Presstek Making Cuts in Order to Return to Positive Earnings
GREENWICH, CT—Nov 14, 2011—Presstek Inc., a leading supplier of digital offset printing solutions to the printing and communications industries, announced $11.2 million in annualized profit improvement actions and expects to return to positive adjusted EBITDA in the first quarter of 2012. It also reported financial and operating results for the third quarter ended Oct. 1, 2011.
Profit Improvement Actions
The company announced that a major profit improvement initiative, launched in the third quarter of 2011, is expected to provide $11.2 million in 2012 savings. Although second half 2011 earnings will see some improvement from these actions, the majority of the benefits will be realized beginning in the first quarter of 2012.
“We started taking major cost reduction actions during the third quarter of this year to right-size our business to current economic conditions, and this work has continued into the fourth quarter,” said Presstek Chairman, President and CEO Jeff Jacobson. “Our goal is to return Presstek to positive adjusted EBITDA beginning in the first quarter of 2012. In total, we expect to reduce our annualized expenses by $11.2 million.
“The vast majority of these actions will be completed by year-end 2011, and are expected to provide the company with significantly improved fiscal performance in 2012. While we are making significant cuts in spending in order to put the company on more stable footing going forward, we are not sacrificing our strategic focus on growing our CtP plate and DI portfolio offerings in larger commercial, in-plant, packaging and digital printing operations.”
Third Quarter 2011 financial results
In the quarter, Presstek reported total revenue of $26.9 million, a decline of 14.4 percent from the third quarter of 2010, which was impacted, as expected, by general global economic weakness. Including a $1.4 million reserve against European accounts receivable and $0.4 million in special charges, the company had an operating loss of $4.7 million in the quarter, compared to an operating loss of $1.3 million reported in the 2010 third quarter. Excluding these two items, the operating loss would have been $2.9 million.
The decrease from the prior year quarter was driven by lower gross margins resulting from the impact of lower factory production volume and an unfavorable mix in both equipment and consumables revenue. During the third quarter of 2011, the company incurred a net loss from continuing operations of $5.4 million, including $0.4 million of foreign exchange losses. This compared to a net loss from continuing operations of $1.5 million in the third quarter of 2010.
“As expected, our third quarter revenue was negatively impacted by global economic conditions. Smaller printers were hit especially hard by these issues, and they are a large portion of our customer base,” said Jacobson. “We continue to be encouraged by a strong pipeline of new opportunities, but customers of all sizes are delaying important investment decisions and conserving cash.
“During the quarter we recorded our third 75DI sale, the first one in our Asia Pacific Region, and expect to complete installations on two additional units in the fourth quarter. In addition, I am excited to see our open platform CtP plate sales gain traction, as evidenced by a sales increase of 51 percent in the quarter versus the prior year quarter.”
Total revenue in the third quarter of 2011 was $26.9 million, down $4.5 million from the third quarter of 2010.
• Equipment revenue was $3.4 million in the third quarter of 2011, a decrease of $1.4 million compared with the same period last year. The decrease was driven by lower volumes of both DI and CtP unit sales.
• Consumables revenue totaled $18.2 million in the third quarter of 2011, compared with $20.6 million for the same period last year. The decrease, primarily in the U.S., was driven by lower customer consumption due to economic conditions. However, sales of open platform CtP plates increased 51 percent on a year over year basis.
• Service revenue was $5.3 million in the third quarter of 2011, a decline of $0.8 million compared to the year-ago quarter. This decline was primarily due to the continued erosion of the analog service base and a general trend by customers to delay service calls and maintenance to save money in a difficult economy.
Gross margin percent for the third quarter of 2011 was 27.1 percent compared to 32.8 percent in the third quarter of 2010. The reduction vs. the third quarter of 2010 was due primarily to unfavorable product mix in equipment and consumables, lower factory volumes, the impact of a strengthening yen on DI press purchases, and general inflation on raw materials and freight cost.
Operating expenses were $12.0 million in the third quarter, and include the impact of a $1.4 million increase to European distributor receivable reserves. Excluding these reserve increases, adjusted operating expenses declined by $1.1 million, or 9.4 percent from the third quarter of 2010. The decline in adjusted operating expenses was primarily related to lower equity-based compensation, lower commission expenses and the initial benefits of cost reduction actions. (See “Information Regarding Non-GAAP Measures”)
Debt net of cash increased $0.7 million during the third quarter of 2011 compared with the second quarter of 2011, ending at $9.8 million. “Strong cash management continues to be our focus across the company and despite the lower earnings, debt net of cash was better than expected,” said Presstek Executive Vice President and Chief Financial Officer Jeff Cook.
The company expects fourth quarter 2011 revenue and gross margin dollars to remain relatively stable on a sequential basis, as a seasonal drop in consumables along with the impact on margins of continued low factory volume levels is expected to be offset by higher equipment revenue at improved margins. In addition, the company expects to report special charges in the fourth quarter in the range of $1.0 million to $1.3 million primarily for employee severance costs associated with the profit improvement actions. Debt net of cash is expected to increase sequentially by approximately $1.0 million to $2.0 million.
An archived webcast of this conference call will also be available on the “Investor Events Calendar” page of the company’s website.
Presstek Inc. is a leading supplier of digital offset printing solutions to the printing and communications industries. Presstek’s DI digital offset solutions bridge the gap between toner and conventional offset printing, enabling printers to cost effectively meet increasing customer demand for high quality, short run color printing with a fast turnaround time while providing improved profit margins. The company’s CTP portfolio ranges from two-page to eight-page systems, many of which are fully automated. These systems support Presstek’s line of chemistry-free plates as well as Aeon, a no preheat thermal plate which offers run lengths up to one million impressions. Presstek also offers a range of workflow solutions, pressroom supplies, and reliable service. Presstek is well positioned to support print environments of any size on a worldwide basis.