Business News

Peerless Systems Announces Fiscal 2009 Fourth Quarter and Full-Year Results

Monday 04. May 2009 - Selected Highlights: - Fourth quarter operating income was $0.4 million before $1.4 million restructuring expense - Operating expenses significantly reduced as a result of staffing and facilities reductions

Peerless Systems Corporation (NASDAQ:PRLS), a licensor of imaging and networking technologies to the digital document market, today reported financial results for its fourth quarter and fiscal year ended January 31, 2009.

Fourth Quarter Results

Fourth quarter revenues were $2.2 million, versus $9.3 million in the fourth quarter last year and $1.6 million in the third quarter of fiscal 2009. Product licensing revenue was $2.0 million, versus $6.4 million in the fourth quarter a year ago and $1.3 million in the third quarter of fiscal 2009. Engineering services and maintenance revenue was $0.2 million, versus $2.9 million in the fourth quarter a year ago and $0.3 million in the third quarter of fiscal 2009. The fourth quarter of fiscal 2008 included $5.0 million of license revenue and $2.2 million of services revenue from Kyocera Mita Corporation (“KMC”). Effective April 30, 2008 (the end of the Company’s first quarter of fiscal 2009), the Company sold certain assets and transferred 38 engineers and support staff to KMC. The first quarter of fiscal 2009 included $1.9 million of services revenue from KMC.

Peerless reported a fourth quarter fiscal 2009 net income of $3.9 million, or $0.23 per basic and diluted share, which includes a $4.7 million reduction in estimated income taxes associated with the sale of assets to KMC. Fiscal Year 2008 fourth quarter net income of $8.5 million or $0.49 per basic share and $0.47 per diluted share, included a $5 million income tax benefit resulting from the reduction of the deferred tax asset valuation allowance attributable to the gain realized in the KMC transaction during the first quarter of fiscal year 2009. The Company reported a loss of $1.2 million or $0.06 per basic share for the third quarter of the 2009 fiscal year.

Peerless had cash and cash equivalents of $44.7 million as of the fiscal year ended January 31, 2009, compared with $48.9 million at the end of the previous quarter and $23.1 million at the end of fiscal 2008. The decline in cash and cash equivalents from the last quarter was primarily due to the payment of $2.7 million for lease terminations, $2.0 million in taxes on the gain associated with the KMC transaction recorded in the first quarter and $0.8 million for the share repurchase program implemented at the end of the second fiscal quarter, offset by other smaller changes in working capital. From inception through the end of the fourth quarter, the Company had purchased 1,462,898 shares of common stock for $2,692,058, or an average price of $1.84 per share, under its stock repurchase plan.

Fiscal 2009 full-year results

For the full fiscal year, Peerless reported net income of $17.6 million, or $0.99 per basic share and $0.97 per diluted share, on total revenue of $10.4 million. Peerless realized a gain of $32.9 million on the sale of assets to KMC at the end of the first quarter of the 2009 fiscal year. Fiscal 2008 net income was $10.1 million, or $0.59 per basic share and $0.56 per diluted share, which included a $5 million income tax benefit. Gross margin decreased from 65.2% in fiscal 2008 to 30.3% in fiscal 2009. The primary reason for the decrease was a $2.4 million increase in product licensing expense in fiscal 2009 due to the KMC transaction and the resulting change in mix of technologies available to be delivered against existing block licenses with KMC.

Over the course of fiscal year 2009, operating expenses, excluding restructuring expense of $3.3 million, were reduced 27.8% compared to fiscal 2008, primarily as a result of the KMC transaction. Fiscal year 2009 was affected by the significant professional fees related to the KMC transaction and subsequent restructuring charges. After the transaction, the company reduced its staffing levels by 74%. Additionally, facilities costs were reduced by approximately 95% due to the termination of certain leases at the end of fiscal year 2009.

William Neil, Chief Financial Officer and Acting Chief Executive Officer, said, “During the fourth quarter, we made strides in restructuring our existing business. We have sufficient staffing and leased space to service our existing customer base. We continue to look for additional ways to reduce our operating expenses while meeting the requirements of our customers and the obligations of a public company.”

Subsequent Event

During the quarter ended April 30, 2009 the Company entered into an agreement amending a third party technology license agreement. This agreement reduces the liability for technologies licensed by the Company to a customer. As a result of this amendment entered into subsequent to January 31, 2009, the Company reduced the liability for third party licensing costs by approximately $2.7 million in the quarter ended April 30, 2009.