HUDSON, N.H., July 28 -- Presstek, Inc., a leading provider of digital imaging technology, today announced financial results for the second quarter ended July 2, 2005.
President and Chief Executive Officer Edward J. Marino said, "The company made some tough decisions in the second quarter around certain strategic initiatives that cost us some revenue in the second quarter. These decisions have positioned us with a higher quality of revenue and, we believe, better growth prospects for the future. Even while supporting these strategic initiatives, the company turned in a great quarter. We made considerable progress in the second quarter of 2005, much of which is visible in our reported quarterly performance, and much of which will be felt in subsequent quarters."
Marino continued, "For the second quarter, we reported strong earnings results; we are seeing continued growth in our core Presstek digital products; and, we are ahead of expectation on the integration of our businesses since the acquisition of ABDick late last year. One of the most encouraging signs in the quarter was the rapid start up of the ABDick sales force in the sell through of Presstek technology products, which resulted in measurable contributions from the ABDick channel on Presstek products in less than 90 days of selling. This is significant considering that these accomplishments occurred simultaneously with the strategic decision to conduct large scale digital training of ABDick's North American sales and service force."
Marino said, "During the second quarter of 2005, the company took the strategic initiative to shed unprofitable sales at both its ABDick and Precision businesses, resulting in the company reporting consolidated revenue of $69.7 million in the second quarter, essentially equal to compared to $70.4 million in the first quarter of 2005."
The company reported consolidated net income for the second quarter of 2005 of $2.3 million, or $0.07 per basic and diluted share, compared to first quarter 2005 consolidated net income of $0.5 million, or $0.01 per basic and diluted share, which included special charges of $1.0 million. Excluding the special charges, first quarter 2005 net income would have been $1.5 million or $0.04 per share diluted.
Consolidated gross margins for the second quarter of 2005 were 31%, or $21.3 million, compared to 29%, or $20.1 million, in the prior quarter. The full two percentage-point increase in gross margins is primarily due to productivity gains and a more favorable product mix.
Marino said, "As mentioned last quarter, we have built a model to create better end-to-end gross margin opportunities. These strategic initiatives resulted in improved gross margins this quarter on a consolidated basis, as well as in our core business. We expect to see continued productivity gains going forward as we continue with the integration and consolidation of our businesses."
Despite the substantial investment in training and marketing to engage the ABDick channel, operating expenses (the sum of research & development and sales, general & administrative, excluding unusual and non-recurring charges) were more favorable at $17.8 million in the second quarter of 2005, compared to $18.0 million in the prior quarter.
Executive Vice President and Chief Financial Officer Moosa E. Moosa said, "Presstek's strong financial results were achieved as we continued to integrate ABDick into Presstek's operations. During the second quarter we continued with our planned reduction in operating expenses through workforce reductions at ABDick. In addition, we made important investments in the training of our new sales and service teams, as well as our dealer network, in the selling and service of Presstek's line of products. As previously mentioned, we expect to begin to see the benefits of these cost savings, expense reductions and investments in the second half of the year."
Moosa continued, "Our cash balance at the end of the quarter was $11.1 million. We generated $12.8 million in cash from operations during the first half of the year, and reduced total debt at the end of the quarter to $33.1 million from $41.9 million at the beginning of the year. Debt-net-of-cash, was $22.0 million at the end of the second quarter, down from $33.2 million at the beginning of the year. EBITDA was $6.0 million for the quarter, compared to $4.9 million last quarter."
Moosa continued, "The solid financials delivered in the second quarter, together with a sound operational plan, are expected to create much bigger opportunities for Presstek than had previously existed. We plan to take further steps soon which we believe will further improve Presstek's financial performance throughout the remainder of 2005 and beyond."
Presstek Core Business
Presstek's core DI and CTP business reported record revenue of $28.7 million in the second quarter of 2005, up 11% from $25.9 million in the first quarter, due primarily to a significant increase in DI press unit and consumable sales. Presstek core business revenue included approximately $2.0 million in initial stocking orders from ABDick, North America in order to ramp up the new channel. Excluding the stocking orders from ABDick, Presstek's core business revenue would have been $26.7 million. Gross margins for Presstek's core business improved significantly to 41% in the second quarter of 2005, compared to 37% last quarter. Income from operations increased substantially to $4.7 million, from $2.3 million in the previous quarter.
Moosa said, "Presstek's core business was very strong in the second quarter of 2005, achieving the highest quarterly revenue in the company's history, and the highest income from operations for the company in the last seven years. We are very pleased with this achievement."
Marino said, "Presstek announced yesterday the completion of a major strategic move with the formation of an alliance between Lasertel and one of the world's largest defense contractors, SELEX Sensors and Airborne Systems, which is a new company formed through a merger of BAE Systems and Finmeccanica of Italy. Selex has designated Lasertel as the preferred and primary supplier for an important category of laser components and assemblies. The transition to this new arrangement resulted in the loss of some revenue that would have ordinarily been recognized in second quarter. We expect to recover this revenue as the year progresses. The value of the initial purchases under the new Selex agreement is close to $1 million over the next three quarters."
Presstek's Lasertel subsidiary recorded $0.7 million in revenue from sales to external customers in the second quarter of 2005, essentially the same level as the first quarter of 2005. Lasertel's loss from operations for the second quarter of 2005 was $1.1 million, compared to $0.8 million in the prior quarter.
Moosa commented, "During the quarter Precision began to selectively shed unprofitable analog sales which did not fit our strategic profile. Precision's digital revenue, including our Anthem product line, grew by 6% over the previous quarter. We are very pleased with the operational progress made at Precision in the second quarter and with the strategic emphasis on digital."
Precision recorded $6.2 million in revenue in the second quarter of 2005, compared with $6.7 million in the first quarter of 2005. As a result of our continued focus on efficiency, we achieved solid income from operations at Precision of $0.4 million.
ABDick's second quarter revenue grew to $43.0 million, from $41.2 million in the first quarter of 2005. On an operating basis, ABDick reported income from operations of $0.7 million in the second quarter of 2005, compared to income from operations of $0.2 million in the prior quarter.
Marino commented, "During the quarter ABDick focused strategically on improving the quality of revenue by shedding some unprofitable and non- strategic analog products and services. More importantly, we made substantial investments in our new business through the training of the ABDick's sales and service teams, along with our expanded dealer network. We are delighted that this investment has already begun to show good results. The ABDick sales team has sold through a measurable number of DI presses and CTP systems within the first 90 days of training, and the sales pipeline for these products continues to build. We are pleased with ABDick's operational performance in the second quarter, as well as with the progress of the integration."
Marino concluded, "Presstek has demonstrated extraordinary focus and discipline in managing its core business through two recent and significant acquisitions. In a very short period of time, the company leveraged these two strategic acquisitions to strengthen its core business and to set the company on a positive earnings growth trajectory. These accomplishments, along with other strategic initiatives, give us further confidence in our ability to meet or exceed our year-end 2005 annualized run rates of $300 million in revenue, 31% in gross margin and $18 million in operating profit."
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