RNS Number:5245U
Applied Graphics Technologies Inc
22 November 2000
Contacts: Joseph Kuo Joseph D. Vecchiolla, CFO
Jim Fingeroth Applied Graphics Technologies
Kekst and Company (212) 716-6730
(212) 521-4800
APPLIED GRAPHICS TECHNOLOGIES REPORTS
THIRD QUARTER 2000 RESULTS
New York, November 14, 2000 - Applied Graphics Technologies, Inc. (NASDAQ:
AGTX), the country's largest provider of outsourced digital media asset
management services, today reported results for the three months and nine months
ended September 30, 2000. The Company was pleased to announce that it earned
$0.08 per share in the third quarter of 2000, its first period of positive
earnings since the second quarter of 1999.
The Company's revenues in the third quarter of 2000 decreased by 7.3% to
approximately $140.0 million, as compared to revenue of $151.1 million in the
same quarter of 1999. Such decrease resulted primarily from the sale of the
photographic laboratory business in April 2000 and the closing of a facility in
Atlanta in June 2000, both of which were acquired as part of the acquisition of
Wace Group Limited ("Wace") in May 1999, as well as from lower revenues at
certain of the Company's Midwest prepress operations. Gross profit was $48.6
million in the 2000 quarter, as compared to $51.5 million in the third quarter
of 1999. Gross profit as a percentage of revenue, however, increased to 34.7% in
the 2000 quarter from 34.1% in the 1999 quarter as a result of the sale of the
lower margin photographic laboratory business in April 2000. Operating income
from continuing operations, before a gain on sale of property and other credits,
was $8.2 million, a decrease of $0.5 million from the 1999 quarter, but
increased as a percent of revenue to 5.8% in 2000 as compared to 5.7% in 1999.
Continuing operations in the third quarter of 2000 benefited from a gain of $2.4
million on the sale of property and equipment, but were negatively impacted
compared to the 1999 period by an increase in interest expense of $1.2 million.
The Company had income from continuing operations of $1.8 million for the 2000
quarter, as compared to income of $0.8 million for the 1999 quarter. For the
same quarter of 2000, the Company had net income of $1.8 million as compared to
a net loss of $0.8 million for the same period of 1999.
"Our core business is beginning to reflect the improvements achieved through our
various restructuring and integration efforts," said Derek Ashley, Vice
Chairman, Chief Executive Officer, and Chief Operating Officer of AGT. "Although
we still face some challenges and are cautious about future results, we are
nonetheless pleased to start seeing positive effects from our recent efforts.
Through the sale of non-core businesses and properties, cash flows from
operations, and cost management, we have been able to reduce our borrowings
under our credit facilities by over $50 million in the first nine months of
2000," Mr. Ashley continued.
"We were able to pay down an additional $10 million of our bank debt in
October 2000, further strengthening our financial position. The pay down of debt
combined with our performance in the third quarter of 2000 enabled us to
maintain compliance with our bank covenants," Mr. Ashley concluded.
For the nine months ended September 30, 2000, the Company's revenues rose
14.8% to $431.4 million, as compared to revenues of $375.8 million for the
nine-month period last year. The revenues from the former Wace operations are
included for the full period in 2000. Gross profit was $146.0 million (33.8%)
for the first nine months of 2000 as compared to $121.8 million (32.4%) for the
same period of 1999. Operating income from continuing operations for the 2000
period was $17.1 million, before a gain on sale of property and other charges,
as compared to $21.5 million in the 1999 period. Operating income for the 2000
period is net of $10.0 million of amortization of intangibles, including
goodwill, as compared to $8.4 million of such amortization in the 1999 period.
Additionally, operating income for the first nine months of 2000 includes a
charge of $1.7 million related to non-restructuring related employee termination
costs. For the first nine months of 2000, the Company incurred a loss from
continuing operations of $7.3 million, as compared to income from continuing
operations of $2.3 million for the first nine months of 1999. Continuing
operations for the first nine months of 2000 benefited from a gain of $2.4
million on the sale of property and equipment, but were negatively impacted
compared to the same period of 1999 by an increase in interest expense of $8.2
million and an increase in minority interest related to dividends on the
outstanding Wace preference shares of $0.5 million. For the first nine months of
2000, the Company incurred a net loss of $105.7 million, including a non-cash
charge of $95.2 million related to the estimated loss on disposal of the Devon
Publishing Group, as compared to net income of $1.5 million for the same period
of 1999.
As previously announced, the Company's Board of Directors approved a plan
to sell its Devon Publishing Group. Therefore, the results of operations of
this business have been reflected as a discontinued operation for all periods
presented and the Company's operating results for the nine month period ended
September 30, 2000, include a non-cash charge of $95.2 million related to the
estimated loss on disposal.
Applied Graphics Technologies, Inc. is a major international provider of
outsourced advanced digital media asset management and archiving services,
through its proprietary Digital Link(R) system, to magazine and newspaper
publishers, advertisers and their agencies, entertainment companies, catalogers
and retailers, and consumer goods and packaging companies. From locations across
the United States, the United Kingdom, and Australia, AGT supplies a complete
range of digital and traditional processes for images, including scanning, color
enhancement, image editing, archiving and electronic distribution. AGT tailors
these services to fit specific customer needs, from conventional project and
contract vendor relationships to today's more progressive arrangements,
consisting of outsourcing on-site facilities management and complete turnkey
operations. 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.
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 Form 10-Q and its
annual reports on Form 10-K and Form 10-K/A.
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 30, Ended September 30,
2000 1999 2000 1999
Revenues $ 140,043 $ 151,144 $ 431,385 $ 375,799
Cost of revenues 91,471 99,596 285,365 253,985
Gross profit 48,572 51,548 146,020 121,814
Gross profit percentage 34.7% 34.1% 33.8% 32.4%
Selling, general and
administrative expenses 37,155 39,555 118,896 91,946
Amortization of intangibles 3,261 3,345 10,005 8,352
Operating income from
continuing operations
before restructuring,
impairments and
other charges 8,156 8,648 17,119 21,516
Loss (gain) on disposal
of property and equipment (2,359) 68 (2,406) 34
Restructuring charge (124) 1,865 487 1,865
Impairment charges 1,241
Operating income 10,639 6,715 17,797 19,617
Interest expense (7,327) (6,160) (20,521) (12,318)
Interest income 200 169 633 297
Other income - net 523 809 369 923
Income (loss) from
continuing operations
before provision for
income taxes and
minority interest 4,035 1,533 (1,722) 8,519
Provision (benefit) for
income taxes 1,606 (154) 3,674 4,773
Income (loss) from
continuing operations
before minority interest
minority interest 2,429 1,687 (5,396) 3,746
Minority interest (608) (868) (1,904) (1,434)
Income (loss) from continuing
operations 1,821 819 (7,300) 2,312
Loss from discontinued
operations (1,640) (98,383) (821)
Net income (loss) $ 1,821 (821) (105,683) 1,491
Basic and Diluted earnings
(loss) per common share:
Income (loss) from
continuing operations $ 0.08 0.03 (0.33) 0.11
Loss from discontinued operations (0.07) (4.35) (0.04)
Total $ 0.08 (0.04) (4.68) (0.07)
Weighted Average Number of Common
Shares:
Basic 22,584 22,475 22,605 22,422
Diluted 22,586 22,475 22,605 22,424
Consolidated Balance Sheet Data
(Unaudited)
(in thousands of dollars)
September 30, December 31,
2000 1999
ASSETS
Current assets:
Cash and marketable securities $ 9,339 $ 25,345
Trade accounts receivable (net of
allowances of $9,095 in 2000 and
$7,732 in 1999) 105,696 119,997
Due from affiliates 5,105 6,615
Inventory 27,199 26,283
Other current assets 45,030 52,924
Net current assets of discontinued operations 46,267 36,233
--------- ---------
Total current assets 238,636 267,397
Property, plant and equipment - net 67,697 95,281
Goodwill and other intangible assets - net 422,034 437,674
Other assets 22,493 18,270
Net non-current assets of discontinued
operations 112,388
--------- ---------
Total assets $ 750,860 $ 931,010
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 87,257 $ 92,056
Current portion of long-term debt and
obligations under capital leases 23,287 19,024
Due to affiliates 1,484 1,909
Other current liabilities 21,082 33,477
--------- ---------
Total current liabilities 133,110 146,466
Long-term debt 238,292 298,125
Subordinated notes 27,461 29,867
Obligations under capital leases 2,189 3,814
Other liabilities 14,782 11,738
--------- ---------
Total liabilities 415,834 490,010
========= =========
Commitments and contingencies
Minority interest - Redeemable Preference
Shares issued by subsidiary 32,982 33,050
--------- ---------
Total stockholders' equity 302,044 407,950
--------- ---------
Total liabilities and stockholders' equity $ 750,860 $ 931,010
========= =========
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