Interim Results

RNS Number:0674Q
Applied Graphics Technologies Inc
29 August 2000


Contacts: David Lilly                        Joseph D. Vecchiolla, CFO
          Jim Fingeroth                      Applied Graphics Technologies
          Kekst and Company                  [phone]
          [phone]

                    APPLIED GRAPHICS TECHNOLOGIES REPORTS
                    SECOND QUARTER 2000 RESULTS


New York, August 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 six
months ended June 30, 2000.

As previously announced, the Company's Board of Directors approved a plan
to sell its Devon Publishing Group. As a result, 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 three and six month periods ended June 30, 2000 include a
non-cash charge of $95.2 million related to the estimated loss on
disposal. In addition, the results of Wace Group Limited ("Wace"), which
was consolidated with AGT effective May 21, 1999, are included for the
full periods in 2000.

The Company's revenues increased by 12.5% to approximately $147.0
million, as compared to $130.7 million in the second quarter of 1999.
Revenues for the 2000 quarter include approximately $45.5 million of
revenues related to former Wace operations, as compared to $27.3 million
for the 1999 quarter. Gross profit was $50.4 million in the 2000 quarter,
a 22.5% increase over the $41.2 million gross profit in the second
quarter of 1999. Gross profit as a percentage of sales was 34.3% in the
2000 quarter, a 2.8 percentage point increase over the 1999 quarter.
Operating income from continuing operations, before restructuring and
other charges totaling $1.6 million, was $6.2 million, a decrease of $2.0
million from the 1999 quarter. Operating income is net of amortization of
intangibles, including goodwill, of $3.4 million in the 2000 quarter and
$2.7 million in the 1999 quarter. Additionally, operating income for the
2000 quarter includes a charge of $0.8 million related to non-restructuring
related employee termination costs. Continuing operations in the second quarter
of 2000 were negatively impacted compared to the 1999 period by an increase in
interest expense of $2.4 million and restructuring and other charges totaling
$1.6 million.

The Company incurred a loss from continuing operations of $1.7 million
for the 2000 quarter, as compared to income from continuing operations of
$2.1 million for the 1999 quarter.  For the second quarter of 2000, the Company
incurred a net loss of $98.6 million, including a non-cash charge of $95.2
million related to the reporting of the Devon Publishing Group as a discontinued
operation, as compared to net income of $1.9 million for the same period of
1999.

For the six months ended June 30, 2000, the Company's revenues rose
29.7% to $291.3 million, as compared to revenues of $224.7 million for the
six-month period last year. Revenues for the first six months of 2000 include
approximately $97.1 million related to former Wace operations, as compared to
$27.3 million for the same period of 1999. Gross profit was $97.4 million
(33.4%) for the first six months of 2000 as compared to $70.3 million (31.3%)
for the same period of 1999. Operating income from continuing operations for the
2000 period was $9.0 million, before restructuring and other charges totaling
$1.8 million, as compared to $12.9 million in the 1999 period. Operating income
for the 2000 period is net of $6.7 million of amortization of
intangibles, including goodwill. Such amortization was $5.0 million for
the 1999 period.  Additionally, operating income for the first six months of
2000 includes a charge of $1.7 million related to non-restructuring related
employee termination costs. For the first six months of 2000, the Company
incurred a loss from continuing operations of $9.1 million, as compared to
income from continuing operations of $1.5 million for the first six months of
1999. Continuing operations for the first six months of 2000 were negatively
impacted compared to the same period of 1999 by an increase in interest expense
of $7.0 million, restructuring and other charges incurred totaling
$1.8 million and an increase in minority interest related to dividends on
the outstanding Wace preference shares of $0.7 million. For the first six months
of 2000, the Company incurred a net loss of $107.5 million, including a non-cash
charge of $95.2 million related to the disposal of the Devon Publishing Group,
as compared to net income of $2.3 million for the same period of 1999.

As previously announced, on April 21, 2000, the Company sold its photographic
laboratory business, the net proceeds of which (approximately $9.0 million) were
used to reduce long-term bank debt.

"The focus of our efforts will continue to be the improvement of
our core business through expanded sales, working capital management,
and further cost savings," said Derek Ashley, Vice Chairman, Chief
Executive Officer and Chief Operating Officer of AGT. "We are also
moving forward with our plan to sell non-core assets and operations. The
proceeds from these sales, if consummated, will allow us to pay down
additional bank debt and to concentrate on the integration and
performance of our core prepress and digital media businesses."

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

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 Operation Data
                               (Unaudited)
                (in thousands, except per-share amounts)

                                   Three Months        Six Months
                                  Ended June 30,      Ended June 30,
                                2000        1999     2000          1999
Revenues                      $147,023 $ 130,710 $ 291,342     $224,655
Cost of Revenues                96,607    89,538   193,894      154,389

 Gross Profit                   50,416    41,172    97,448       70,266
 Gross Profit Percentage         34.3%     31.5%     33.4%         31.3%

 Selling,General and 
   Administrative Expenses      40,855    30,340    81,741       52,391
 Amortization of Intangibles     3,381     2,652     6,744        5,007

 Operating Income from 
  Continuing Operations 
  Before Restructuring, 
  Impairments and Other Charges  6,180     8,180     8,963       12,868
 Restructuring Charge              611         -       611          -
 Gain on Disposal of Property and 
  Equipment                       (272)      (18)      (47)         (34)
 Impairment Charges              1,241        --     1,241          -

 Operating Income                4,600     8,198     7,158       12,902
 Interest Expense               (5,991)   (3,558)  (13,194)      (6,158)
 Interest Income                   231       116       433          128
 Other Income (Expense) - Net       48        70     (154)          114

 Income (Loss) From Continuing 
   Operations Before Provision 
   for Income Taxes and
   Minority Interest           (1,112)     4,826   (5,757)        6,986
 Provision (Benefit) for Income 
  Taxes                           (69)     2,202    2,068         4,927
 Income (Loss) from Continuing 
  Operations Before Minority 
  Interest                     (1,043)     2,624   (7,825)         2,059
 Minority Interest               (633)      (566)  (1,296)          (566)
 Income (Loss) from Continuing 
 Operations                    (1,676)     2,058   (9,121)         1,493
 Income (Loss) from Discontinued 
 Operations                   (96,909)      (121)  (98,383)          819
 Net Income (Loss)           $(98,585)   $ 1,937 $(107,504)     $  2,312

 Basic and Diluted Earnings (Loss) 
  Per Common Share:
 Income (Loss) from Continuing 
  Operations                  $(0.07)    $   0.09  $ (0.40)         0.07
 Income (Loss) from 
  Discontinued Operations      (4.29)          --    (4.35)         0.03
 Total                        $(4.36)    $   0.09  $ (4.75)        $0.10
 
Weighted Average Number of Common
   Shares: 
   Basic                       22,615      22,396   22,615        22,396
   Diluted                     22,615      22,400   22,615        22,397


                                             
                       Applied Graphics Technologies, Inc.

                         Consolidated Balance Sheet Data
                                   (Unaudited)
                            (in thousands of dollars)

                                                June 30,  December 31,
ASSETS                                            2000        1999

Current assets:
Cash and cash equivalents                    $   8,611            $23,218
Marketable securities                              289              2,127
Trade accounts receivable 
 (net of allowances of $7,879 in
 2000 and $7,732 in 1999)                      107,551            119,997
Due from affiliates                              6,654              6,615
Inventory                                       28,244             26,283
Prepaid expenses                                 8,882             12,095
Deferred income taxes                           27,757             26,985
Other current assets                            10,277             13,844
Net current assets of discontinued 
 operations                                     44,673             36,233

Total current assets                           242,938            267,397
 Property, plant and equipment - net            71,252             95,281
Goodwill and other intangible assets-net       427,058            437,674
Other assets                                    23,110             18,270
Net non-current assets of discontinued 
 operations                                          -            112,388
Total assets                                 $ 764,358          $ 931,010

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued expenses        $  79,929            $92,056
Current portion of long-term debt and 
  obligations under capital leases              17,943             19,024
Due to affiliates                                1,466              1,909
Other current liabilities                       23,750             33,477

Total current liabilities                      123,088            146,466
Long-term debt                                 260,589            298,125
Subordinated notes                              28,119             29,867
Obligations under capital leases                 2,773              3,814
Deferred income taxes                            3,413              2,975
Other liabilities                               12,900              8,763
Total liabilities                              430,882            490,010
                                                               
Commitments and contingencies

Minority interest - Redeemable Preference Shares
issued by subsidiary                            32,982             33,050

Stockholders' equity:

Common stock                                       226                225
Additional paid-in capital                     388,547            386,548
Accumulated other comprehensive income            (688)             1,264
Retained earnings (deficit)                    (87,591)            19,913
Total stockholders' equity                     300,494            407,950
                                             ---------            -------
                              
Total liabilities and stockholders' equity $   764,358        $   931,010