By Trevor Shackelford February 27, 2006 -- Presstek Inc. (NASDAQ: PRST) recently announced their fourth quarter and fiscal 2005 results. The company’s consolidated revenue for the fourth quarter was $69.3 million, an increase of $4.6 million, or 7% from the third quarter of 2005. Consolidated net income for the quarter was $2.4 million, or $0.07 per diluted share, compared to a net loss of $2.2 million in the same period last year. Sequentially, earnings were up from $0.8 million, or $0.02 per diluted share. Consolidated revenue for 2005 was $274.1 million, up from $129.9 million reported in the prior year. Consolidated net income was $6.1 million, compared to $3.9 million reported in 2004. The company began 2005 with the acquisition of ABDick, and having completed the year, Presstek believes it has essentially completed the integration of its businesses. Contents of this Summary * Quarter Highlights * Segment Performance * Guidance * Raine Radar Q & A Quarter Highlights • Gross margin for the quarter was 30%, essentially flat from the previous quarter. • Operating income for the quarter was $3.3 million, up $1.8 million, or 121%, sequentially, and up from a net operating loss of $1.4 million reported for the same period last year. • EBITDA for the quarter was $6.2 million, up from $4.4 million reported in the previous quarter. EBITDA for the fiscal 2005 was $21.4 million, compared to $13.4 million reported last year. • Operating expenses declined from $18.1 million reported in the third quarter of 2005 to $17.6 million in the fourth quarter, primarily due to integration synergies. • Net working capital was up by $6.5 million quarter-over-quarter, primarily due to the increase in equipment revenue during the quarter and its integration activities. • During the fourth quarter, the company paid down $1.75 million of term debt, leaving debt at the end of the year at $35.5 million, down from $41.8 million at the beginning of the year. • European channel business produced 12% revenue growth in the second half, compared to first half of 2005. • In 2005, the company placed 600 digital units, compared to 300 digital units placed in 2004. The greatest growth came from the sales of DI press units, which grew by 75% from 2004 to 2005. Segment Performance Equipment Total equipment revenue for the quarter was $24.4 million, up $6.5 million, or 36% from the third quarter of 2005. Digital equipment revenue for the quarter was $18.6 million, up $4.4 million, or 31% from the third quarter of 2005. DI press equipment revenue for the quarter was $10.6 million, up 63% from the third quarter of 2005. At the beginning of the fiscal 2005, digital to analog mix was 57% and 43% respectively. By the end of fourth quarter, this mix was shifted to 63% and 37% respectively. Lasertel The company’s Lasertel subsidiary reported sales of $1.3 million to external customers in the fourth quarter of 2005, an increase of 30% from the $1.0 million in revenue reported in the third quarter of 2005. The increase is due primarily to the sale of new products, including the new stacked-array product for Selex that was announced in the third quarter. Lasertel’s gross margins improved considerably during the quarter and operating expenses were down. During the quarter, the company extended the lives of certain depreciable equipment. The change favorably impacted fourth quarter earnings by approximately $0.4 million on a pre-tax basis. Lasertel’s loss from operations for the fourth quarter was $0.3 million, an improvement of 76% from the loss of $1.3 million in the prior quarter. Precision External revenue at the company’s Precision operation for the fourth quarter was $3.5 million, up from $3.4 million reported in the previous quarter. Operating income for the quarter was $0.5 million. Guidance The company did not provide the specific financial guidance for the first quarter and for the full year of fiscal 2006. However, the company stated that its main priorities in 2006 will be to increase the market share and market penetration of Presstek’s technology. Raine Radar Last quarter, the issue for the company was a loss of some traditional analog business. This quarter, it appears the company has made back much of its lost ground. Total equipment revenues are up 36% sequentially and the company saw its earnings rebound as well. The company appears to be satisfied with its integration of ABDick, and the Lasertel business also seems to have seen some improvement. Although certainly not without challenges, so far Presstek has undergone a very controlled and clean transition to a digital technology platform. Q & A 1. Presstek explained that the fourth quarter is seasonally a good time for the Lasertel business. 2. Both higher external and internal volumes, as well as the realignment of the lives of some depreciable assets contributed to the improved performance of Lasertel. 3. Overall the Lasertel business had over $3 million in operating loss. 4. Total consumable sales declined quarter-to-quarter, due to the impact of the analog business. There was natural erosion in that business due to technology substitution and other factors. 5. Presstek saw some buying pattern fluctuations from the Q3 to the Q4 in the DI area. 6. The company expects that its R&D spending will probably step up slightly during 2006. 7. SG&A expense reduced approximately $1.8 million for the quarter or $7.2 million annually. 8. Overall revenue coming from European operations was approximately 16%. 9. The company said that the majority of the ABDick consolidation happened in the second half of the quarter. 10. Presstek’s entry level DI machine is selling for under $300,000 and higher capability DI machines are selling at $350,000 to $400,000. 11. Presstek said that going forward you could see some scale up in format size and a scale down in feature content in its technology. 12. The company expects a 10% to 20% productivity gain on an annual basis from the North American sales force. The company intends to add head count to its sales force in order to take advantage of the market opportunity. 13. CAPEX for the year was approximately $6.5 million and the company expects it to remain at this level or slightly lower unless the company has a major capacity expansion. Much of the 2006 expenditure is slated for the IT area. 14. The company said that most of the savings were reflected in the Q4 earnings; however it believes that all of the savings will be reflected in the next quarter. The company is hopeful for consumable revenue of its new technology. 15. Traditionally, the company has seen high double-digit growth in consumables from new products.