SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULA 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
April 25, 2000
CREO PRODUCTS INC.
(Exact name of Registrant as specified in its charter)
3700 Gilmore Way
Burnaby, B.C. Canada V5G 4M1
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.)
Form 20-F x Form 40-F
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(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934.)
Yes No x
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FOR IMMEDIATE RELEASE
CREO PRODUCTS INC. ANNOUNCES 2000 SECOND QUARTER:
Revenue Growth of 52.5% and Net Earnings Increase of 67.3%
(In thousands of U.S. dollars)
Vancouver, BC, Canada (April 25, 2000) Creo Products Inc. (NASDAQ - CREO, TSE -
CRE) ("Creo") reported net income for the three months ended March 31, 2000 of
$7.1 million or $0.20 per share (diluted - US GAAP) compared to $4.3 million or
$0.15 per share for the three months ended March 31, 1999.
Total revenue for the three months ended March 31, 2000 increased 52.5% to $63.3
million from $41.5 million for the three months ended March 31, 1999. Total
revenue for the six months ended March 31, 2000 increased 50.4% to $117.4
million from $78.1 million for the six months ended March 31, 1999.
"The second quarter of fiscal 2000 was a landmark quarter with the highest
quarterly profits in the history of Creo," states Tom Kordyback, Chief Financial
Officer, "Creo penetrated new markets and experienced tremendous growth. We
finalized our $35 million investment in printCafe, a business-to-business
internet-based solution for the graphic arts industry, and we expect notable
growth in this market."
On April 4, 2000, Creo acquired certain assets of Scitex Graphic Business and
shares of related subsidiaries for 13,250,000 shares of Creo. The aggregate
value of these shares is estimated at $540 million under US GAAP, which will be
allocated to the assets and liabilities acquired along with the related goodwill
from the acquisition. The acquisition will be accounted for under the purchase
method, with the results from the operations of the Business acquired being
included in the consolidated financial statements of Creo commencing April 4,
2000.
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"CreoScitex, the principal operating division of Creo Products, signals solid
leadership in worldwide digital prepress solutions," Kordyback continues, "We
anticipate continued growth for Creo in the coming quarters as strong synergies
in innovation and technology are realized from this merger."
Product revenue from our joint venture with Heidelberg increased 75.5% to $26.0
million for the three months ended March 31, 2000 from $14.8 million for the
three months ended March 31, 1999. This increase was primarily due to increased
sales activity on the part of Heidelberg.
Product revenue from our joint venture with Heidelberg increased 77.9% to $48.2
million for the six months ended March 31, 2000 from $27.1 million for the six
months ended March 31, 1999.
On April 5, 2000, subsequent to the close of the Creo-Scitex merger, Creo gave
notice to Heidelberger Druckmaschinen AG ("Heidelberg") of its election to
terminate the Heidelberg/Creo joint venture. The joint venture agreement
provides that upon termination Creo will enter into an original equipment
manufacture (OEM) arrangement with Heidelberg. Creo expects that the current
Heidelberg/Creo joint-venture products such as the Trendsetter(R) family of
thermal platesetters and the Prinergy(TM) workflow management system will be
sold through both CreoScitex and Heidelberg distribution channels. The parties
are currently engaged in discussions about OEM terms and about certain
objections raised by Heidelberg concerning Creo's termination of the joint
venture. Agreement has not been reached on all outstanding issues but
discussions are continuing with a view to their resolution.
Service revenue increased 37.8% to $10.6 million for the three months ended
March 31, 2000 from $7.7 million for the three months ended March 31, 1999. This
increase in service revenue was due to fees generated from additional customer
support agreements entered into in connection with new product sales. Service
revenue increased 50.7% to $19.8 million for the six months ended March 31, 2000
from $13.2 million for the six months ended March 31, 1999.
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Cost of sales increased 59.0% to $33.7 million for the three months ended March
31, 2000 from $21.2 million for the three months ended March 31, 1999. This
increase was primarily due to the increase in our product sales and our
installed customer base. Cost of sales increased as a percentage of total
revenue to 53.3% for the three months ended March 31, 2000 from 51.1% for the
three months ended March 31, 1999. Cost of sales increased 52.5% to $62.0
million for the six months ended March 31, 2000 from $40.7 million for the six
months ended March 31, 1999. Cost of sales increased as a percentage of total
revenue to 52.8% for the six months ended March 31, 2000 from 52.1% for the six
months ended March 31, 1999.
Gross research and development expenses increased 57.3% to $11.4 million for the
three months ended March 31, 2000 from $7.2 million for the three months ended
March 31, 1999. This increase was due to a 25.3% increase in the number of
research and development personnel and the increase in the amount of materials
used for prototyping and developing new products. Gross research and development
expenses increased 63.8% to $21.7 million for the six months ended March 31,
2000 from $13.3 million for the six months ended March 31, 1999.
Outside funding of our research and development activities increased 24.4% to
$5.0 million for the three months ended March 31, 2000 from $4.0 million for the
three months ended March 31, 1999. Outside funding of our research and
development activities increased 17.3% to $9.4 million for the six months ended
March 31, 2000 from $8.0 million for the six months ended March 31, 1999.
As a result of these factors affecting gross research and development expenses
and research and development funding, net research and development expenses,
which represent gross research and development expenses less outside funding,
increased 98.1% to $6.4 million for the three months ended March 31, 2000 from
$3.2 million for the three months ended March 31, 1999. Net research and
development expenses increased 134.3% to $12.4 million for the six months ended
March 31, 2000 from $5.3 million for the six months ended March 31, 1999.
<PAGE>
Sales and marketing expenses increased 20.2% to $9.1 million, or 14.5% of total
revenue, for the three months ended March 31, 2000 from $7.6 million, or 18.3%
of total revenue, for the three months ended March 31, 1999. This increase was
primarily due to the increase in sales activity. Sales and marketing expenses
increased 27.0% to $18.3 million, or 15.6% of total revenue, for the six months
ended March 31, 2000 from $14.4 million, or 18.4% of total revenue, for the six
months ended March 31, 1999.
General and administration expenses increased 79.4% to $3.5 million, or 5.5% of
total revenue, for the three months ended March 31, 2000 from $1.9 million, or
4.7% of total revenue, for the three months ended March 31, 1999. This increase
was primarily due to the growth of our business. General and administration
expenses increased 60.4% to $6.4 million, or 5.4% of total revenue, for the six
months ended March 31, 2000 from $4.0 million, or 5.1% of total revenue, for the
six months ended March 31, 1999.
Income tax expense increased to $4.7 million, or 39.6% of pre-tax income, for
the three months ended March 31, 2000 from $3.0 million, or 41.1% of pre-tax
income, for the three months ended March 31, 1999. This increase was primarily
due to the increase in our profitability. Income tax expense increased to $8.1
million, or 39.6% of pre-tax income, for the six months ended March 31, 2000
from $5.5 million, or 41.8% of pre-tax income, for the six months ended March
31, 1999.
In February 2000, Creo invested $25 million in printCafe, Inc. and acquired in
return 31,186,312 Class B common shares representing 17.24 per cent of
printCafe's voting rights. As part of the investment, Creo will have a seat on
the board of directors of printCafe, an Internet-based, business-to-business
communication solution tailored specifically for the printing and graphic arts
industries. In a subsequent round of financing, Creo invested an additional $10
million and acquired 1,132,502 Class C common shares that currently grant no
additional voting rights but are convertible to stock with full voting rights at
our discretion. Creo may, at its option, increase
<PAGE>
its ownership and voting rights to approximately 53 per cent by giving notice to
printCafe and by paying an exercise/conversion premium.
On March 14, 2000, printCafe announced in a press release that it had filed a
registration statement with the Securities and Exchange Commission for an
initial public offering of its Class A common stock.
In February 2000, Creo invested $2.0 million and acquired 750,000 common shares
in Creo Ltd. of Israel, representing approximately 10 per cent of Creo Ltd.'s
total outstanding shares.
Based in Vancouver, Canada, Creo Products Inc. is a publicly held high-
technology company focused on the application of imaging and information
technology. Through CreoScitex our principal operating division we are
leading the digital transformation of the graphic arts industry. Creo Products
Inc. trades under the symbols CREO on NASDAQ and CRE on the Toronto Stock
Exchange. Additional information on Creo may be obtained by calling Investor
Relations at 604-451-2700 or visiting www.creo.com or through public sources,
including the company's regulatory filings in Canada and the US.
Investors will have the opportunity to listen to the analyst conference call
scheduled for April 25, 2000 at 4:30pm ET live over the Internet through
Investor Broadcast Networks' Vcall website, located at http://www.vcall.com or
Streetfusion, located at http://www.streetfusion.com. To listen to the call,
please go to the web site at least fifteen minutes early to register, download,
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 or
http://www.streetfusion.com. To access phone replay, available until April
28th, investors (except Toronto area) should dial 1-800-408-3053, access
#443310. In the Toronto area, please dial 416-695-5800 to avoid long distance
charges.
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This release contains forward-looking statements within the meaning of the "safe
harbor" provisions of the U.S. Private Securities Litigation Reform Act 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) Creo and Heidelberger
Druckmaschinen AG may be unable to transition to an OEM arrangement or the
expected advantages of the transition to an OEM arrangement may be less than
expected and may adversely affect Creo's operating results and financial
performance; (2) the expected cost-savings and synergies from the combination of
Creo's business with the Scitex Business cannot be fully realized or take
significantly longer to realize than expected; (3) revenues from the Scitex
Business are lower than expected or customer attrition and business disruption
following the acquisition are greater than expected; (4) the integration of the
Scitex Business into Creo's operations is more difficult, time-consuming or
expensive than anticipated, or the attrition rate of key employees of the
combined business is greater than expected; (5) technological changes or changes
in the competitive environment adversely affect the products, market share,
revenues or margins of the combined business; or (6) changes in general
economic, financial or business conditions adversely affect the combined
business or the markets in which it operates. Additional risks and
uncertainties are described under the caption "Information Regarding Forward-
looking Statements" and elsewhere in our Annual Report on Form 20-F for the
fiscal year ended September 30, 1999, as filed with the U.S. Securities and
Exchange Commission. We do not assume any obligation to update the forward-
looking information contained in this press release.
Creo, the Creo logo, CreoScitex, Trendsetter, and Prinergy are registered
trademarks or trademarks of Creo Products Inc.
<PAGE>
Creo Products Inc.
Consolidated Balance Sheets
(In thousands of U.S. dollars)
March 31 March 31
2000 1999
(unaudited) (unaudited)
Assets
Current assets
Cash and cash equivalents $ 53,924 $ 37,150
Accounts receivable 47,301 31,923
Inventories 41,309 27,061
Prepaid expenses 5,774 3,421
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148,308 99,555
Investments 37,071 -
Capital assets 45,922 37,215
Future income taxes 2,177 120
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$ 233,478 $ 136,890
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Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 30,749 $ 17,481
Income taxes payable 4,260 2,072
Future income taxes 307 -
Deferred revenue and deposits 21,005 20,787
Current portion of long-term debt - 296
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56,321 40,636
Long-term debt - 6,512
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56,321 47,148
Stockholders' Equity
Share capital 143,047 78,917
Retained earnings 34,110 10,825
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Total shareholders' equity 177,157 89,742
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$ 233,478 $ 136,890
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Creo Products Inc.
Consolidated Statements of Operations and Retained Earnings
(In thousands of U.S. dollars except earnings per share)
Three months ended Six months ended
March 31 March 31
2000 1999 2000 1999
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue
Product revenue $ 52,702 $ 33,829 $ 97,571 $ 64,894
Service revenue 10,582 7,679 19,834 13,163
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63,284 41,508 117,405 78,057
Cost of sales 33,727 21,217 62,044 40,688
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29,557 20,291 55,361 37,369
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Research and development,
gross 11,406 7,249 21,718 13,256
Research and development,
funding (4,983) (4,007) (9,358) (7,981)
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Research and development, net 6,423 3,242 12,360 5,275
Sales and marketing 9,145 7,611 18,279 14,396
General and administration 3,495 1,948 6,390 3,983
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19,063 12,801 37,029 23,654
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Earnings from operations 10,494 7,490 18,332 13,715
Other income (expense) 1,319 (261) 2,114 (593)
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Earnings before income taxes 11,813 7,229 20,446 13,122
Income tax expense (4,683) (2,968) (8,090) (5,491)
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Net earnings $ 7,130 $ 4,261 $ 12,356 $ 7,631
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Earnings per common share
- - Basic, Canadian GAAP $ 0.22 $ 0.15 $ 0.38 $ 0.28
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- - Fully diluted, Canadian
GAAP $ 0.20 $ 0.14 $ 0.35 $ 0.25
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- - Diluted, U.S. GAAP $ 0.20 $ 0.15 $ 0.35 $ 0.27
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Retained earnings,
beginning of period $ 26,980 $ 6,564 $ 21,754 $ 3,194
Net earnings 7,130 4,261 12,356 7,631
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Retained earnings,
end of period $ 34,110 $ 10,825 $ 34,110 $ 10,825
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