Creo Products Inc. Announces 1999 Fourth Quarter and Year-end Results.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)--Nov. 22, 1999-- Revenue Growth of 38% and Net Earnings Increase of 67% (In thousands of U.S. dollars) Creo Products Inc. (Nasdaq: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 ) reported net income for 1999 of $18.6 million or 0.62 per share (fully 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. - U.S. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). This compares to $11.1 million or $0.38 per share for 1998. Net income for the fourth quarter 1999 was $6.2 million or $0.19 per share (fully diluted - U.S. GAAP), an increase of 155.1% over $2.4 million or $0.09 per share recorded in the fourth quarter of 1998. "1999 was an extremely successful year for Creo," states Tom Kordyback, Chief Financial Officer. " We are proud to announce that sales and profits surpassed expectations in our first quarter as a publicly traded company publicly traded company A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. . The final quarter of fiscal 1999 was the best in the history of the company." In August 1999, Creo and joint venture partner Heidelberger Druckmaschinen AG launched the new Prinergy Prinergy is a prepress workflow system created by Creo and currently maintained and sold through Kodak. It is a client/server system that integrates PDF creation, job proofing, imposition, and a Raster Image Processor (RIP) into one unified workflow. (TM) 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 system at Seybold San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden . "This state-of-the-art system, which is based on Adobe adobe (ədō`bē): see rammed earth. adobe Handmade sun-dried bricks formed from a mixture of heavy clay and straw found in arid regions. (R) Extreme(TM) and PDF (Portable Document Format) The de facto standard for document publishing from Adobe. On the Web, there are countless brochures, data sheets, white papers and technical manuals in the PDF format. technology, is attracting the attention of printers around the world and is operating in full production at a number of sites 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. and 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). ," says
Kordyback. "We consider our success to be a direct reflection of
the success of our customers, and we believe we are well positioned for
continued growth and success in the coming year."Total revenue increased 56.6% to $56.0 million for the fourth quarter of 1999 from $35.7 million for 1998. Product revenue increased 52.8% to $46.7 million for the fourth quarter of 1999 from $30.6 million for 1998. This increase was due to higher unit sales unit sales Sales measured in terms of physical units rather than dollars. Unit sales data are often used by financial analysts when evaluating the health of a company. of computer-to-plate See CTP. products by us through direct sales and our joint venture with Heidelberg Heidelberg (hī`dəlbĕrkh), city (1994 pop. 139,430), Baden-Württemberg, SW Germany, picturesquely situated on the Neckar River. Manufactures include machinery, precision instruments, leather goods, and tobacco and wood products. . Product revenue from the joint venture represented 28.6% of our total revenue for the fourth quarter of 1999 and 31.2% for the fourth quarter of 1998. Service revenue increased 79.4% to $9.2 million for the fourth quarter of 1999 from $5.1 million for the fourth quarter of 1998. Total revenue increased 38.4% to $178.3 million for 1999 from $128.8 million for 1998. Product revenue increased 29.5% to $148.4 million for 1999 from $114.7 million for 1998. This increase was due to higher unit sales of computer-to-plate products by us through direct sales and our joint venture with Heidelberger Druckmaschinen AG. Product revenue from the joint venture represented 32.3% of our total revenue for 1999 and 27.6% for 1998. Service revenue increased 110.6% to $29.9 million for 1999 from $14.2 million for 1998. As substantially all of our customers contract for service support, this increase in service revenue was due to the substantial increase in the installed base of our equipment. Revenue from our North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. customers accounted for $110.0 million, or 61.7% of total revenue, for 1999; compared to $75.1 million, or 58.3% of total revenue, for 1998. Revenue from our European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. customers accounted for $56.3 million, or 31.5% of total revenue, for 1999; compared to $41.7 million, or 32.3% of total revenue, for 1998. Revenue from our Japanese Japanese (jăp'ənēz`), language of uncertain origin that is spoken by more than 125 million people, most of whom live in Japan. There are also many speakers of Japanese in the Ryukyu Islands, Korea, Taiwan, parts of the United States, and customers accounted for $2.6 million, or 1.5% of total revenue, for 1999; compared to $5.3 million, or 4.1% of total revenue, for 1998. The decrease in Japanese sales is primarily due to depressed economic conditions in the region. Cost of sales increased 32.6% to $94.5 million for 1999 from $71.2 million for 1998. This increase was primarily due to a 44.4% increase in the number of production and customer service staff as well as increased subassembly sub·as·sem·bly n. pl. sub·as·sem·blies An assembled unit forming a component to be incorporated into a larger assembly. and component costs and overhead expenses associated with the increase in both our product sales and our installed customer base. Cost of sales decreased slightly as a percentage of total revenue to 53.0% for 1999 from 55.3% for 1998. This decrease was primarily due to lower per-unit labor, subassembly and component costs, increased plant capacity utilization Capacity Utilization measures the rate at which a firm makes use of their capital productive capacities, such as factories and machinery. Capacity Utilization generally rises when the economy is healthy and falls when demand softens. , and increased product reliability offset by increased costs of service related to the hiring of additional service personnel. Gross research and development expenses increased 63.5% to $31.3 million for 1999 from $19.1 million for 1998. This increase was primarily due to a 51.0% increase in the number of research and development personnel. Gross research and development expenses increased as a percentage of total revenue to 17.5% for 1999 from 14.8% for 1998. This increase was due to the large number of new products we have in development, especially in the area of software. Outside funding of our research and product development activities increased 43.2% to $17.5 million for 1999 from $12.2 million for 1998. The $17.5 million in outside funding during 1999 included $5.4 million received from media suppliers and press manufacturers, $7.2 million received from the joint venture, and $4.9 million in investment tax credits. The $12.2 million in outside funding received during 1998 included $4.4 million received from media suppliers and press manufacturers, $4.1 million received from the joint venture, and $3.7 million in investment tax credits. As a result of these factors affecting gross research and development expenses and research and development funding, net research and development expenses increased 99.2% to $13.8 million for 1999 from $6.9 million for 1998. Net research and development expenses increased as a percentage of total revenue to 7.7% for 1999 from 5.4% for 1998. Sales and marketing expenses increased 35.5% to $30.4 million, or 17.0% of total revenue for 1999; from $22.4 million, or 17.4% of total revenue for 1998. This increase was primarily due to a 35.5% increase in the number of sales and marketing staff in North America and Europe to support the expansion of our operations, including the joint venture. General and administration expenses increased 13.5% to $10.1 million, or 5.7% of total revenue for 1999 from $8.9 million, or 6.9% of total revenue for 1998. This increase was primarily due to the growth of our business. Income tax expense increased to $12.3 million for 1999 from $6.7 million for 1998. This increase was primarily due to the increase in our profitability. Our effective tax rate of 39.9% for 1999 was below the statutory rate of 45.6% due to 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. manufacturing and processing tax credits and the fact that a portion of our profits were earned in foreign jurisdictions with tax rates lower than those of Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . Creo is a leading developer, manufacturer and distributor of comprehensive digital solutions that automate To turn a set of manual steps into an operation that goes by itself. See automation. the 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 phase of commercial printing, in which master printing plates are created prior to actual printing. Creo computer-to-plate technology transfers digitized text, graphic images and line artwork from desktop publishing desktop publishing, system for producing printed materials that consists of a personal computer or computer workstation, a high-resolution printer (usually a laser printer), and a computer program that allows the user to select from a variety of type fonts and sizes, computer systems directly onto printing plates, eliminating labor-intensive la·bor-in·ten·sive adj. Requiring or having a large expenditure of labor in comparison to capital: "Intrigue and subversion are labor-intensive undertakings" George F. Kennan. , complex and costly preparatory pre·par·a·to·ry adj. 1. Serving to make ready or prepare; introductory. See Synonyms at preliminary. 2. Relating to or engaged in study or training that serves as preparation for advanced education: steps required by the conventional prepress process. Creo offers a comprehensive line of precision imaging equipment, including scanners, proofing devices, and output devices, as well as workflow management software. Investors will have the opportunity to listen to the analyst conference call scheduled for November 22, 1999 at 4:30pm EST EST electroshock therapy. EST abbr. electroshock therapy live over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the through Investor Broadcast Networks' Vcall website, located at http://www.vcall.com. To listen to the call, please go to the web site at least fifteen minutes early to register, download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. , and install any necessary audio software. For those who cannot listen to the live broadcast, a web and phone replay will be available shortly after the call. Web replay will be available at http://www.vcall.com. To access phone replay, available until November 26, 1999 at 6:00pm EST, investors (except Toronto area) should dial 800/408-3053, access No. 352348. In the Toronto area, please dial 416/695-5800 to avoid long distance charges. This press release contains both historical information and forward-looking information. Numerous important factors affect our operating results and could cause the actual results to differ materially from the results indicated in this press release or in any other forward looking statements made by us or on our behalf. There can be no assurance that future results will meet expectations. Among the factors which could affect our future results are: (1) the failure of our computer-to-plate solutions to gain broad market acceptance among small and mid-size printers; (2) our ability to re-channel our resources fast enough if our joint venture with Heidelberg were to be terminated; (3) our ability to establish necessary relationships with plate suppliers and press manufacturers, and to maintain our existing relationships; and (4) our ability to overcome significant and increasing competition in the digital prepress market and to adapt to new technologies and changing demands of our customers. Information about these and other factors that could affect our financial results is included in the Creo prospectus dated July 28, 1999 filed with the SEC, which can be accessed via our website at www.creo.com. We do not assume any obligation to update the forward-looking information contained in this press release. -0-
Creo Products Inc.
Consolidated Statements of Operations and Retained Earnings (Deficit)
(In thousands of U.S. dollars except earnings per share)
Three months ended Years ended
Sept. 30, Sept. 30,
1999 1998 1999 1998
(unaudited) (unaudited) (audited) (audited)
Revenue
Product revenue $46,743 $30,597 $148,433 $114,652
Service revenue 9,203 5,130 29,890 14,196
------- ------- -------- --------
55,946 35,727 178,323 128,848
Cost of sales 30,108 19,703 94,465 71,217
------- ------- -------- --------
25,838 16,024 83,858 57,631
Research and
development, gross 9,242 5,063 31,269 19,123
Research and
development, funding (4,812) (2,976) (17,464) (12,192)
Research and
development, net 4,430 2,087 13,805 6,931
Sales and marketing 8,352 6,593 30,373 22,417
General and administration 3,570 2,869 10,144 8,937
------- ------- -------- --------
16,352 11,549 54,322 38,285
Earnings from operations 9,486 4,475 29,536 19,346
Other income (expenses)
and foreign exchange
gain (loss) 631 (503) 1,358 (1,580)
Earnings before income taxes 10,117 3,972 30,894 17,766
Income tax expense 3,900 1,535 12,334 6,676
Net earnings for period $6,217 $2,437 $18,560 $11,090
Earnings per common share
- basic $0.20 $0.10 $0.65 $0.44
- fully diluted (CDN GAAP) $0.18 $0.09 $0.59 $0.41
- fully diluted (US GAAP) $0.19 $0.09 $0.62 $0.38
Retained earnings (deficit),
beginning of the period $15,537 $757 $3,194 $(7,896)
Net earnings for period 6,217 2,437 18,560 11,090
Retained earnings (deficit),
end of the period $21,754 $3,194 $21,754 $3,194
Creo Products Inc.
Consolidated Balance Sheets
(In thousands of U.S. dollars)
September September
1999 1998
(audited) (audited)
Assets
Current assets
Cash and cash equivalents $103,075 $16,224
Accounts receivable 38,736 24,385
Inventories 32,247 25,151
Prepaid expenses 3,312 2,212
--------- ---------
177,370 67,972
Capital assets 40,718 34,146
Future income taxes 2,067 --
--------- ---------
$220,155 $102,118
Liabilities
Current liabilities
Accounts payable and accrued liabilities $30,144 $17,878
Income taxes payable 3,486 825
Future income taxes 862 34
Deferred revenue and deposits 19,047 13,677
Current portion of long-term debt 296 943
--------- ---------
53,835 33,357
Long-term debt 6,364 6,660
Future income taxes -- 53
--------- ---------
60,199 40,070
Shareholders' Equity
Share capital 138,202 58,854
Retained earnings 21,754 3,194
Total shareholders' equity 159,956 62,048
--------- ---------
$220,155 $102,118
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