first quarter includes the one-time impact from the Printcafe equity transaction.
The guidance for the 2004 fiscal first quarter is based on foreign exchange rates on October 30, 2003.
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