Creo Announces 2002 First Quarter Financial Results; Net Operating Expenses Decrease by Approximately $5.6 Million; Mark Dance Appointed Chief Financial Officer.Business Editors VANCOUVER Vancouver, city, Canada Vancouver, city (1991 pop. 471,844), SW British Columbia, Canada, on Burrard Inlet of the Strait of Georgia, opposite Vancouver Island and just N of the Wash. border. , BRITISH COLUMBIA--(BUSINESS WIRE)--Feb. 4, 2002 Creo Products Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : CREO) (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). : CRE CRE Commercial Real Estate CRE Corporate Real Estate CRE Commission for Racial Equality (Scotland) CRE CCD (Charge Coupled Device) and Readout Electronics CRE Camp Response Element ) ('Creo') today announced financial results for the three months ended December December: see month. 31, 2001, reported in U.S. dollars. For the first quarter of 2002, Creo recorded revenues of $139.5 million compared to $143.2 million in the fourth quarter of 2001. Adjusted loss for the first quarter of 2002 was $2.3 million or $0.05 per share (diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ). This compares to an adjusted loss of $5.7 million or $0.12 per share (diluted) for the last quarter. The adjusted results exclude restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , business integration costs, goodwill and other intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. amortization, and one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. write-downs. "This quarter we achieved a $3.4 million improvement in our bottom line over last quarter. We are pleased to see that cost control measures have improved our results despite the continued weakness in the economy," stated Amos Michelson Mi·chel·son , Albert Abraham 1852-1931. German-born American physicist who with Edward Morley disproved the existence of ether, the hypothetical medium of electromagnetic waves. He won a 1907 Nobel Prize in physics. Noun 1. , chief executive officer of Creo. "The continued economic uncertainty is apparent in the results reported today. However, we see indications of increased sales activity that we expect to be reflected in our revenues, provided the U.S. economy continues on the path for growth in the second half of this calendar year." Mr. Michelson continued, "We have implemented strategic initiatives to reduce expenses through deliberate cost reduction measures and increase revenue through focused R&D efforts. During the quarter we continued to focus on making the latest digital prepress In typography and printing, the preparation of camera-ready materials up to the actual printing stage, which includes typesetting, page makeup and plate processing. By the turn of the century, the creation of digital content by authors and designers, digital printers, computer-to-plate technology accessible for mid-sized and smaller printers through our line of entry-level en·try-lev·el adj. Appropriate for or accessible to one who is inexperienced in a field or new to a market: an entry-level job in advertising; an entry-level computer. products and consumable A material that is used up and needs continuous replenishment, such as paper and toner. "The low-tech end of the high-tech field!" partnerships. We believe that Creo continues to be in a good position to take advantage of the inevitable digitization dig·i·tize tr.v. dig·i·tized, dig·i·tiz·ing, dig·i·tiz·es To put (data, for example) into digital form. dig of the graphic arts graphic arts: see aquatint; drawing; drypoint; engraving; etching; illustration; linoleum block printing; lithography; mezzotint; niello; pastel; poster; silk-screen printing; silhouette; silverpoint; sketch; stencil; woodcut and wood engraving. market." Highlights -- In January 2002, Creo launched Six Degrees(TM) software - a new product for the creative desktop, which dramatically improves the way content creators and creative professionals work with their projects -- at the MacWorld Conference and Expo held in San Francisco. Six Degrees was awarded the prestigious "MacWorld Best of Show Award." The Best of Show Awards are presented to the most exciting hardware and software products featured at the four-day MacWorld exhibit. Creo plans to begin sales of the product at MacWorld New York in July 2002, and European-language versions will follow in September. -- Creo also launched its new graphic look and web site at MacWorld, consolidating all business activities and subsidiaries worldwide under a single name and logo: Creo. -- Net operating expenses were reduced by approximately $5.6 million due to cost reduction programs and reduction in activity. -- Gross margins remained stable at 41 percent. -- Accounts receivable and other receivables were reduced by $13.6 million or approximately 8 percent. -- Inventory decreased from $99.4 million last quarter to $93.6 million this quarter. "We focused our collection efforts, and were able to reduce days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). to 80 days this quarter from 88 days last quarter," stated Mike Graydon, chief financial officer of Creo. "Creo closed the quarter in a strong financial position with a cash balance of approximately $57 million." For the first quarter of 2002, Creo achieved revenues of $139.5 million compared to $170.4 million in the first quarter of 2001. Adjusted loss for the first quarter of 2002 was $2.3 million or $0.05 per share (diluted). This compares to adjusted earnings of $10.0 million or $0.20 per share (diluted) for the same period a year ago. Under U.S. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , Creo recorded a loss of $5.4 million or $0.11 per share (diluted) for the first fiscal quarter, and under Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. GAAP, the company reported a loss of $5.0 million or $0.10 per share (diluted). 2002 Outlook "The economic climate continues to be challenging," commented Mr. Graydon. "We expect revenue for our second quarter of 2002 to be moderately lower than for the first quarter and our bottom line to show some continued improvement." Subsequent Events Subsequent to the quarter end, in January January: see month. 2002, Creo extended $23.6 million of secured long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. to printCafe, Inc., an important strategic partner for Creo. The Creo Networked Graphic Production initiative is leading the graphic arts industry into a fully digitized world. This solution leverages existing prepress solutions to link production and business systems from the creative desktop to the delivery of the finished product. By integrating content production workflows from Creo with print management systems from printCafe, customers can take advantage of a fully integrated production A farming system that produces high quality food and other products by using natural resources and regulating mechanisms to replace polluting inputs and to secure sustainable farming. environment. Also in January 2002, Creo entered into an agreement for the early repayment of royalties to the Government of Israel Israel, in the Bible Israel (ĭz`rēəl, ĭz`rāəl) [as understood by Hebrews,=he strives with God], according to the book of Genesis, name given to Jacob as eponymous ancestor of the Hebrews, the chosen people of God. relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc grants received for research and development. Pursuant to the agreement, Creo will pay approximately $21.5 million over the next five years in lieu of Instead of; in place of; in substitution of. It does not mean in addition to. future royalty obligations. This amount, adjusted for amounts previously accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. , will be reflected as a one-time charge of approximately $15 million to the income statement in the second quarter of 2002. The agreement will allow Creo to qualify for a recently announced program that allows for royalty-free Royalty-free describes material (typically graphics such as stock photography and icons, but also sound such as music loop samples) that may be used for profit, without paying royalties. grants to offset future R&D. Management Changes Mark Dance was appointed chief financial officer effective April 30, 2002. Mr. Dance remains a director of the company and chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. . Mr. Dance was most recently the President of the Creo graphic arts division, a position that will be filled by Judi Hess Hess , Walter Rudolf 1881-1973. Swiss physiologist. He shared a 1949 Nobel Prize for his research on the brain's control of the body. , who currently holds the position of Corporate VP, Printing Workflow The automatic routing of documents to the users responsible for working on them. Workflow is concerned with providing the information required to support each step of the business cycle. Systems. Mr. Dance will replace Michael Graydon Air Chief Marshal Sir Michael James Graydon, GCB, CBE, ADC (born 24 October 1938) is a former Chief of the Air Staff. Flying career Educated at Wycliffe College and the Royal Air Force College Cranwell Michael Graydon joined the Royal Air Force in January 1957 and was who will continue with Creo in an advisory role. Conference Call Creo will hold a conference call today, February February: see month. 4, 2002, at 5:00 p.m. Eastern Time to review 2002 first quarter results and discuss the outlook for the following quarter. To participate, tune in to the webcast at www.creo.com. An audio replay will be available; one hour after the call until February 7, 2002 at 7 p.m. Eastern Time. For replay dial 1-800-558-5253, access code 20201165 except in Toronto Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing dial 1-416-626-4100, access code 20201125. A Web replay will also be available at www.creo.com. About Creo Creo is a world leader in solutions for the graphic arts industry. Core product lines include image capture systems; inkjet See inkjet printer. proofers; thermal imaging devices for films, plates and proofs; professional color and copydot scanning systems; and workflow management software. Creo is also an Original Equipment Manufacture supplier of on-press imaging technology, components for digital presses, and color servers for high-speed high-speed adj. 1. Operated or designed for operation at high speed: a high-speed food processor. 2. Taking place at high speed: a high-speed chase. 3. , print-on-demand digital printers. Creo trades under the symbols CREO on NASDAQ and CRE on the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. . www.creo.com (c) 2002 Creo Products Inc. The Creo product names mentioned in this document are trademarks or service marks of Creo Products Inc. and may be registered in certain jurisdictions. Other company and brand, product and service names are for identification purposes only and may be trademarks or registered trademarks of their respective holders. Data is subject to change without notice. This release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the U.S. Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include the following: (1) technological changes or changes in the competitive environment may adversely affect the products, market share, revenues or margins of the business; (2) changes in general economic, financial or business conditions may adversely affect the business or the markets in which it operates; and (3) new regions and new products do not proceed as planned and may adversely affect future revenues. These risks and uncertainties as well as other important risks and uncertainties are described under the caption "Information Regarding Forward-looking Statements" and elsewhere in our Annual Report for the fiscal year ended September September: see month. 30, 2001, as filed with the U.S. Securities and Exchange Commission and which are incorporated herein by reference. We do not assume any obligation to update the forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information contained in this press release.
Creo Products Inc.
Statements of Adjusted Earnings (Loss)
(In millions of U.S. dollars except per share amounts) (unaudited)
December 31 September 30
2001 2001
(unaudited) (unaudited)
Revenue $ 139.5 $ 143.2
Cost of sales 81.7 84.7
--------------------------
Gross profit 57.8 58.5
Research and development, net 19.6 21.5
Sales and marketing 24.6 27.0
General and administration 17.2 18.2
Other income (0.7) (0.4)
--------------------------
Adjusted operating loss (2.9) (7.8)
Income tax recovery (0.6) (2.1)
--------------------------
Adjusted loss (2.3) (5.7)
--------------------------
Adjusted loss per share - basic $ (0.05) $ (0.12)
--------------------------
Adjusted loss per share - diluted $ (0.05) $ (0.12)
--------------------------
Reconciliation to Canadian GAAP loss
Adjusted loss (2.3) (5.7)
Write-down of inventory, capital
assets and accounts receivable - (15.3)
Tax recovery on adjustments above - 5.7
--------------------------
One-time charges, net of tax - (9.6)
Severance - (4.1)
Tax recovery on severance - 1.5
--------------------------
Severance, net of tax - (2.6)
Business integration costs - -
Goodwill and other intangible
assets amortization - (18.8)
Write-down of intangible
assets and goodwill - (265.7)
Write-down of investments - (70.5)
Write-down of future tax
assets - (9.0)
Restructuring - Iris and Creo America (3.3) -
Tax recovery related to
reconciling items 0.6 -
--------------------------
Loss under Canadian GAAP $ (5.0) $(381.9)
--------------------------
Loss per share - Basic, Canadian GAAP $ (0.10) $ (7.79)
--------------------------
Loss per share - Basic, U.S. GAAP $ (0.11) $ (7.17)
--------------------------
Loss per share - Diluted, Canadian
GAAP $ (0.10) $ (7.79)
--------------------------
Loss per share - Diluted, U.S. GAAP $ (0.11) $ (7.17)
--------------------------
The adjusted results exclude restructuring, business integration
costs, goodwill and other intangible assets amortization, and one-time
write-downs and for U.S. GAAP purposes, stock compensation expense.
The adjusted earnings are not prepared in accordance with generally
accepted accounting principles (GAAP) since it excludes these costs.
Creo Products Inc.
Consolidated Statements of Operations and Retained Earnings (Deficit)
(In thousands of U.S. dollars except per share amounts)
Three months ended
December 31
2001 2000
(unaudited) (unaudited)
Revenue
Product $ 87,106 $ 118,266
Service 41,268 39,988
Consumables 11,135 12,164
----------------------------
139,509 170,418
Cost of sales 81,726 101,283
----------------------------
57,783 69,135
----------------------------
Research and development, net 19,592 16,121
Sales and marketing 24,567 22,205
General and administration 17,213 16,536
Other expense (income) (667) 2,799
Restructuring 3,287 -
----------------------------
Operating income before
undernoted items (6,209) 11,474
Business integration costs - 6,672
Goodwill and other intangible
assets amortization - 19,191
----------------------------
Loss before income taxes (6,209) (14,389)
Income tax recovery (1,215) (716)
----------------------------
Net loss $ (4,994) $ (13,673)
----------------------------
Loss per common share
- Basic, Canadian GAAP $ (0.10) $ (0.29)
----------------------------
- Basic, U.S. GAAP $ (0.11) $ (0.25)
----------------------------
- Diluted, Canadian GAAP $ (0.10) $ (0.29)
----------------------------
- Diluted, U.S. GAAP $ (0.11) $ (0.25)
----------------------------
Retained earnings (deficit),
beginning of period $ (394,431) $ 20,324
Net loss (4,994) (13,673)
----------------------------
Retained earnings (deficit),
end of period $ (399,425) $ 6,651
----------------------------
Creo Products Inc.
Consolidated Balance Sheets
(In thousands of U.S. dollars)
December 31 September 30
2001 2001
(unaudited) (audited)
Assets
Current assets
Cash and cash equivalents $ 57,578 $ 60,241
Accounts receivable 125,176 140,551
Other receivables 28,851 27,041
Inventories 93,569 99,438
Future income taxes 12,995 11,034
---------------------------
318,169 338,305
Capital assets, net 111,153 111,768
Goodwill and other intangible
assets, net 4,280 -
Other assets 20,071 24,005
Future income taxes 14,779 13,629
---------------------------
$ 468,452 $ 487,707
---------------------------
Liabilities
Current liabilities
Short-term debt $ 17,516 $ 19,298
Accounts payable 59,478 60,707
Accrued and other liabilities 54,478 54,928
Income taxes payable 439 2,286
Future income taxes 1,065 1,200
Deferred revenue and credits 40,442 48,067
---------------------------
173,418 186,486
Future income taxes 2,541 2,556
---------------------------
175,959 189,042
Shareholders' Equity
Share capital 693,164 691,955
Contributed surplus 2,060 2,060
Cumulative translation adjustment (3,306) (919)
Deficit (399,425) (394,431)
---------------------------
Total shareholders' equity 292,493 298,665
---------------------------
$ 468,452 $ 487,707
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