Applied Graphics Reports 2001 Results, Reflects Sluggish Ad Market
Press release from the issuing company
NEW YORK, April 1 -- Applied Graphics Technologies reported results for the three months and full year ended December 31, 2001.
"Our results in the fourth quarter of 2001 reflect the continuing weakness in the advertising market," said Joe Vecchiolla, President and Chief Operating Officer of AGT. "We did, however, start to see some positive effect from our integration efforts during the quarter. Although we are still not satisfied with our results, we believe that the ongoing benefits of our operational restructuring efforts, when combined with an improvement in the economy, should result in improved performance in the future.
"Most importantly, we remain in compliance with our bank financial covenants," continued Mr. Vecchiolla. "Additionally, as disclosed in our Form 10-K that was filed with the Securities and Exchange Commission today, we are currently engaged in discussions with our banks regarding an overall renegotiation of the terms of our credit agreement. Reaching an agreement will allow us to focus our attention on running and growing our core business and, subject to certain contingencies, to improve our balance sheet. There can be no assurance that we will agree to new terms with our banks," concluded Mr. Vecchiolla.
As previously disclosed, at June 30, 2001, the Company was required by the accounting rules to reclassify its publishing business previously reported as a discontinued operation to "Net assets held for sale," resulting in the reversal of the estimated loss on disposal of the publishing business that had been recorded in June 2000. Accordingly, the results of operations for the year ended December 31, 2001, include income from discontinued operations of $98.6 million, and a related impairment charge of $97.8 million as a component of the loss from continuing operations. As a result of this required accounting treatment, the results of operations for 2001 are not comparable to 2000 since the publishing business is included as part of the results from continuing operations only for periods subsequent to June 30, 2001, and was included as part of discontinued operations in all prior periods. In order to provide a better comparison of the Company's results, the following table of Pro-Forma Selected Financial Information presents the unaudited results of operations of the Company exclusive of the publishing business in all periods.
The Company's revenues in the fourth quarter of 2001 increased by 1.6% to $137.4 million, as compared to $135.2 million in the same quarter of 2000. Exclusive of the publishing business, revenues in the fourth quarter of 2001 decreased by 10.7% to $120.7 million. This decrease resulted primarily from the adverse impact of the economy in general, and the softening advertising market in particular, on the Company's prepress operations in the eastern and midwestern regions of the United States. Gross profit was $49.8 million in the 2001 quarter, as compared to $44.9 million in the 2000 quarter, and as a percentage of revenue increased to 36.2% in the 2001 quarter from 33.2% in the 2000 quarter. Exclusive of the publishing business, gross profit decreased to $40.4 million, but as a percentage of revenue increased to 33.5% in the fourth quarter of 2001. This slight increase was due primarily to the benefits realized from the Company's cost cutting and integration efforts that offset the adverse impact of the aforementioned decrease in revenues. The Company had operating income before amortization and other charges of $4.8 million in the 2001 quarter, as compared to $8.6 million in the 2000 quarter. Exclusive of the publishing business, operating income before amortization and other charges decreased to $3.5 million. The operating loss of $23.0 million in the fourth quarter of 2001 includes a restructuring charge of $15.0 million, which primarily related to the integration of certain of the Company's domestic operations in the eastern and midwestern regions of the United States, and an impairment charge of $9.0 million, which primarily related to the impairment of two businesses and the impairment of certain machinery and equipment in connection with the restructuring and integration efforts.
The Company's revenues in 2001 decreased by 10.5% to $507.0 million, as compared to $566.5 million in 2000. Exclusive of the publishing business, revenues in the 2001 period decreased by 17.9% to $465.2 million. Gross profit was $168.5 million in 2001, as compared to $190.9 million in 2000, and as a percentage of revenue decreased to 33.2% in 2001 from 33.7% in 2000. Exclusive of the publishing business, gross profit decreased to $145.6 million, and as a percentage of revenue decreased to 31.3% in the 2001 period. The Company had operating income before amortization and other charges of $10.8 million in the 2001 period as compared to $35.7 million in the 2000 period. Exclusive of the publishing business, operating income before amortization and other charges decreased to $4.7 million. The results for 2001 also include an impairment charge of $106.7 million primarily relating to the aforementioned impairment of the publishing business, restructuring charges of $16.2 million, and an extraordinary loss of $3.4 million, net of tax, related to the loss on extinguishment of debt associated with an amendment to the Company's credit agreement in the third quarter of 2001.
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