RNS Number:4563N
Applied Graphics Technologies Inc
20 November 2001
Contacts: Joseph D. Vecchiolla, President & COO Applied Graphics Technologies
(212) 716-6730
FOR IMMEDIATE RELEASE
APPLIED GRAPHICS TECHNOLOGIES REPORTS
THIRD QUARTER 2001 RESULTS
New York, November 14, 2001 - Applied Graphics Technologies, Inc. (AMEX: AGD),
the country's largest provider of outsourced digital media asset management
services, today reported results for the three and nine months ended September
30, 2001.
"Our business continues to be negatively impacted by the overall state of the
economy, particularly the softness in the advertising market, including the
adverse effects of September 11," said Joe Vecchiolla, President and Chief
Operating Officer of AGT. "In response to the challenges posed by the current
economic situation, we are continuing with our cost cutting and integration
efforts, the benefits of which we have begun to realize. In spite of all of
the obstacles we have faced this year, however, we continue to remain in full
compliance with our bank covenants," concluded Mr. Vecchiolla.
As previously disclosed, at June 30, 2001, the Company was required to
reclassify its publishing business previously reported as a discontinued
operation to "Net assets held for sale." At that time, the Company reversed
the estimated loss on disposal of the publishing business that had been
recorded in June 2000. Accordingly, the results of operations for the nine
months ended September 30, 2001, include income from discontinued operations
of $98.7 million, and a related impairment charge of $97.8 million as a
component of the loss from continuing operations. In addition, the results of
operations of the publishing business, which in all prior periods were
reported as discontinued operations, are included as part of the Company's
results from continuing operations subsequent to June 30, 2001.
The Company's revenues in the third quarter of 2001 decreased by 3.7% to
$134.8 million, as compared to $140.0 million in the same quarter of 2000.
Exclusive of the publishing business, revenues in the third quarter of 2001
decreased by 21.7% to $109.7 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 and creative services
operations, primarily in the East and the Midwest. The Company also
experienced an anticipated reduction in revenues due to the previous sale of
its digital portrait systems businesses, the results of which are included in
the 2000 period. Gross profit was $47.8 million in the 2001 quarter, as
compared to $48.6 million in the 2000 quarter, and as a percentage of revenue
increased to 35.5% in the 2001 quarter from 34.7% in the 2000 quarter.
Exclusive of the publishing business, the gross profit percentage decreased to
31.1% in the third quarter of 2001. This decrease was due primarily to lower
margins at the Company's East Coast and Midwest prepress operations resulting
from the aforementioned decrease in revenues. The Company had operating
income before amortization and other charges of $5.1 million in the 2001
quarter, as compared to $11.4 million in the 2000 quarter. The net loss in
the third quarter of 2001 includes an extraordinary loss of $3.4 million, net
of tax, related to the loss on extinguishment of debt associated with the most
recent amendment to the Company's credit facility.
The Company's revenues in the first nine months of 2001 decreased by 14.3% to
$369.7 million, as compared to $431.4 million in the same period of 2000.
Exclusive of the publishing business, revenues in the 2001 period decreased by
20.1% to $344.5 million. Gross profit was $118.7 million in the 2001 period,
as compared to $146.0 million in the 2000 period, and as a percentage of
revenue decreased to 32.1% in the first nine months of 2001 from 33.8% in the
2000 period. Exclusive of the publishing business, the gross profit
percentage decreased to 30.5% in the 2001 period. The decrease in revenues
and gross profit in the first nine months of 2001 were the result of the same
factors that adversely impacted the third quarter of 2001 as described above.
The Company had operating income before amortization and other charges of $6.0
million in the 2001 period as compared to $27.1 million in the 2000 period.
The net loss in the 2001 period also includes the aforementioned extraordinary
loss of $3.4 million.
Prior period share and per-share amounts have been adjusted for the effects of
the Company's two-for-five reverse stock split on December 5, 2000.
Applied Graphics Technologies, Inc., provides digital media asset management
services across all forms of media, including print, broadcast, and the
Internet and is a leading application service provider for the on-line
management of brands. AGT offers a variety of digital imaging and related
services to major corporations, which include magazine and newspaper
publishers, advertisers and their agencies, entertainment companies,
catalogers, retailers, and consumer goods and packaging companies. From
locations across the United States, the United Kingdom, and Australia, AGT
supplies a complete range of services that are tailored to provide solutions
for specific customer needs, with a focus on improving and standardizing the
management and delivery of visual communications for clients on a local,
national, and international basis. Additionally, AGT provides a wide range of
advertising and marketing-related creative services for customers, primarily
in retailing. These services include assistance in creation of newspaper
advertising campaigns, development of in-store and collateral media, and
photographic services. AGT also provides content management and the volume
reproduction and distribution of television and radio commercials to broadcast
and cable media for ad agencies and their clients. Finally, through its Devon
Publishing Group, AGT is a leading publisher of alternative greeting cards,
calendars, fine art and other prints, and wall decor items.
Certain statements in this press release may contain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements are inherently subject to known and unknown risks,
uncertainties, and other factors that may cause actual results, performance or
achievements of the Company to be materially different from those expected or
anticipated in the forward-looking statements. Such factors are described in
the Company's SEC filings, including its Quarterly Reports on Forms 10-Q and
its Annual Report on Form 10-K.
Additional information about Applied Graphics Technologies can be obtained by
visiting the AGT website: http://www.agt.com.
(tables follow)
Applied Graphics Technologies, Inc.
Consolidated Statements of Operations Data
(Unaudited)
(In thousands, except per-share amounts)
Three Months Nine Months
Ended September Ended September 30,
30,
2001 2000 2001 2000
Revenues $ 134,829 $ 140,043 $ 369,658 $ 431,385
Cost of revenues 87,003 91,471 250,965 285,365
Gross profit 47,826 48,572 118,693 146,020
Gross profit percentage 35.5% 34.7% 32.1% 33.8%
Selling, general and administrative 42,714 37,155 112,693 118,896
expenses
Operating income before
amortization and 5,112 11,417 6,000 27,124
other charges
Amortization of intangibles 3,335 3,261 10,113 10,005
Loss (gain) on disposal of property 266 (2,359) 2,242 (2,406)
and equipment - net
Restructuring charge (124) 1,167 487
Impairment charges 97,766 1,241
Operating income (loss) 1,511 10,639 (105,288) 17,797
Interest expense (7,548) (7,327) (19,297) (20,521)
Interest income 176 200 513 633
Other income (expense) - net 43 523 2,213 369
Income (loss) from continuing (5,818) 4,035 (121,859) (1,722)
operations before provision for
income taxes and minority interest
Provision (benefit) for income (617) 1,606 (3,097) 3,674
taxes
Income (loss) from continuing
operations before minority interest (5,201) 2,429 (118,762) (5,396)
Minority interest (592) (608) (1,778) (1,904)
Income (loss) from continuing (5,793) 1,821 (120,540) (7,300)
operations
Income (loss) from discontinued 98,726 (98,383)
operations
Extraordinary loss (3,410) (3,410)
Net income (loss) $ (9,203) $ 1,821 $ (25,224) $ (105,683)
Basic and diluted loss per
common share:
Income (loss) from continuing $ (0.63) $ 0.20 $ (13.29) $ (0.81)
operations
Income (loss) from discontinued 10.89 (10.88)
operations
Extraordinary loss (0.38) (0.38)
Total $ (1.01) $ 0.20 $ (2.78) $ (11.69)
Weighted average number of common
shares:
Basic 9,068 9,034 9,068 9,042
Diluted 9,068 9,034 9,068 9,042
Applied Graphics Technologies, Inc.
Consolidated Balance Sheet Data
(Unaudited)
(In thousands of dollars)
September December
30, 31,
Assets 2001 2000
Current assets:
Cash and cash equivalents $ 3,425 $ 6,406
Marketable securities 1,677
Trade accounts receivable (net of allowances of
$5,763 in
2001 and $5,100 in 2000) 92,897 100,394
Due from affiliates 3,927 5,084
Inventory 21,436 21,842
Prepaid expenses 4,578 7,248
Deferred income taxes 13,943 18,618
Other current assets 1,877 4,905
Net assets held for sale 40,875
Net assets of discontinued operations 44,790
Total current assets 182,958 210,964
Property, plant and equipment - net 57,795 63,789
Goodwill and other intangible assets-net 415,112 424,031
Deferred income taxes 4,207
Other assets 22,150 23,449
Total assets $ 682,222 $ 722,233
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 65,463 $ 87,344
Current portion of long-term debt and obligations
under
capital leases 7,857 18,204
Due to affiliates 1,009 1,115
Other current liabilities 20,919 21,626
Total current liabilities 95,248 128,289
Long-term debt 223,533 204,080
Subordinated notes 27,298 27,745
Obligations under capital leases 955 1,540
Deferred income taxes 3,896
Other liabilities 13,979 11,395
Total liabilities 361,013 376,945
Commitments and contingencies
Minority interest - Redeemable Preference Shares
issued by subsidiary 38,232 36,584
Total stockholders' equity 282,977 308,704
Total liabilities and stockholders' equity $ 682,222 $ 722,233
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