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Presstek posts larger 4Q loss but trims costs

Thursday, March 11, 2010

Press release from the issuing company

Greenwich, CT - Presstek, Inc., a leading supplier of digital offset printing solutions to the printing and communications industries, today reported financial and operating results for the fourth quarter ended January 2, 2010. The Company reported total revenue of $33.5 million in the fourth quarter of 2009, compared with $42.3 million in the fourth quarter of 2008, a decline of $8.8 million, or approximately 21 percent. However, sequential quarterly revenue increased by 1.4 percent compared to $33.0 million of revenue in the third quarter of 2009.

The Company had an operating loss of $0.7 million in the fourth quarter of 2009, an improvement from a loss of $0.9 million in the 2008 fourth quarter and a loss of $6.2 million in the third quarter of 2009. In the quarter, the Company had adjusted EBITDA of $1.1 million compared to the fourth quarter 2008 adjusted EBITDA of $3.0 million, which included an unusually large foreign currency gain in other income. In the third quarter of 2009 the Company had negative adjusted EBITDA of $1.1 million. During the fourth quarter of 2009, the Company incurred a loss from continuing operations of $1.5 million, or $0.04 per share, compared to income from continuing operations of $0.6 million in the fourth quarter of 2008, or $0.02 per share, and a loss from continuing operations of $6.6 million in the third quarter of 2009, or $0.18 per share. (See "Information Regarding Non-GAAP Measures")

"Today we have reported our fourth quarter 2009 results with revenue of $33.5 million, positive adjusted EBITDA of $1.1 million and a reduction in debt net of cash of $4.2 million," said Presstek Chairman, President and Chief Executive Officer, Jeff Jacobson. "These results represent our first sequential quarterly increase in revenue since the second quarter of 2008; a return to positive adjusted EBITDA after two negative quarters; and a strengthening of our overall financial position as we were able to significantly reduce our debt net of cash in the quarter. These positive financial results combined with the recent sale of Lasertel, the closing on our new credit facility, the completion of the SEC review and the successful result achieved with the International Trade Commission in the VIM patent litigation give us a great deal of momentum as we move forward."

Fourth Quarter 2009 Financial Results
Total revenue in the fourth quarter of 2009 was $33.5 million, compared with $42.3 million in the fourth quarter of 2008.

- Equipment revenue declined 40 percent to $5.8 million in the fourth quarter of 2009, compared with $9.8 million for the same period last year. Throughout 2009, equipment sales have been negatively impacted by the global economic recession that has caused credit markets to tighten and customers to delay major capital investment decisions. However, the fourth quarter equipment revenue represents a sequential quarterly revenue increase of $2.2 million, or 60 percent, and was the highest equipment revenue quarter of the year.
- Consumables revenue totaled $20.6 million in the fourth quarter of 2009, compared with $24.2 million for the same period last year. The decline in consumables revenue was primarily related to lower industry print volume, as well as lower sales in the Company's "traditional" portfolio of consumables products. Sequential quarterly revenue for consumables decreased $1.6 million, or 7 percent in the fourth quarter primarily due to a decline in "traditional" consumables in the quarter.
- Service revenue declined approximately 15 percent to $7.1 million in the fourth quarter of 2009 compared to 2008 primarily due to a decrease in the level of traditional equipment service and lower installation volume. Sequential quarterly revenue was essentially flat.

Gross margin for the fourth quarter was 33.9% compared to 37.9% in the fourth quarter of 2008. This reduction was driven by unfavorable shifts in foreign currency exchange rates from the prior year and reduced productivity in equipment and digital plate manufacturing caused by lower production levels. These reductions were partially offset by a favorable mix of products and cost reductions across the manufacturing and service areas as part of the $10 million cost reduction program announced in August 2009.

Fourth quarter operating expenses of $12.0 million declined $4.9 million, or 29 percent, from the fourth quarter of 2008. This decrease is primarily related to significant reductions in legal and professional fees, bad debt charges and headcount related costs resulting primarily from the cost reduction program implemented in August 2009; and the timing of trade show expenses. A restructuring charge of $0.5 million related to the cost reduction program was recorded in the fourth quarter of 2009.

"The $12.0 million operating expense level in the fourth quarter of 2009 represents a 42 percent decrease from 2007 levels when operating expenses averaged in excess of $20 million per quarter," said Presstek Executive Vice President and Chief Financial Officer, Jeff Cook. "This decline has been due, in part, to operating expense reductions achieved in connection with the approximately $40 million of cost reduction and profit improvement actions that have been taken across the business in the past two years."

Interest and other income/expense was an expense of $0.9 million in the fourth quarter of 2009 compared to income of $1.6 million in the fourth quarter of 2008. This change was primarily attributed to a $1.7 million unfavorable swing in foreign currency impacts due to an unusually large foreign currency gain in the fourth quarter of 2008 and an increase in interest expense of $0.3 million as a result of higher interest rates and average debt outstanding during the quarter.

Results from continuing operations exclude the results from the Company's Lasertel subsidiary which were recorded as discontinued operations. Lasertel's results improved during the fourth quarter of 2009 with income from operations, excluding $0.7 million of legal fees related to the sale of Lasertel, of $0.9 million compared with a loss from operations of $1.1 million in the same period last year. On March 5, 2010, the Company completed the sale of Lasertel for approximately $10 million, comprised of $8 million of cash and $2 million of laser diode inventory for Presstek's future product requirements.

The fourth quarter debt net of cash totaled $12.1 million, which is essentially flat from last year's fourth quarter and is down 67 percent from its highest point of $37 million in March of 2007. During the fourth quarter, debt net of cash was reduced by $4.2 million.

"We were pleased that we could complete 2009 with debt net of cash essentially flat in this environment," added Cook. "Even in the face of the contraction of our markets and the expense associated with the refinancing, VIM litigation, SEC review and the Lasertel sale, we were able to end 2009 at essentially the same debt net of cash position as we started the year."

Full Year 2009 Financial Results
Revenue for the full year was $134.5 million, a decrease of $58.8 million or 30 percent from 2008. The decline in revenue was driven primarily by the impact of the deterioration in the global economy and an unfavorable change in foreign currency exchange rates in the year.

Gross margin declined from 35.6% in 2008 to 31.4% in 2009, driven largely by unfavorable changes in foreign currency exchange rates, the negative impact of lower manufacturing productivity due to volume reductions and a third quarter equipment inventory adjustment of $2.7 million. These negative impacts were partially offset by a favorable mix of product sales and the positive impact of cost reduction actions taken in manufacturing and service during the year.

The Company recorded two non-cash, non-routine charges in 2009: a $19.1 million goodwill write-off and a $16.8 million valuation allowance against its U.S. deferred tax assets. These charges are non-cash and did not affect the Company's liquidity or cash flows.

Excluding the goodwill impairment charge, operating expenses declined to $54.5 million in 2009, reflecting a year-over-year improvement of $9.3 million, or approximately 15 percent. Lower expenses resulted primarily from lower headcount related costs due to the Company's cost reduction activities, as well as lower trade show costs and lower legal and other professional services fees.

"We are very pleased with the progress we have made in the past quarter," commented Jacobson. "Since our last earnings call we have accomplished several significant steps toward achieving our long-term strategy.

- We successfully completed the sale of our Lasertel business, closed on our new revolving credit facility, completed the SEC review and won our patent litigation against VIM Technologies in the International Trade Commission. The effect of these actions is that we will free up valuable time and resources to focus even more on our growth initiatives and we will have the financial flexibility to continue to drive our strategy, expand our business and maximize our shareholder value.
- In addition to these achievements, our 2009 fourth quarter results include sequential quarterly revenue growth, a return to positive  adjusted EBITDA and a strengthening of our overall financial position as we were able to reduce our debt net of cash by $4.2 million.
- Through our cost reduction and profit improvement programs we have optimized our cost structure, achieving total annualized benefits of approximately $40 million over the past two years and reducing operating expense levels by 42 percent from 2007 levels. I am very pleased that actions such as these have allowed us to achieve a positive adjusted EBITDA of $1.1 million in the fourth quarter of 2009 on $33.5 million of revenue.
- We also continue to experience positive reactions to our expanded product portfolio, including our thirteen new product announcements in the past two years. We are excited about the organic growth potentialthat the new portfolio and our expanded international distribution channels provide us.

We believe revenue has stabilized and we are poised for growth. However, as industry-wide revenue levels tend to be lower in the first quarter due to typical industry seasonality, we expect first quarter 2010 revenue to be consistent with the fourth quarter of 2009. The revenue stabilization combined with our optimized cost structure will allow us to continue to achieve positive adjusted EBITDA in the first quarter of 2010, and we expect that future revenue growth will drive improved profitability and cash generation."

Information Regarding Non-GAAP Measures
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, the Company provides non-GAAP financial measures, including operating expenses, excluding the impact of restructuring charges; adjusted EBITDA; cash earnings from continuing operations, excluding non-routine charges; working capital, excluding short-term debt; debt net of cash; operating expenses, excluding the impact of goodwill impairment; income from discontinued operations, excluding legal fees; and other GAAP measures adjusted for certain charges, which the Company believes are useful to help investors better understand its past financial performance and prospects for the future. A full reconciliation of GAAP to non-GAAP measures is provided in the financial tables below. Supplemental financial information has been provided with this release to provide additional details on the Company's performance.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:
Certain statements contained in this News Release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding expected revenue, gross margins, operating income (loss), EBITDA, asset impairments, expectations concerning the level of costs, the level of customer demand, the results of the Company's cost reduction measures, and the ability of the Company to achieve its stated objectives. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to: the severity and length of the current economic downturn, the impact of the economic downturn on the availability of credit for the Company's customers, market acceptance of and demand for the Company's products and resulting revenue, the ability of the Company to successfully expand into new territories, the ability of the Company to meet its stated financial and operational objectives, the Company's dependence on its partners (both manufacturing and distribution), and other risks and uncertainties detailed in the Company's 2008 Annual Report on Form 10-K and the Company's other reports on file with the Securities and Exchange Commission. The words "looking forward," "looking ahead," "believe(s)," "should," "may," "expect(s)," "anticipate(s)," "project(s)," "likely," "opportunity," expressions of optimism concerning future events or results, and similar expressions, among others, identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. The Company undertakes no obligation to update any forward-looking statements contained in this news release.

 

 

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