Creo Announces 2002 Second Quarter Financial Results; Second Quarter of Improved Operating Performance; New Products Strengthen Competitive Position.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)--May 7, 2002 Creo 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 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 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. ) 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 one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. royalty Compensation for the use of property, usually copyrighted works, patented inventions, or natural resources, expressed as a percentage of receipts from using the property or as a payment for each unit produced. arrangement, 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). costs, business integration costs and 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. 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 GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , the company reported a loss of $17.1 million or $0.35 per share (diluted) this quarter. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. 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 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. "Print industry reports show a steady rise in the volume of print shipments in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. 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 Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). 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 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. equipment spending levels of the last few
years."
Mr. Michelson continued, "We had a great response to our exhibit at IPEX IPEX Italian Power Exchange IPEX Immunodysregulation, Polyendocrinopathy, Enteropathy, X Linked (Syndrome) IPEX Input Parameter Extra (Alcatel) , 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 aug·ment v. aug·ment·ed, aug·ment·ing, aug·ments v.tr. 1. To make (something already developed or well under way) greater, as in size, extent, or quantity: 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 cancellation (See: cancel) CANCELLATION. Its general acceptation, is the act of crossing a writing; it is used sometimes to signify the manual operation of tearing or destroying the instrument itself. Hyde v. Hyde, 1 Eq. Cas. Abr. 409; Rob. of stock options. The non-cash impact of the acceleration acceleration, change in the velocity of a body with respect to time. Since velocity is a vector quantity, involving both magnitude and direction, acceleration is also a vector. In order to produce an acceleration, a force must be applied to the body. 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 Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. 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 Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. of Creo. "While we expect some seasonality in our costs, our operating expenses will be approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $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." Highlights -- 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. 2002 Outlook "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." Conference Call Creo will hold a conference call today, May 7, 2002, at 5:00 p.m. Eastern Time to review 2002 second quarter results and discuss the outlook for the following quarter. To participate, tune in to the web cast at http://www.creo.com/investors/index.asp. An audio replay will be available two hours after the call until May 10, 2002 at midnight Eastern Time. For replay dial 800/633-8284, access code 20490419 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 416/626-4100, access code 20490419. A Web replay will also be available at http://www.creo.com/investors/index.asp. 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 thermal /ther·mal/ (ther´m'l) pertaining to or characterized by heat. ther·mal adj. 1. Of, relating to, using, producing, or caused by heat. 2. imaging devices for films, plates and proofs; professional color and copydot scanning scanning /scan·ning/ (skan´ing) 1. the act of examining by passing over an area or organ with a sensing device. 2. scanning speech. systems; and 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. 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 Inc. The Creo product names mentioned in this document are trademarks or service marks of Creo 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 Inc.
Statements of Adjusted Earnings (Loss)
(In millions of U.S. dollars except per share amounts)
Three months Three months Six months
ended ended ended
March 31 December 31 March 31
2002 2001 2001 2002 2001
(unaudited) (unaudited) (unaudited)
----------------------------------------------------------------------
Revenue $ 130.1 $ 172.9 $ 139.5 $ 269.6 $ 343.3
Cost of
sales 74.5 98.0 81.7 156.2 199.3
------- ------- ------- ------- -------
Gross profit 55.6 74.9 57.8 113.4 144.0
Research and
development,
net 17.2 18.7 19.6 36.8 34.9
Sales and
marketing 23.9 25.3 24.6 48.5 47.4
General and
administration 17.1 17.5 17.2 34.3 34.0
Other expense
(income) (1.3) (2.0) (0.7) (2.0) 0.8
----- ----- ---- ----- ----
Adjusted
operating
income (loss) (1.3) 15.4 (2.9) (4.2) 26.9
----- ---- ----- ----- ----
Income tax
expense
(recovery) (0.3) 4.3 (0.6) (0.9) (7.5)
----- ---- ----- ----- -----
Adjusted net
operating
income
(loss) (1.0) 11.1 (2.3) (3.3) 19.4
----- ---- ----- ----- ----
Cash tax
recovery
from the
amortization
of
intellectual
property - 1.7 - - 3.4
----- ---- ---- ----- ----
Adjusted
earnings
(loss) $ (1.0) 12.8 $ (2.3) $ (3.3) $ 22.8
Adjusted
earnings
(loss)
per share
- basic $ (0.02) $ 0.26 $ (0.05) $ (0.07) $ 0.47
-------- ------ -------- -------- -------
Adjusted
earnings
(loss)
per share
- diluted $ (0.02) $ 0.25 $ (0.05) $ (0.07) $ 0.45
-------- ------ -------- -------- ------
Reconciliation to Canadian GAAP earnings
Adjusted
earnings
(loss) (1.0) 12.8 (2.3) (3.3) 22.8
Business
integration
costs (0.3) (5.2) - (0.3) (11.9)
Goodwill
and other
intangible
assets
amortization (0.1) (18.0) - (0.1) (37.2)
Restructuring
- Iris and
Creo America - - (3.3) (3.3) -
Royalty
arrangement (15.8) - - (15.8) -
Tax related
to
reconciling
items 0.1 0.5 0.6 0.7 2.7
---- ---- ---- ----- ---
Loss under
Canadian
GAAP $(17.1) $ (9.9) $(5.0) $ (22.1) $(23.6)
------- ------- ------ -------- -------
Loss per
share
- Basic,
Canadian
GAAP $(0.35) $ (0.20) $(0.10) $ (0.45) $(0.49)
------- -------- ------- -------- -------
Loss per
share
- Basic,
U.S. GAAP
(restated) $(0.37) $ (0.42) $(0.31) $ (0.68) $(0.96)
------- -------- ------- -------- -------
Loss per
share
- Diluted,
Canadian
GAAP $(0.35) $ (0.20) $(0.10) $ (0.45) $(0.49)
------- -------- ------- -------- -------
Loss per
share
- Diluted,
U.S. GAAP
(restated) $(0.37) $ (0.42) $(0.31) $ (0.68) $(0.96)
------- ------- ------ -------- -------
Creo Inc.
Consolidated Statements of Operations and Retained Earnings (Deficit)
(In thousands of U.S. dollars except per share amounts)
Three months ended Six months ended
March 31 March 31
2002 2001 2002 2001
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue
Product $ 79,730 $ 121,054 $ 166,836 $ 239,320
Service 39,030 39,554 80,298 79,542
Consumables 11,383 12,311 22,518 24,475
---------------------------------------------
130,143 172,919 269,652 343,337
Cost of sales 74,470 98,041 156,196 199,324
---------------------------------------------
55,673 74,878 113,456 144,013
---------------------------------------------
Research and
development, net 17,206 18,736 36,798 34,857
Sales and marketing 23,924 25,241 48,491 47,446
General and
administration 17,075 17,510 34,288 34,046
Other expense (income) (1,247) (1,973) (1,914) 826
Restructuring - - 3,287 -
---------------------------------------------
Operating income (loss)
before undernoted items (1,285) 15,364 (7,494) 26,838
Business integration
costs 268 5,152 268 11,824
Goodwill and other
intangible assets
amortization 102 17,972 102 37,163
Royalty agreement
settlement 15,846 - 15,846 -
---------------------------------------------
Loss before income
taxes (17,501) (7,760) (23,710) (22,149)
Income tax recovery
(expense) 364 (2,126) 1,579 (1,410)
---------------------------------------------
Net loss $ (17,137) $ (9,886) $ (22,131) $ (23,559)
---------------------------------------------
Loss per common share
- Basic and diluted,
Canadian GAAP $ (0.35) $ (0.20) $ (0.45) $ (0.49)
---------------------------------------------
- Basic and diluted,
U.S. GAAP
(restated) $ (0.37) $ (0.42) $ (0.68) $ (0.96)
---------------------------------------------
Retained earnings
(deficit), beginning
of period $(399,425) $ 6,651 $(394,431) $ 20,324
Net loss (17,137) (9,886) (22,131) (23,559)
---------------------------------------------
Deficit, end of period $(416,562) $ (3,235) $(416,562) $ (3,235)
---------------------------------------------
Creo Inc.
Consolidated Balance Sheets
(In thousands of U.S. dollars)
March 31 December 31 September 30
2002 2001 2001
(unaudited) (unaudited) (audited)
Assets
Current assets
Cash and cash equivalents $ 33,290 $ 57,578 $ 60,241
Accounts receivable 119,535 125,176 140,551
Other receivables 29,298 28,851 27,041
Inventories 88,761 93,569 99,438
Income taxes receivable 1,639 - -
Future income taxes 11,994 12,995 11,034
-------------------------------------
284,517 318,169 338,305
Investments 23,627 - -
Capital assets, net 110,494 111,153 111,768
Goodwill and other
intangible assets, net 4,178 4,280 -
Other assets 20,204 20,071 24,005
Future income taxes 16,730 14,779 13,629
-------------------------------------
$ 459,750 $ 468,452 $ 487,707
-------------------------------------
Liabilities
Current liabilities
Short-term debt $ 17,265 $ 17,516 $ 19,298
Accounts payable 55,737 59,478 60,707
Accrued and other liabilities 52,464 54,478 54,928
Income taxes payable - 439 2,286
Future income taxes 451 1,065 1,200
Deferred revenue and credits 38,612 40,442 48,067
-------------------------------------
164,529 173,418 186,486
Long-term liability 15,163 - -
Future income taxes 2,540 2,541 2,556
-------------------------------------
182,232 175,959 189,042
Shareholders' Equity
Share capital 695,685 693,164 691,955
Contributed surplus 2,060 2,060 2,060
Cumulative translation
adjustment (3,665) (3,306) (919)
Deficit (416,562) (399,425) (394,431)
-------------------------------------
Total shareholders' equity 277,518 292,493 298,665
-------------------------------------
$ 459,750 $ 468,452 $ 487,707
-------------------------------------
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