Presstek Reports Q2 Loss: Expects Return to Profitability Later in the Year
Press release from the issuing company
HUDSON, N.H., July 25-- Presstek, Inc., a leading provider of direct digital imaging technology, today announced financial results for the second quarter ended June 29, 2002.
Revenues for the second quarter ended June 29, 2002 decreased 29% to $19.3 million, compared to the same period a year ago. Revenues for the current quarter were down 7% from the previous quarter. The company reported a net loss for the second quarter of 2002 of $11.5 million, or $0.34 per diluted share, compared to net income of $105,000, or $0.00 per diluted share, for the corresponding period in the prior year. Excluding inventory write-downs due to discontinued programs, and special charges relating to the company's repositioning of resources, facilities consolidation and headcount reduction announced in June 2002, the company's net loss would have been $825,000, or $0.02 per diluted share for the second quarter of 2002.
Revenues for the six months ended June 29, 2002 decreased 24% to $40.1 million, compared to the first half of 2001. Presstek reported a net loss of $11.3 million for the first six months of 2002, or $0.33 per diluted share, compared to net income of $1.1 million, or $.03 per diluted share, for the same period last year. Excluding the inventory write-downs and special charges mentioned above, the company's net loss for the first six months of 2002 would have been $642,000, or $0.02 per diluted share.
Revenues for the quarter consisted of product sales of $17.7 million and $1.6 million of royalties and fees from licensees, compared with product sales of $24.9 million and $2.2 million of royalties and fees from licensees in the corresponding quarter last year. Product sales for the previous quarter were $19.4 million. A significant portion of the year-over-year decrease is due to a reduction in press sales to Xerox and kit sales to Heidelberg. Plate media revenues for the second quarter of 2002 were $12.1 million, up 10% from $11.1 million in the second quarter of 2001. Equipment revenues for the second quarter were $5.6 million, compared to $13.8 million in the same period a year ago. During the same period a year ago, equipment sales to Xerox were $4.0 million.
Results for the second quarter of 2002 include an operating loss before inter-company charges and inventory write-downs due to discontinued programs of $1.9 million at the company's Lasertel subsidiary, down significantly from its operating loss of $2.8 million in the corresponding quarter in the prior year. Lasertel reported an operating loss before inter-company charges of $1.6 million in the first quarter of 2002. The increase in the operating loss in the current quarter is the result of lower yields. Lasertel did not record any external revenues during the first half of 2002.
Excluding the inventory write-downs and other charges relating to discontinued programs, gross margins for the second quarter of 2002 would be 43%. This would be up from 40% in the prior quarter, and reflects a favorable mix and better manufacturing yields. Including the write-downs and other charges, gross margins for the current quarter were 18%, down from 40% in the first quarter of 2002 and 41% in the corresponding quarter last year.
During the quarter, the company generated $2.4 million in cash from operations and working capital. Cash and cash equivalents at the end of the quarter were $12.9 million, up from $7.8 million at the end of the first quarter of 2002.
President and Chief Executive Officer Edward J. Marino said, "Equipment sales decreased significantly from those reported in the second quarter of last year. We believe this reflects a continuing worldwide slowdown in capital spending, and the resulting reduction in inventory made by our marketing partners. Much of last year's equipment sales represented initial stocking orders for press equipment at Xerox and other marketing partners. Much of this equipment did not sell through at the rates expected, particularly at Xerox, which has resulted in much lower shipments to date in 2002. We expect these lower shipment rates to our partners will continue until their inventories are brought into line. The good news is that we are beginning to see improving sell-through of press products due, in part we believe, to Presstek's enhanced marketing and sales efforts with our partners. Looking ahead, we anticipate that press sales will improve in the third quarter. Consumable sales continue to be a bright spot, and were strong at $12.1 million, in spite of the fall off in print volumes in the second quarter."
Presstek's Chief Financial Officer Moosa E. Moosa said, "The results for the quarter include special charges of $2.2 million related to severance costs associated with the workforce reductions completed in early June and other contractual obligations, and $3.8 million related to asset write-offs and consolidation costs. In addition, the company booked $4.7 million to cost of sales for inventory write-downs and other charges relating to the discontinuance of certain programs."
Moosa continued, "The repositioning activity initiated in late June is substantially complete. The consolidation of our Hampshire Drive facility is expected to be finalized in September 2002. The benefits from the June repositioning activities are expected to be approximately $5.6 million annually when completed. These benefits, in conjunction with the January reduction in our workforce, will result in a total reduction of approximately $8.2 million in annual operating costs. While we expect to be adding resources in the marketing and sales areas, we believe that these additional costs will have a minimal effect on the ongoing cost savings resulting from our repositioning actions."
Regarding the balance sheet, Moosa said, "We continue to have a strong balance sheet. Our total debt at the end of the quarter was $18.2 million, up by $794,000 on a year-to-date basis mainly as a result of an opportunity to draw down on an expiring lease line of credit. During the same period, we repaid $2.2 million of debt."
Marino continued, "While we do not yet see signs of recovery in the capital equipment business, we nonetheless expect to see a slow return to profitability in the second half of the year. This is based, in part, on the cost-cutting measures implemented recently, as well as on our efforts to expand our market channels and improve relationships with our existing partners. We have begun strengthening our marketing and sales efforts around both our off-press and on-press DI products. Our recent agreement with MAN Roland to combine sales of our Anthem/Dimension CTP system with the Roland 300 and 500 presses, and the new Anthem bundling agreement with Creo are important additions to our marketing efforts. We expect these efforts will contribute to sales growth in the second half of this year and beyond. We believe the changes we have implemented have positioned the company for future growth and profitability. We are working diligently toward the fulfillment of our plan and are optimistic about the future of the company."
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