Creo Announces Improved 2Q Results, Strengthens Competitive Position
Press release from the issuing company
VANCOUVER, British Columbia--May 7, 2002--Creo Inc. today announced financial results for the quarter ended March 31, 2002, reported in U.S. dollars.
For the second fiscal quarter of 2002, Creo recorded revenues of $130.1 million compared to $139.5 million in the first fiscal quarter of 2002. Adjusted loss for the second fiscal quarter of 2002 was $1.0 million or $0.02 per share (diluted) compared to an adjusted loss of $2.3 million or $0.05 per share (diluted) for the last quarter. This compares to revenue of $172.9 million and adjusted earnings of $12.8 million or $0.25 per share (diluted) for the same period a year ago. The adjusted results exclude a one-time royalty arrangement, restructuring costs, business integration costs and intangible assets amortization.
Under Canadian GAAP, the company reported a loss of $17.1 million or $0.35 per share (diluted) this quarter. In accordance with U.S. GAAP, Creo recorded a loss of $18.2 million or $0.37 per share (diluted) for the second fiscal quarter. Weighted shares outstanding (diluted) for the period were 49,448,986.
"Our adjusted loss improved by $1.3 million as a result of the continued savings and efficiencies realized from our cost reduction program, despite the expected reduction in revenue this quarter," stated Amos Michelson, chief executive officer of Creo. "Print industry reports show a steady rise in the volume of print shipments in North America this year, as well as an upward trend in printer's confidence and buying intention. We saw improved results from our U.S. sales channel this quarter, although our results from Europe and Asia were mixed. We are encouraged by the positive indicators in North America, but there is still considerable distance to go before we approach the graphic arts equipment spending levels of the last few years."
Mr. Michelson continued, "We had a great response to our exhibit at IPEX, the largest printing and graphic arts trade show of 2002, which was held last month in the UK. At this tradeshow we introduced a number of significant products that will allow us to reach new customers and to leverage our existing installed base. These new products continue to add to our technology leadership, and augment the strongest and broadest product offering in the industry."
For the six months ended March 31, 2002, Creo achieved revenues of $269.7 million, compared to $343.3 million in the six months ended March 31, 2001. Adjusted loss for Creo was $3.3 million or $0.07 per share (diluted) for the six months ended March 31, 2002 excluding a one-time royalty agreement, restructuring costs, business integration costs and intangible assets amortization. This compares to adjusted income of $22.8 million or $0.45 per share (diluted) for the same period a year ago.
In accordance with Canadian GAAP, the company recorded a loss of $22.1 million or $0.45 per share (diluted) for the six months ended March 31, 2002 and under U.S. GAAP, Creo reported a loss of $33.6 million or $0.68 per share (diluted). As a result of the restructuring of the employee stock option incentive program, the company accelerated the amortization of the non-cash stock compensation expense under U.S. GAAP related to the cancellation of stock options. The non-cash impact of the acceleration of the stock compensation expense amortization is $10.1 million in the first quarter and $0.6 million in the second quarter. As a result, the company's net loss under U.S. GAAP for the first quarter has been restated to $15.4 million or $0.31 per share (diluted). There is no change to the company's reported results under Canadian GAAP and the U.S. GAAP results for this quarter have been reported under this treatment.
"We have reduced operating expenses from our fiscal 2001 levels, and we expect this to continue through the fiscal year," commented Mark Dance, chief financial officer and chief operating officer of Creo. "While we expect some seasonality in our costs, our operating expenses will be approximately $60 million per quarter for the balance of the fiscal year. We have focused on managing our working capital, and have applied prudent cost reduction measures through this down turn, while continuing to invest in new product development and improving our service and operational infrastructure. We believe we are in a great position to grow as the world economies return to strength."
* Net operating costs, excluding other income, were reduced by $3.2 million or 5.2 percent to $58.2 million this quarter compared to $61.4 million last quarter.
* Over the last two quarters, net operating expenses, excluding other income, were reduced 10.3 percent for cumulative savings of $13.8 million compared to the fourth quarter 2001.
* Gross margins increased to 42.8 percent this quarter from 41.4 percent last quarter.
* Creo achieved its seventh consecutive quarter of accounts receivable and inventory reduction. Accounts receivable were reduced by 4.5 percent or $5.6 million and inventory by 5.1 percent or $4.8 million.
* Creo demonstrated the successful on-site production of a daily news magazine at IPEX 2002 held in Birmingham, UK. Each step of the production was performed before a trade show audience of 70,000 people, and the Ipex Daily was successfully produced every afternoon, showcasing the Creo Networked Graphic Production initiative.
* At IPEX, Creo featured prepress solutions for small, medium and large printers in offset, and flexographic packaging segments. The company launched the Veris(TM) proofer, a tabletop contract proofing system that uses a new-patented Creo technology to produce extremely consistent high-quality proofs. It will be available later this year. Also launched was the new iQsmart(TM) professional color scanner which offers the highest possible scanning quality and excellent productivity, at an affordable price.
"Our business in the U.S. has improved, but we have seen some offsetting decline in Asia and Europe," Mr. Dance concluded. "As a result we expect revenues to increase modestly next quarter and our loss to remain approximately the same as in the second fiscal quarter due to a slight seasonal increase in operating expenses. We continue to expect a return to profitability in the fourth fiscal quarter of this year."
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