Document Security Systems, Inc. : Announces Fourth Quarter and 2011 Year-End Financial Results
03/19/2012| 03:45pm US/Eastern
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ROCHESTER, N.Y., March 19, 2012 /PRNewswire/ -- Document Security Systems, Inc. (NYSE Amex: DSS; "DSS"), a world-wide developer and manufacturer of security and authentication solutions which prevent counterfeiting and brand fraud, reported results for the fourth quarter and year ended December 31, 2011. Management will host a teleconference and web cast today at 4:30 pm ET to discuss the results with the investment community:
Time: 4:30 p.m. Eastern Time
Date: March 19th, 2012
Investor Dial-in (Toll Free): 877-407-9205
Investor Dial-In (International): 201-689-8054
Live Web Cast URL: http://www.investorcalendar.com/IC/CEPage.asp?ID=167798
A replay of the teleconference will be available until April 2, 2012, which can be accessed by dialing (877) 660-6853 if calling within the U.S. or (201) 612-7415 if calling internationally. Please enter account #286 and conference ID #391059 to access the replay. The webcast will be available for replay within the Investor Relations "Events & Presentations" section of the DSS home page located at www.DSSsecure.com.
Fourth Quarter 2011 Highlights
-- Sales of $4.2 million up 16% from the third quarter of 2011, up 2% from
the fourth quarter of 2010.
-- Gross profit of $1.2 million down 9% from the third quarter of 2011, up
8% from the fourth quarter of 2010.
-- Gross margin percentage of 28% up from 26% in the fourth quarter of
2010.
-- Operating expenses decreased 5% from the third quarter of 2011 and
decreased 13% from the fourth quarter of 2010.
-- Net loss of $955,000, an increase of 26% from the third quarter of 2011,
and a decrease of 40% from the fourth quarter of 2010.
-- Net loss per share of $(0.05), compared to a net loss per share of
$(0.04) during the third quarter of 2011, and a net loss per share of
$(0.11) during the fourth quarter of 2010.
Full Year 2011 Highlights
-- Sales of $13.4 million, even with 2010.
-- Gross profit of $4.2 million up 13% from 2010.
-- Gross margin percentage of 31% up from 28% in 2010.
-- Operating expenses up 1% from 2010.
-- Net loss of $3.2 million, a 7% decrease from 2010.
-- Net loss per share of $(0.17) compared to $(0.20) in 2010.
Robert Fagenson, Chairman of the Board of Document Security Systems, stated: "During 2011, we set in motion several significant initiatives that will help shape our company going forward. First, we more fully committed ourselves to our digital division through the acquisition of ExtraDev in May, and have been bringing in talent and dedicating resources to that division ever since. Second, our plastics division made a major push into more sophisticated products such as RFID and smart cards which has materialized into significant performance improvement at that division. We also have right-sized our printing division to ensure long-term sustainability, with a focus on core security printing for our government and corporate clients. Finally, we continued our focus on research and development and expanded our patent and patent protection efforts, which we expect will deliver long term benefits to our company."
Document Security System's CEO Patrick White said, "We were able to finish 2011 with a strong fourth quarter that allowed us to increase revenue despite a significant reduction in printing sales. Our successful push towards higher margin product sales in our plastics division and our digital division has stabilized our core business and are positive trends for this company going forward. As we enter 2012, we will build upon this foundation and continue to focus on our core security technology offerings, especially in digital applications, to take advantage of the myriad of opportunities that exist in the security industry."
About DSS (Document Security Systems, Inc.)
DSS is comprised of four operating groups, DSS Plastics Group, DSS Printing Group, DSS Packaging Group and DSS Digital Group. Through these divisions, DSS provides counterfeit prevention and comprehensive brand and digital information protection solutions to corporations, governments, and financial institutions around the world. DSS develops and manufactures products and services containing patented and patent pending optical deterrent technologies that help prevent counterfeiting and brand fraud from the use of the most advanced scanners and copiers in the market.
The Company owns numerous patented and patent-pending technologies and products. DSS uses its covert and overt technologies to protect a wide range of documents including, but not limited to, consumer packaging, vital records, ID Cards/RFID, smart cards, passports, gift certificates, checks and coupons. The Company also protects digital information via secure cloud computing and disaster recovery services. Furthermore, DSS uses its extensive knowledgebase to provide comprehensive brand protection solutions to its customers. From risk analysis and vulnerability assessment, to systems integration and monitoring, DSS offers the advanced tools and knowledgebase needed to protect the world's most valuable and at-risk brands. DSS's customized solutions are designed to protect against product diversion, counterfeit, and other costly and damaging occurrences. In addition, DSS offers commercial printing services.
For more information on DSS and its subsidiaries, please visit www.DSSsecure.com.
Follow DSS on Facebook, click HERE.
For more information:
Investor Relations
Document Security Systems
(585) 325-3610
Email: ir@documentsecurity.com
Safe Harbor Statement
The statements contained in this press release that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbors created thereby. These forward-looking statements include, but are not limited to, statements regarding expectations for future financial performance, potential sales from new and existing customers, expected benefits from the Company's cost cutting efforts and/or statements preceded by, followed by or that include the words "believes," "could," "expects," "anticipates," "estimates," "intends," "plans," "projects," "seeks," or similar expressions, all of which involve uncertainty and risk. Many of these risks and uncertainties are discussed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed with the Securities and Exchange Commission (the "SEC"), and in any subsequent reports filed with the SEC, all of which are available at the SEC's website at www.sec.gov. It is possible the company's future financial performance may differ from expectations due to a variety of factors including, but not limited to, the risks referred to above, and changes in economic and business conditions in the world, increased competitive activity, achieving sales levels to fulfill revenue expectations, consolidation among its competitors and customers, technology advancements, unexpected costs and charges, adequate funding for plans, changes in interest and foreign exchange rates, regulatory and other approvals and failure to implement all plans, for whatever reason. It is not possible to foresee or identify all such factors. Any forward-looking statements in this report are based on current conditions; expected future developments and other factors it believes are appropriate in the circumstances. Prospective investors are cautioned that such statements are not a guarantee of future performance and actual results or developments may differ materially from those projected. The company makes no commitment to update any forward-looking statement included herein, or disclose any facts, events or circumstances that may affect the accuracy of any forward-looking statement.
TABLES FOLLOW.
DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For The Three Months Ended
For The Years Ended December 31, December 31,
2011 2010 2011 2010
Revenue (unaudited) (unaudited)
Printing $3,227,457 $4,697,142 $884,994 $1,208,791
Packaging 5,940,077 5,752,601 2,144,478 2,300,495
Plastic IDs and
cards 2,769,085 2,290,788 681,889 469,158
Licensing and
digital
solutions 1,446,985 641,050 495,316 151,999
Total revenue 13,383,604 13,381,581 4,206,677 4,130,443
Costs of revenue
Printing 2,928,410 3,799,108 845,600 978,656
Packaging 4,430,860 4,386,829 1,667,919 1,713,374
Plastic IDs and
cards 1,698,439 1,504,844 467,360 361,701
Licensing and
digital
solutions 154,016 5,476 67,139 -
Total costs of
revenue 9,211,725 9,696,257 3,048,018 3,053,731
Gross profit 4,171,879 3,685,324 1,158,659 1,076,712
31% 28% 28% 26%
Operating
expenses:
Selling, general
and
administrative 7,075,822 6,136,152 1,863,034 1,694,359
Research and
development 285,450 265,360 76,952 61,274
Impairment of
intangible
assets - 376,481 - 376,481
Amortization of
intangibles 284,716 803,468 79,300 183,801
Operating
expenses 7,645,988 7,581,461 2,019,286 2,315,915
Operating loss (3,474,109) (3,896,137) (860,627) (1,239,203)
Other income
(expense):
Change in fair
value of
derivative
liability 360,922 - - -
Interest expense (259,142) (290,087) (89,431) (62,005)
Loss on equity
investment - (121,393) - -
Amortizaton of
note discount - (420,385) - (298,189)
Other income - 143,061 - -
0 0
--- ---
Loss before
income taxes (3,372,329) (4,584,941) (950,058) (1,599,397)
Income (tax
benefit) expense (150,183) (1,122,091) 4,738 4,737
Net loss $(3,222,146) $(3,462,850) $(954,796) $(1,604,134)
Other
comprehensive
income (loss):
Interest rate
swap income
(loss) (84,854) (25,834) (88,532) 6,000
------- ------- ------- -----
Comprehensive
Loss $(3,307,000) $(3,488,684) $(1,043,328) $(1,598,134)
=========== =========== =========== ===========
Net loss per
share -basic and
diluted: $(0.17) $(0.20) $(0.05) $(0.11)
====== ====== ====== ======
Dividend per
share $ - $0.01 $ - $ -
=== ===== === ===
Weighted average
common shares
outstanding,
basic and
diluted 19,454,046 17,755,141 19,507,806 14,700,453
DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
As of December 31,
2011 2010
ASSETS
Current assets:
Cash $717,679 $4,086,574
Accounts receivable, net of
allowance
of $76,000 ($66,000-2010) 1,595,750 2,227,877
Inventory 783,442 601,359
Prepaid expenses and other
current assets 95,399 231,190
-
---
Total current assets 3,192,270 7,147,000
Property, plant and
equipment, net 4,019,829 2,543,494
Other assets 244,356 325,953
Goodwill 3,322,799 3,084,121
Other intangible assets, net 2,043,212 1,847,859
Total assets $12,822,466 $14,948,427
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,666,963 $1,828,138
Accrued expenses and other
current liabilities 1,142,629 1,286,529
Revolving lines of credit 763,736 614,833
Short-term loan from
related party 150,000 -
Current portion of long-
term debt 460,598 300,000
Current portion of capital
lease obligations 88,172 88,776
Total current liabilities 4,272,098 4,118,276
Revolving note from related
party - 583,000
Long-term debt, net of
unamortized discount of
$88,000 ($0-2010) 2,819,783 1,578,242
Interest rate swap hedging
liabilities 110,688 25,834
Capital lease obligations 11,133 98,532
Deferred tax liability 108,727 89,779
Derivative liabilities - 3,866,836
Commitments and
contingencies (see Note 12)
Stockholders' equity
Common stock, $.02 par
value; 200,000,000 shares
authorized, 19,513,132
shares issued and
outstanding
(19,391,319 in 2010) 390,262 387,825
Additional paid-in capital 48,395,241 44,178,569
Accumulated other
comprehensive loss (110,688) (25,834)
Accumulated deficit (43,174,778) (39,952,632)
Total stockholders' equity 5,500,037 4,587,928
Total liabilities and
stockholders' equity $12,822,466 $14,948,427
DOCUMENT SECURITY SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31,
2011 2010
Cash flows from operating
activities:
Net loss $(3,222,146) $(3,462,850)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation and amortization 766,977 1,261,122
Stock based compensation 398,090 423,471
Amortization of note discount - 420,385
Loss on equity investment - 121,393
Change in fair value of
derivative liability (360,922) -
Deferred tax benefit (169,131) (1,141,040)
Intangible asset impairment - 376,481
(Increase) decrease in
assets:
Accounts receivable 701,482 200,339
Inventory (182,083) 86,977
Prepaid expenses and other
assets 112,911 (101,465)
Increase (decrease) in
liabilities:
Accounts payable (229,528) (209,516)
Accrued expenses and other
current liabilities 59,845 265,450
------ -------
Net cash used by operating
activities (2,124,505) (1,759,253)
Cash flows from investing
activities:
Purchase of property, plant
and equipment (523,596) (157,422)
Purchase of other intangible
assets (72,069) (269,729)
Acquisition of business 61,995 (2,000,000)
------ ----------
Net cash used by investing
activities (533,670) (2,427,151)
Cash flows from financing
activities:
Net (payments) borrowings on
revolving lines of credit (90,256) 342,428
Borrowings on long-term debt - 1,553,242
Payments of long-term debt (359,399) (250,000)
Payments of capital lease
obligations (88,003) (73,283)
Issuance of common stock, net
of issuance costs (173,062) 6,251,696
-------- ---------
Net cash (used) provided by
financing activities (710,720) 7,824,083
-------- ---------
Net (decrease) increase in
cash (3,368,895) 3,637,679
Cash beginning of period 4,086,574 448,895
Cash end of period $717,679 $4,086,574
SOURCE Document Security Systems, Inc.
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