Business News

Presstek Announces Second Quarter 2009 Financial Results

Thursday 13. August 2009 - $10 Million in Expected Annualized Savings Through Additional Cost Reductions; Non-Cash Charges Totaling $35.9 Million -- Write Down of Goodwill and a Deferred Tax Asset Valuation Allowance; Presstek to Debut Its New Long-Run Thermal Plate at Print 09

Presstek, Inc. (NASDAQ: PRST), a leading manufacturer and marketer of digital offset printing business solutions, today reported financial and operating results for the second quarter ended July 4, 2009. The Company’s second quarter 2009 results reflect the global economic recession and significant non-cash charges.
Including non-cash, non-routine charges totaling $35.9 million, the Company incurred a loss from continuing operations (after tax) for the second quarter of 2009 of $39.9 million, or $1.09 per share, compared with income from continuing operations of $1.0 million, or $0.03 per share, in the second quarter of 2008. Results from continuing operations exclude the Company’s Lasertel subsidiary, which is currently being marketed for sale and is recorded in discontinued operations.
Excluding the non-cash, non-routine charges, the Company reported a pre-tax operating loss in the second quarter of 2009 of $3.6 million, a decrease of $5.6 million from the prior year. In addition to lower sales, earnings were negatively impacted by foreign currency exchange rates and a $0.7 million increase in bad debt reserves, partially offset by continued improvements in operating expenses.
Second quarter 2009 revenue totaled $33.5 million, compared to $51.6 million in the second quarter of 2008, reflecting the global economic recession and an unfavorable change in foreign currency exchange rates.
“Although non-cash charges and additions to our bad debt reserves significantly reduced our second quarter results, we were able to hold sequential quarterly revenues relatively stable despite ongoing challenges created by the state of the economy,” said Presstek Chairman, President and Chief Executive Officer, Jeff Jacobson.
Cost-Reduction Initiative
The Company has begun implementing additional cost reductions that primarily will be completed by the end of 2009 and will generate approximately $10 million of annualized savings. Including savings from the Company’s Business Improvement Plan, once these additional actions are fully implemented, the Company will have achieved nearly $40 million in annualized savings since 2007. Presstek expects to incur one-time costs of approximately $1.0 million related to these actions. As part of these initiatives, the Company will reduce its global workforce across all levels of the organization by approximately 60 positions, or ten percent. Additional cost actions will result in the elimination of the 401(k) company matching contribution and furloughs in certain of the Company’s operating areas.
“These actions, while difficult, are necessary to help us weather the current economic conditions and properly position ourselves to capture market share and grow revenues once the industry and economy start to recover,” added Jacobson. “We strongly believe in the strategy we have put in place and will continue to stay focused on building a stronger product portfolio and expanding our distribution channels while carefully managing our cost structure and cash position.”
Second Quarter 2009 Financial Results
Revenue for the second quarter of 2009 fell $18.1 million, or 35 percent, to $33.5 million when compared to the same quarter in 2008. The year-over-year decline in revenue was driven primarily by the deterioration of the global economy resulting in a 64 percent reduction in equipment sales due to delays in customer purchasing decisions and continued tightening in the credit markets. Consumable sales were down 26 percent in the second quarter of 2009 to $21.1 million, when compared to the second quarter of 2008. The decline in consumables revenue was primarily attributable to lower print volume. However, sales of 52DI plates were up 14 percent from last year’s second quarter performance. In addition, sales of Presstek’s new chemistry-free CTP thermal plate, Aurora Pro, were up 54 percent over last year’s second quarter sales. Service revenue declined approximately 16 percent to $7.2 million in the second quarter of 2009 primarily due to reduced service of traditional equipment and lower parts sales.
Gross margin in the second quarter of 2009 was 32.9 percent, compared with 33.8 percent in the second quarter of 2008. Margins in the second quarter of 2009 were negatively impacted by an unfavorable change in foreign currency exchange rates as well as lower manufacturing productivity.
Excluding the goodwill impairment charge of $19.1 million and a $0.7 million addition to bad debt reserves, second quarter operating expenses declined to $13.9 million, reflecting a year-over-year improvement of $1.5 million, or approximately 10 percent. Lower expenses resulted primarily from cost reduction activities as well as lower trade show costs and restructuring charges.
Second Quarter 2009 Non-Cash Accounting Charges
Special charges totaled $19.2 million in the second quarter of 2009, primarily due to the Company recording a non-cash, non-routine charge of $19.1 million related to goodwill. The goodwill write-off reflects the full impairment of amounts relating to the 2004 acquisitions of A.B. Dick and Precision Lithograining.
During the second quarter of 2009, the Company also recorded a non-cash valuation allowance against its deferred tax assets of $16.8 million related to its U.S. business entities. However, the benefit of the net operating losses remains available to offset the Company’s future U.S. income tax liability.
The Company’s second quarter 2009 debt net of cash totaled $13.1 million, an increase of $3.5 million from the first quarter of 2009. This increase was due to lower earnings, the timing of inventory purchases, and the reduction of accrued expenses. However, debt net of cash was down $9.6 million, or 42 percent, from the second quarter of 2008.
Including discontinued operations and the non-cash charges, the Company reported a net loss of $41.4 million for the second quarter of 2009, compared with net income of $0.6 million in the second quarter of 2008.
Credit Facility
As a result of the Company’s financial performance during the second quarter, the Company is not in compliance with certain financial covenants under its credit agreement. The Company is in discussions with the agent bank to ensure that the Company continues to have access to its revolving credit facility. Concurrently, the Company is in discussions with potential lenders concerning a new credit facility and expects to have a new credit agreement in place on or prior to the expiration of the current credit agreement on November 4, 2009.
Print 09 Trade Show
“While we are disappointed with the impact that the economy has had on our business, we remain encouraged about our future and are making good progress toward our key strategic initiatives,” commented Jacobson. “We have many exciting new products in our pipeline, some of which will be highlighted at the upcoming Print 09 trade show taking place next month in Chicago. We will officially announce our first long-run thermal plate at Print 09, which will debut as an expansion to our current digital plate offerings. Our newest offering is a non-preheat thermal technology plate which, along with our latest chemistry-free technology, can be imaged on a substantial number of new and a large installed base of existing platesetters worldwide. In addition, we will be showcasing a 52DI press with ultraviolet printing capability, which is currently available, as well as a 52DI with aqueous coating capability, which will be available for order starting in the fourth quarter of 2009.”
Second Quarter 2009 Report on Form 10-Q
The Company announced it would be filing a Form 12b-25, Notification of Late Filing, with the Securities and Exchange Commission regarding its quarterly report on Form 10-Q for the second quarter of 2009. The late filing is caused by delays in documenting supporting schedules for the report. The Company expects to file its second quarter 2009 Form 10-Q within the five-day extension period permitted by the Securities and Exchange Commission.
Information Regarding Non-GAAP Measures
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, the Company provides non-GAAP financial measures, including debt net of cash, which is defined as debt minus cash, and other GAAP measures adjusted for certain charges, which the Company believes are useful to help investors better understand its past financial performance and prospects for the future. 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.