3rd Quarter & 9 Mths Results

RNS Number:4563N
Applied Graphics Technologies Inc
20 November 2001



Contacts:  Joseph D. Vecchiolla, President & COO   Applied Graphics Technologies
          [phone]

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