RNS Number:7587I
Applied Graphics Technologies Inc
20 August 2001
Contacts: Joseph D. Vecchiolla, COO & CFO
Applied Graphics Technologies
(212) 716-6730
FOR IMMEDIATE RELEASE
APPLIED GRAPHICS TECHNOLOGIES REPORTS
SECOND QUARTER 2001 RESULTS
New York, August 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 six months ended June 30,
2001.
"We continue to be disappointed by the adverse impact the economy has had on
our operations in 2001, particularly the softness in the advertising market,"
said Joe Vecchiolla, Chief Operating Officer and Chief Financial Officer of
AGT. "In order to counter these macroeconomic forces, we are continuing with
our integration efforts and cost-cutting measures, and are encouraged by the
fact that, notwithstanding the state of the economy, we have recently
attracted a number of major corporations as new customers. We do believe,
however, that faced with the prospect that the overall economy, and the
advertising market in particular, will not rebound until sometime in 2002, we
will need to be particularly diligent in assessing and operating our business.
Our recent bank deal will give us the opportunity to devote our full
attention to our business and to evaluate any changes that may be necessary,"
concluded Mr. Vecchiolla.
The Company's revenues in the second quarter of 2001 decreased by 19.7% to
$118.1 million, as compared to revenues of $147.0 million in the same quarter
of 2000. This decrease resulted primarily from the adverse impact the economy
in general, and the softening advertising market in particular, had on the
Company's prepress and creative services operations, primarily in the Midwest.
The Company also experienced an anticipated reduction in revenues from the
sale of its photographic laboratory and digital portrait systems businesses
and the closing of one of its Atlanta prepress facilities, the results of
which are included in the 2000 period. Gross profit was $35.9 million in the
2001 quarter, as compared to $50.4 million in the second quarter of 2000.
Gross profit as a percentage of revenue decreased to 30.4% in the 2001 quarter
from 34.3% in the 2000 quarter due primarily to lower margins at the Company's
Midwest operations resulting from the aforementioned decrease in revenues.
In accordance with accounting standards, the Company was required to
reclassify its publishing business previously reported as a discontinued
operation to "Net assets held for sale" at June 30, 2001. Accordingly, the
Company reversed the estimated loss on disposal of the publishing business,
recognizing income from discontinued operations of $98.7 million and
recognizing a related impairment charge of $97.8 million. Since the
impairment charge is included as a component of the operating loss in the 2001
period, the Company had an operating loss of $102.8 million in the 2001
quarter, as compared to operating income of $4.6 million in the 2000 quarter.
In addition to the aforementioned impairment charge, the operating loss in the
second quarter of 2001 includes a restructuring charge of $1.2 million and a
loss on disposal of equipment of $1.9 million primarily related to the
Company's consolidation and integration efforts in the Midwest. The operating
loss in the 2000 period includes a restructuring charge of $0.6 million and
impairment charges of $1.2 million. The Company incurred a loss from
continuing operations of $106.1 million in the 2001 quarter as compared to a
loss of $1.7 million in the 2000 quarter. For the second quarter of 2001, the
Company had a net loss of $7.4 million as compared to a net loss of $98.6
million for the same period of 2000, which included a loss from discontinued
operations of $96.9 million. That $96.9 million loss primarily related to the
estimated loss on disposal of the publishing business that was reversed in the
2001 period.
The Company's revenues in the first six months of 2001 decreased by 19.4% to
$234.8 million, as compared to revenues of $291.3 million in the same period
of 2000. Gross profit was $70.9 million in the 2001 period, as compared to
$97.4 million in the 2000 period. Gross profit as a percentage of revenue
decreased to 30.2% in the first six months of 2001 from 33.4% in the 2000
period. The decrease in revenues and gross profit in the first six months of
2001 were the result of the same factors that adversely impacted the second
quarter of 2001 as described above. The Company had an operating loss of
$106.8 million in the first six months of 2001, as compared to operating
income of $7.2 million in the 2000 period. In addition to the aforementioned
impairment charge of $97.8 million, the operating loss in 2001 includes a
restructuring charge of $1.2 million and a loss on disposal of equipment of
$2.0 million primarily related to the Company's consolidation and integration
efforts in the Midwest. Operating income in 2000 is net of a restructuring
charge of $0.6 million and impairment charges of $1.2 million. The Company
incurred a loss from continuing operations of $114.7 million in the first six
months of 2001 as compared to a loss of $9.1 million in the 2000 period. For
the first six months of 2001, the Company had a net loss of $16.0 million as
compared to a net loss of $107.5 million in the 2000 period, which included a
loss from discontinued operations of $98.4 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 Report on Form 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 Six Months
Ended June 30, Ended June 30,
2001 2000 2001 2000
Revenues $ 118,060 $ 147,023 $ 234,829 $ 291,342
Cost of 82,126 96,607 163,962 193,894
revenues
Gross profit 35,934 50,416 70,867 97,448
Gross profit 30.4% 34.3% 30.2% 33.4%
percentage
Selling, 34,449 40,855 69,979 81,741
general and
administrative
expenses
Amortization 3,389 3,381 6,778 6,744
of
intangibles
Loss (gain) 1,948 (272) 1,976 (47)
on disposal
of property
and
equipment -
net
Restructuring 1,167 611 1,167 611
charge
Impairment 97,766 1,241 97,766 1,241
charges
Operating (102,785) 4,600 (106,799) 7,158
income
(loss)
Interest (5,760) (5,991) (11,749) (13,194)
expense
Interest 134 231 337 433
income
Other income 768 48 2,170 (154)
(expense) -
net
Loss from (107,643) (1,112) (116,041) (5,757)
continuing
operations
before
provision
for income
taxes and
minority
interest
Provision (2,123) (69) (2,480) 2,068
(benefit)
for income
taxes
Loss from
continuing (105,520) (1,043) (113,561) (7,825)
operations
before
minority
interest
Minority (586) (633) (1,186) (1,296)
interest
Loss from (106,106) (1,676) (114,747) (9,121)
continuing
operations
Income 98,726 (96,909) 98,726 (98,383)
(loss) from
discontinued
operations
Net loss $ (7,380) $ (98,585) $ (16,021) $ (107,504)
Basic and
diluted loss
per
common
share:
Loss from $ (11.70) $ (0.19) $ (12.66) $ (1.01)
continuing
operations
Income 10.89 (10.71) 10.89 (10.87)
(loss) from
discontinued
operations
Total $ (0.81) $ (10.90) $ (1.77) $ (11.88)
Weighted
average
number of
common
shares:
Basic 9,068 9,046 9,068 9,046
Diluted 9,068 9,046 9,068 9,046
Applied Graphics Technologies, Inc.
Consolidated Balance Sheet Data
(Unaudited)
(In thousands of dollars)
June 30, December 31,
ASSETS 2001 2000
Current assets:
Cash and cash equivalents $ 34,357 $ 6,406
Marketable securities 1,677
Trade accounts receivable (net of
allowances of $5,814 in
2001 and $5,100 in 2000) 87,712 100,394
Due from affiliates 5,113 5,084
Inventory 20,472 21,842
Prepaid expenses 6,658 7,248
Deferred income taxes 12,933 18,618
Other current assets 5,509 4,905
Net assets held for sale 37,567
Net current assets of discontinued 44,790
operations
Total current assets 210,321 210,964
Property, plant and equipment - net 60,802 63,789
Goodwill and other intangible 418,590 424,031
assets-net
Deferred income taxes 1,557
Other assets 22,476 23,449
Total assets $ 713,746 $ 722,233
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 61,713 $ 87,344
Current portion of long-term debt and
obligations under
capital leases 1,469 18,204
Due to affiliates 708 1,115
Other current liabilities 21,853 21,626
Total current liabilities 85,743 128,289
Long-term debt 258,259 204,080
Subordinated notes 26,122 27,745
Obligations under capital leases 1,154 1,540
Deferred income taxes 3,896
Other liabilities 12,438 11,395
Total liabilities 383,716 376,945
Commitments and contingencies
Minority interest - Redeemable
Preference Shares
issued by subsidiary 37,426 36,584
Total stockholders' equity 292,604 308,704
Total liabilities and stockholders' $ 713,746 $ 722,233
equity
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