HUDSON, N.H., Feb. 24 -- Presstek, Inc., a leading provider of direct digital imaging technology, today announced financial results for the fourth quarter ended January 1, 2005.
The company reported a record $54.1 million in consolidated revenue for the fourth quarter ended January 1, 2005, up 82% compared to $29.8 million reported in the third quarter of 2004, and up 140% compared to $22.5 million reported in the fourth quarter a year ago.
President and Chief Executive Officer Edward J. Marino said, "The significant increase in fourth quarter revenues resulted from two sources. First, Presstek's core business has grown in both the third and fourth quarters of 2004 compared to prior year corresponding periods; and, second, the company made two important strategic acquisitions in the second half of 2004 which greatly contributed to fourth quarter revenues."
Marino continued, "Our vision for the company is coming into focus, and we believe our fourth quarter results validate the strategies we have employed to realize that vision. We have done exactly what we said we would do to get the company on a growth track."
"Fourth quarter 2004 results were in line with our expectations, and demonstrate that the company's growth strategy is fully engaged," said Marino. "As anticipated, we had significant charges related to our acquisitions of Precision Lithograining and ABDick, and we expect additional charges in the first half of 2005 related to the further integration and streamlining of our businesses. The changes we intend to make to our companies are essential, and we believe they clear the way for strong and profitable future operations. We believe that the growth in the core Presstek business combined with the new revenue streams created by our two recent acquisitions will create more margin and earnings opportunities for the company in 2005."
The company reported a consolidated net loss for the fourth quarter of 2004 of $2.2 million, or $0.06 per basic and diluted share. This compares to fourth quarter 2003 net income of $2.0 million, or $0.06 per basic and diluted share, and third quarter net income of $2.7 million, or $0.08 per basic and diluted share.
Consolidated net income for the fourth quarter of 2004 was impacted by a number of anticipated unusual and non-recurring charges totaling $3.1 million, including: (1) ABDick acquisition-related charges totaling approximately $1.0 million; (2) $500,000 in legal charges relating to the favorable outcome of the shareholder lawsuit; (3) $1.0 million in estimated charges relating to changes made at Presstek's Precision Lithograining subsidiary; and (4) an additional $600,000 above and beyond normal charges relating to compliance with Sarbanes-Oxley Section 404 requirements. ABDick's loss for the period excluding the acquisition related charges, but including interest expense, was $1.4 million. Excluding these non-recurring unusual charges and the loss at ABDick, the company would have recorded consolidated net income of $2.5 million in the fourth quarter of 2004.
Executive Vice President and Chief Financial Officer Moosa E. Moosa said, "Our net income in the fourth quarter compares favorably with the $2.0 million recorded in the prior year. These results reflect Presstek's robust core business."
Consolidated gross margins for the fourth quarter of 2004 were 27%, or $14.5 million, compared to 33%, or $9.9 million in the prior quarter. The decrease in gross margins in the fourth quarter of 2004 is primarily due to the inclusion of eight weeks of ABDick's results, as well as Precision's results for the full quarter. These businesses traditionally have lower gross margins than Presstek's core business.
Operating expenses (being the sum of research & development and sales, general & administrative) were $16.0 million in the fourth quarter of 2004, compared to $7.4 million in the same period last year. The year-over-year increase is primarily the result of: (1) the impact of the some of the unusual charges mentioned above; (2) the acquisitions of ABDick and Precision Lithograining; and (3) the small addition of resources to Presstek's sales & marketing and general & administrative efforts.
Commenting on the balance sheet, Moosa said, "Our cash balance at the end of the quarter was $8.7 million, compared to $28.2 million at the beginning of 2004. Total debt at the end of the quarter was $41.9 million compared with $14.5 million at the beginning of the year. The decrease in cash from the end of last year and the increase in debt primarily reflect the aggregate consideration of $57 million for the acquisitions of Precision and ABDick.
On a consolidated basis, excluding the unusual and acquisition related charges mentioned above, the company generated $4.6 million in earnings before interest, taxes, depreciation and amortization in the fourth quarter of 2004. During the quarter, the company generated $2.8 million in net cash from operations.
Moosa continued, "We believe the company is on a firm financial footing. As a positive indication of how well we managed the acquisition of ABDick, our generation of $2.8 million in net cash from operations was made despite the company's consolidated loss of $2.0 million. Our cash flows and balance sheet are strong and are expected to improved through 2005."
Presstek Core Business
Presstek's core DI and CTP business recorded revenue of $24.3 million in the fourth quarter of 2004, up from $21.8 million in the corresponding quarter of last year. Presstek's core business recorded net income (excluding the unusual items mentioned above) of $3.6 million for the quarter, compared to $3.1 million for the corresponding quarter last year. Presstek's equipment revenue for the fourth quarter was $9.1 million, compared to $8.5 million in the fourth quarter a year ago. Presstek's consumable revenue for the fourth quarter of 2004 was a record $14.8 million, up significantly from $12.4 million in the fourth quarter of 2003. Gross margins for Presstek's core business were 40% for the fourth quarter of 2004, compared to 37% last quarter.
Moosa said, "Excluding unusual charges, Presstek's core business continued to have solid quarterly earnings. The business is strong, achieving record consumable sales, led by our award-winning Anthem chemistry-free plate and our Ryobi DI platform consumables. Presstek's fourth quarter equipment revenue was solid at $9.1 million. Our DI press products gained considerable traction in the fourth quarter of 2004, led by strong sales to Kodak Polychrome Graphics. Our Dimension CTP sales were lower for the quarter as we introduced new models in our product line which we believe will be well accepted by the marketplace."
Presstek's Lasertel subsidiary achieved a record $989,000 in revenue from sales to external customers in the fourth quarter of 2004, up 37% from $722,000 in the fourth quarter of 2003. Excluding inter company interest of $558,000 in the current quarter, Lasertel's operating loss was $604,000 down from the $793,000 operating loss in the corresponding quarter last year.
Marino said, "Lasertel made significant progress in the fourth quarter of 2004, delivering record external revenue and the lowest operating loss since the start up of full-scale production. With our recently announced plans to increase capacity at Lasertel and its new contract with HTOE of China, we believe that Lasertel will continue to grow in 2005."
Fourth quarter 2004 consolidated revenue includes $24.3 million in revenue from ABDick, which was acquired on November 5, 2004. ABDick recorded a net loss of $2.0 million in the fourth quarter of 2004, which includes acquisition related charges of approximately $600,000, and approximately $400,000 in interest charges on the loan used for the acquisition. ABDick was cash flow positive in the fourth quarter of 2004.
The company's Precision Lithograining operation, acquired by the company in July 2004, reported record revenue of $7.4 million for the fourth quarter of 2004, which includes $5.3 million in external revenue. This compares to revenue of $3.8 million in the third quarter of 2004, which included $3.1 million in external revenue. Precision reported a net loss of $919,000 in the fourth quarter of 2004, which includes the estimated $1.0 million in unusual charges mentioned above, relating to a capacity and quality upgrade campaign which was implemented following the acquisition.
Marino commented, "We are delighted with the status of our two recent acquisitions. The integration of Precision Lithograining is substantially complete and we have made initial investments intended to scale up the business to meet the demands of our growing Anthem chemistry free plate line, and to improve the overall product quality in the operation. The integration of ABDick is progressing better than we expected. We have a strong management team in place at ABDick, and we are pleased with the achievements of this business in the first eight weeks under Presstek ownership. The performance of our two acquisitions along with the growth in the Presstek core business in the second half of 2004 make us very enthusiastic about the company's future."
"In 2004, we leveraged our strong financial and strategic position to take advantage of some valuable opportunities which we believe have set us on a solid course for the future," said Marino. "Our vision of Presstek as a leading high tech manufacturer of digital solutions and our ability to effectively deliver that digital technology to the market, has come more sharply into focus as a result of our actions in the second half of 2004. There is more work to do to get our newly acquired operations to deliver the earnings we expect, and we believe that we are on course to do that in 2005. As we have previously indicated, we intend to take approximately $7 million of costs out of our operations in 2005 as we complete our integration and restructuring efforts. Overall, Presstek is stronger and more capable today than we were just 12 months ago, and we believe the next 12 months will further demonstrate this strength. Our goal is to achieve an annualized revenue run-rate by the end of 2005 in excess of $300 million, and an annualized EBITDA run-rate of greater than $30 million. We believe the actions taken in the second half of 2004 were critical to achieving these goals."
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