HUDSON, N.H., Feb. 21 -- Presstek, Inc., a leading manufacturer and marketer of high tech digital imaging solutions for the graphic arts and laser imaging markets, today reported fourth quarter and full year results for 2006. Consolidated revenue from continuing operations for the fourth quarter of 2006 was $66.1 million, compared to $65.8 million in the same quarter last year, and $61.4 million in Q3. For the full year, Presstek reported consolidated revenue from continuing operations of $265.7 million, compared to $259.1 million in 2005.
The company's results for the fourth quarter reflect three unusual items, which affected GAAP results. First, net income was affected by Presstek treating the shutdown of the Precision Analog newspaper plate business as a discontinued operation. Net income in the fourth quarter includes a $2.4 million loss from the discontinued Precision analog operations.
Second, special charges included the expensing of the Precision analog goodwill amounting to $2.6 million. Special charges also included the expensing of $2.2 million of previously capitalized legal costs related to patent defense in litigation that Presstek has brought against a competitor. This action was prompted by a determination that the company made in December, that the merits of our legal action had increased, and that the likelihood of settlement had changed.
Third, net income from continuing operations was affected by income tax accounting. Due to Presstek's recent track record of profitability and the company's expectation of future profitability, the company has reversed its deferred tax asset reserves, which resulted in an income tax benefit in the quarter of $10.7 million.
Revenue for the fourth quarter of 2006 was made up of the following components:
* Consolidated equipment revenue of $25.8 million, compared to $24.4 million in the same quarter last year;
* Consolidated consumable revenue of $30.0 million, compared to $29.7 million in the same quarter last year;
* Digital equipment and consumables revenue of $44.9 million, compared to $38.6 million in the same quarter last year;
* Consolidated service revenue of $10.3 million, compared to $11.7 million the same quarter last year;
Net income in the fourth quarter was $4.6 million or $0.13 per diluted share, compared to $2.4 million or $0.07 per share in the same quarter last year and a net loss of $423,000 or ($0.01) per 1 share in Q3. For the full- year 2006, net income was $9.7 million, or $0.27 per share, compared to $6.1 million or $0.17 in 2005.
Excluding special charges, operating income in Q4 of 2006 was $1.9 million, compared $3.2 million in the same quarter last year and $72,000 in Q3.
The numbers presented above represent the results of continuing operations and include non-GAAP measures. 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.
Presstek's President and Chief Executive Officer Edward J. Marino said, "Our execution started to show the improvements we anticipated in Q4. Our fourth quarter revenue was up 8% from Q3, and was our best sequential gain in a year. In addition, our revenue mix was of a higher, more favorable quality and contained a heavier mix of digital products than in prior quarters.
"Our operating income for the fourth quarter was $1.9 million, achieving our target of positive operating profit. This level of profit is in the right direction but still far below our potential. While there are additional improvements we can make, we believe that with highlights such as record DI equipment sales, we have entered 2007 with a healthy foundation we can expand upon."
In the quarter, equipment and service gross margins improved, while consumables margins held flat despite addressing quality issues. Gross margins benefited from reduced expenses arising from cost reductions implemented in the quarter. Operating expenses were also reduced by $0.5 million in the quarter despite costs associated with the Graph Expo trade show.
Debt-net-of-cash in Q4 was $28.1 million, down from $29.9 million in the same quarter last year, but up from $26.9 million in Q3, due to funding the shutdown of the Precision analog operations in Q4 described above.
Due to seasonality, for Q1 of 2007, Presstek expects total revenue in the range of $63 to $65 million. The company also expects to again report positive operating income in the quarter.
For the full year 2007, Presstek expects total revenue to grow by at least 5% from 2006, with digital equipment and consumables expected to grow by at least 15%. The company expects operating margin to grow to approximately 5% of revenue, on a full-year basis.
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