ROCHESTER, N.Y., March 26, 2014 /PRNewswire/ -- Document
Security Systems, Inc. (NYSE MKT: DSS), ("DSS"), a leading
developer and integrator of security technologies, today announced
its 2013 fourth quarter and full-year financial results.
"During the fourth quarter, the Company continued to improve the
profitability of its production business and strengthen its IP
portfolio," said Jeff Ronaldi, CEO
of Document Security Systems. "Our Printing and Packaging
operations are now housed in one location, which will streamline
customer service and generate cost savings for the Company starting
in 2014. In addition, we strengthened our IP portfolio with
our suit against Apple and our licensing and advisory services
partnership with Express Mobile. Overall, we are confident in the
direction of the Company for 2014."
Financial Highlights for the Fourth Quarter of
2013:
Revenue of $5.2 million
decreased 5% compared to $5.4 million
for the fourth quarter of 2012.
Printed product revenue of $4.7
million decreased 6% compared to $5.0
million for the fourth quarter of 2012.
Technology sales, services and licensing revenues of
$0.5 million increased 3% compared to
$0.5 million for the fourth quarter
of 2012.
Cost of revenue, excluding depreciation and amortization,
of $3.2 million decreased 14%
compared to $3.7 million for the
fourth quarter of 2012 as a result of an increase in sales of
higher margin products along with cost reductions realized in the
fourth quarter of 2013.
Total Operating Expenses of $7.7
million increased 19% compared to $6.5 million in the fourth quarter of 2012,
driven by a $1.1 million increase in
depreciation and amortization to $1.3
million and a $0.4 million
increase in professional fees to $0.9
million. The Company's acquisition of Lexington Technology
Group ("LTG") drove the year-over-year increase in depreciation and
amortization. The increase in professional fees was driven
primarily by the Company's Technology Management division.
Adjusted EBITDA1 loss (earnings before
interest, taxes, depreciation, amortization, stock based
compensation and other non-recurring items, including professional
fees and stock based compensation incurred for the Company's merger
with LTG) was $(0.8) million compared
to $(0.3) million for the fourth
quarter of 2012, driven by the increase in non-merger related
professional fees incurred by the Company's Technology Management
division in the fourth quarter of 2013. Adjusted EBITDA of
$0.6 million for Printed products
increased 95% compared to $0.3
million in the fourth quarter of 2012.
Net Loss was $(0.8)
million, or $(0.02) per basic
and diluted share, as compared to a net loss of $(1.1) million, or $(0.05) per basic and diluted share in the fourth
quarter of 2012. The decrease in net loss was primarily due to a
deferred tax benefit of $1.8 million
recorded in the fourth quarter of 2013 in connection with the
Company's merger with LTG.
Financial Highlights for the Fiscal Year ended December 31, 2013:
Revenue of $17.5 million
increased 2% compared to $17.1
million for 2012.
Printed product revenue of $15.4
million increased 1% compared to $15.3 million for 2012.
Technology sales, services and licensing revenues of
$2.0 million increased 11% compared
to $1.8 million for the prior
year.
Cost of revenue,excluding depreciation and amortization,
of $10.5 million decreased 5%
compared to $11.0 million for 2012 as
a result of an increase in sales of higher margin products along
with cost reductions realized in the fourth quarter of 2013.
Total Operating Expenses of $25.6
million increased 23% compared to $20.9 million in 2012 driven by a $2.1 million increase in depreciation and
amortization to $3.0 million and a
$1.0 million increase in professional
fees to $2.5 million. The Company's
acquisition of LTG drove the year-over-year increase in
depreciation and amortization. The increase in professional fees
was driven primarily by the Company's Technology Management
division.
Adjusted EBITDA1 loss (earnings before
interest, taxes, depreciation, amortization, stock based
compensation and other non-recurring items, including professional
fees and stock based compensation incurred for the Company's merger
with LTG) for 2013 was $(2.0) million
compared to $(1.4) million for 2012,
driven by the increase in non-merger related professional fees
incurred by the Company's Technology Management division in the
fourth quarter of 2013. Adjusted EBITDA for the Printed
products group increased 386% to $1.6
million compared to $0.3
million for 2012.
Net Income (Loss) was $2.6
million, or $0.08 per basic
and diluted share, as compared to a net loss of $(4.3) million, or $(0.21) per basic and diluted share for 2012. The
increase in net income in 2013 is primarily due to a one-time
deferred tax benefit of $10.9 million
related to the Company's merger with LTG.
The Company's balance sheet as of December 31, 2013 reflects the impact of the
acquisition of LTG as of July 1,
2013. The cash balance of $2.5
million reflects the $6.6
million of cash that the Company received upon the closing
of the LTG Merger, primarily offset by the use of approximately
$2.75 million during the second half
of 2013 for the purchase of investments, patents and patent rights,
by the Company's Technology Management division. The December 31, 2013 balance sheet also reflects the
acquisition accounting for the estimated fair values of LTG's
investments and intangible assets as of the Merger date of
July 1, 2013, which significantly
increased the Company's investments, amortizable intangible assets,
and goodwill balances.
1 Adjusted EBITDA loss is a non-GAAP financial
measure. Please see the discussion below under the heading
"Adjusted EBITDA: Non-GAAP Financial Performance Measures" and the
reconciliation at the end of this release.
Conference Call and Webcast Details:
Time: 4:30 p.m. ET
Date: Wednesday, March 26, 2014
Investor Dial In (Toll Free): (877) 407-9210
Investor Dial In (International): (201) 689-8049
DSS will offer a live webcast of the conference call, which will
also include forward-looking information. The live webcast will be
accessible under "Events and Presentations" on the Company's
Investor Relations website at http://irdirect.net/DSS.
A replay of the earnings call will be available until
April 9, 2014 which can be accessed
by dialing (877) 660-6853 if calling within the U.S. or (201)
612-7415 if calling internationally. Please enter conference ID #
13578802 to access the replay.
About DSS (Document Security Systems, Inc.)
Document Security Systems, Inc.'s (NYSE MKT: DSS) products and
solutions are used by governments, corporations and financial
institutions to defeat fraud and to protect brands and digital
information from the expanding world-wide counterfeiting
problem. DSS technologies help ensure the authenticity of
both digital and physical financial instruments, identification
documents, sensitive publications, brand packaging and
websites.
DSS continually invests in research and development to meet the
ever-changing security needs of its clients and provides licensing
of its patented technologies through its subsidiary, DSS Technology
Management, Inc.
For more information on the AuthentiGuard Suite, please visit
www.AuthentiGuard.com.
For more information on DSS and its subsidiaries, please visit
www.DSSsecure.com.
To follow DSS on Facebook, click here.
For more information:
Investor Relations
Document Security Systems
(585) 325-3610
Email: ir@documentsecurity.com
Forward Looking Statements
Forward-looking statements that may be contained in this press
release, including, without limitation, statements related to the
Company's plans, strategies, objectives, expectations, potential
value, intentions and adequacy of resources, are made pursuant to
the safe harbor provisions of the Private Securities Litigation
Reform Act and contain words such as "believes", "anticipates",
"expects", "plans", "intends" and similar words and phrases. These
forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from the
results projected in any forward-looking statement. In addition to
the factors specifically noted in the forward-looking statements,
other important factors, risks and uncertainties that could result
in those differences include, but are not limited to, those that
will be disclosed in the "Risk Factors" section of the Company's
Annual Report on Form 10-K for the year ended December 31, 2013, to be filed with the
Securities and Exchange Commission. Forward-looking statements that
may be contained in this press release are being made as of the
date of its release, and the Company assumes no obligation to
update the forward-looking statements, or to update the reasons why
actual results could differ from those projected in the
forward-looking statements.
FINANCIAL TABLES FOLLOW
DOCUMENT SECURITY
SYSTEMS, INC. AND SUBSIDIARIES
|
Consolidated
Statements of Operations
|
(Unaudited)
|
|
|
|
|
Year
Ended
December
31,
2013
|
Year
Ended
December
31,
2012
|
%
change
|
|
Three
Months
Ended
December
31,
2013
|
Three
Months
Ended
December
31,
2012
|
%
change
|
Revenue
|
|
|
|
|
|
|
|
|
Printed
products
|
$
15,426,000
|
$
15,289,000
|
1%
|
|
$
4,653,000
|
$
4,964,000
|
-6%
|
|
Technology sales,
services and licensing
|
2,027,000
|
1,826,000
|
11%
|
|
501,000
|
485,000
|
3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenue
|
$
17,453,000
|
$
17,115,000
|
2%
|
|
$
5,154,000
|
$
5,449,000
|
-5%
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
Cost of revenue,
exclusive of depreciation and amortization
|
$
10,458,000
|
$
10,978,000
|
-5%
|
|
$
3,193,000
|
$
3,694,000
|
-14%
|
|
Sales, general and
administrative compensation
|
4,931,000
|
4,383,000
|
13%
|
|
1,371,000
|
1,207,000
|
14%
|
|
Depreciation and
amortization
|
2,966,000
|
845,000
|
251%
|
|
1,305,000
|
247,000
|
428%
|
|
Professional
Fees
|
2,549,000
|
1,546,000
|
65%
|
|
935,000
|
578,000
|
62%
|
|
Stock based
compensation
|
1,895,000
|
782,000
|
142%
|
|
315,000
|
331,000
|
-5%
|
|
Sales and
marketing
|
443,000
|
337,000
|
31%
|
|
113,000
|
104,000
|
9%
|
|
Rent and
utilities
|
688,000
|
612,000
|
12%
|
|
201,000
|
174,000
|
16%
|
|
Other operating
expenses
|
906,000
|
916,000
|
-1%
|
|
226,000
|
218,000
|
4%
|
|
Research and
development, including research and
development costs paid by equity instruments
|
254,000
|
491,000
|
-48%
|
|
78,000
|
(54,000)
|
-244%
|
|
Impairment of
intangible assets
|
517,000
|
-
|
100%
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Expenses
|
$
25,607,000
|
$
20,890,000
|
23%
|
|
$
7,737,000
|
$
6,499,000
|
19%
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
(8,154,000)
|
(3,775,000)
|
116%
|
|
(2,583,000)
|
(1,050,000)
|
146%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expenses)
|
|
|
|
|
|
|
|
|
Interest
expense
|
(246,000)
|
(228,000)
|
8%
|
|
(87,000)
|
(51,000)
|
71%
|
|
Gain on sale of fixed
assets
|
117,000
|
-
|
100%
|
|
117,000
|
-
|
100%
|
|
Amortization of note
discount and loss on debt extinguishment
|
(72,000)
|
(260,000)
|
-72%
|
|
-
|
(11,000)
|
-100%
|
Other expense, net
|
$
(201,000)
|
$
(488,000)
|
-59%
|
|
$
30,000
|
$
(62,000)
|
-148%
|
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
(8,355,000)
|
(4,263,000)
|
96%
|
|
(2,553,000)
|
(1,112,000)
|
130%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax
(benefit) expense, net
|
(10,949,000)
|
19,000
|
-57726%
|
|
(1,753,000)
|
5,000
|
-35160%
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
2,594,000
|
$
(4,281,000)
|
-161%
|
|
$
(800,000)
|
$
(1,117,000)
|
-28%
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
Basic
|
$
0.08
|
$
(0.21)
|
-140%
|
|
$
(0.02)
|
$
(0.05)
|
-63%
|
|
Diluted
|
$
0.08
|
$
(0.21)
|
-140%
|
|
$
(0.02)
|
$
(0.05)
|
-63%
|
|
|
|
|
|
|
|
|
|
|
Shares used in
computing earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
31,838,593
|
20,828,149
|
|
|
41,911,569
|
21,705,969
|
|
|
Diluted
|
31,884,957
|
20,828,149
|
|
|
41,911,569
|
21,705,969
|
|
DOCUMENT SECURITY
SYSTEMS, INC. AND SUBSIDIARIES
|
Consolidated
Balance Sheets
|
As of
December 31,
|
|
|
|
|
|
2013
|
|
2012
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2,477,031
|
|
|
$
|
1,887,163
|
|
|
Accounts receivable,
net of allowance
of $60,000 ($60,000- 2012)
|
|
|
2,149,123
|
|
|
|
2,123,019
|
|
|
Inventory
|
|
|
834,979
|
|
|
|
817,685
|
|
|
Prepaid expenses and
other current assets
|
|
|
403,107
|
|
|
|
290,402
|
|
|
Deferred tax asset,
net
|
|
|
223,323
|
|
|
|
-
|
|
|
Total current
assets
|
|
|
6,087,563
|
|
|
|
5,118,269
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
5,157,852
|
|
|
|
3,723,908
|
|
Investments and other
assets
|
|
|
11,448,008
|
|
|
|
232,815
|
|
Goodwill
|
|
|
|
15,046,197
|
|
|
|
3,322,799
|
|
Other intangible
assets, net
|
|
|
29,602,591
|
|
|
|
1,852,677
|
|
Total
assets
|
|
$
|
67,342,211
|
|
|
$
|
14,250,468
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
1,421,765
|
|
|
$
|
1,417,460
|
|
|
Accrued expenses and
other current liabilities
|
|
|
1,455,629
|
|
|
|
1,218,534
|
|
|
Revolving lines of
credit
|
|
|
158,087
|
|
|
|
238,240
|
|
|
Short-term debt,
net
|
|
|
824,857
|
|
|
|
-
|
|
|
Current portion of
long-term debt, net
|
|
|
613,488
|
|
|
|
913,454
|
|
|
Total current
liabilities
|
|
|
4,473,826
|
|
|
|
3,787,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt,
net
|
|
|
3,087,358
|
|
|
|
1,483,676
|
|
Interest rate swap
hedging liabilities
|
|
|
27,566
|
|
|
|
127,883
|
|
Deferred tax
liability, net
|
|
|
1,364,447
|
|
|
|
127,675
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
|
Common stock, $.02
par value; 200,000,000 shares
authorized, 49,411,486 shares issued and outstanding
|
|
|
|
|
|
|
|
|
|
(21,705,969 in
2012)
|
|
|
988,230
|
|
|
|
434,118
|
|
|
Additional paid-in
capital
|
|
|
97,790,426
|
|
|
|
55,872,917
|
|
|
Accumulated other
comprehensive loss
|
|
|
(27,566)
|
|
|
|
(127,883)
|
|
|
Accumulated
deficit
|
|
|
(44,862,076)
|
|
|
|
(47,455,606)
|
|
|
Non-controlling
interest in subsidiary
|
|
|
4,500,000
|
|
|
|
-
|
|
|
Total stockholders'
equity
|
|
|
58,389,014
|
|
|
|
8,723,546
|
|
Total liabilities
and stockholders' equity
|
|
$
|
67,342,211
|
|
|
$
|
14,250,468
|
|
DOCUMENT SECURITY
SYSTEMS, INC. AND SUBSIDIARIES
|
Consolidated
Statements of Cash Flows
|
For the Years
Ended December 31,
|
|
|
|
|
2013
|
|
2012
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
2,593,530
|
|
$
|
(4,280,828)
|
|
Adjustments to
reconcile net income (loss) to net cash used by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
2,966,368
|
|
|
845,137
|
|
|
Stock based
compensation
|
|
1,894,719
|
|
|
846,705
|
|
|
Amortization of note
discount
|
|
45,266
|
|
|
259,816
|
|
|
Loss on
extinguishment of debt
|
|
26,252
|
|
|
-
|
|
|
Gain on sale of fixed
assets
|
|
(116,569)
|
|
|
-
|
|
|
Impairment of
intangible assets
|
|
516,726
|
|
|
-
|
|
|
Change in deferred
tax provision
|
|
(10,948,875)
|
|
|
18,948
|
|
Increase in
assets:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
(26,104)
|
|
|
(527,269)
|
|
|
Inventory
|
|
(17,294)
|
|
|
(34,243)
|
|
|
Prepaid expenses and
other assets
|
|
(184,956)
|
|
|
(117,951)
|
|
Increase (decrease)
in liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
159,948
|
|
|
(249,503)
|
|
|
Accrued expenses and
other liabilities
|
|
(58,250)
|
|
|
75,905
|
Net cash used by
operating activities
|
|
(3,149,239)
|
|
|
(3,163,283)
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
Purchase of equipment
and building improvements
|
|
(378,587)
|
|
|
(245,112)
|
|
Sale of
equipment
|
|
753,000
|
|
|
-
|
|
Acquisition of
business
|
|
6,568,112
|
|
|
-
|
|
Purchase of
intangible assets
|
|
(2,593,495)
|
|
|
(113,569)
|
|
Investment in
VirtualAgility
|
|
(250,000)
|
|
|
-
|
Net cash provided by (used by) investing
activities
|
|
4,099,030
|
|
|
(358,681)
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
Net payments on
revolving lines of credit
|
|
(80,153)
|
|
|
(525,496)
|
|
Payment of short-term
loan from related party
|
|
-
|
|
|
(150,000)
|
|
Payments of long-term
debt
|
|
(353,192)
|
|
|
(352,350)
|
|
Payments of capital
lease obligations
|
|
-
|
|
|
(94,595)
|
|
Issuance of common
stock, net of issuance costs
|
|
73,422
|
|
|
5,813,889
|
Net cash (used)
provided by financing activities
|
|
(359,923)
|
|
|
4,691,448
|
|
|
|
|
|
|
|
Net increase
in cash
|
|
589,868
|
|
|
1,169,484
|
Cash beginning of
year
|
|
1,887,163
|
|
|
717,679
|
Cash end of
year
|
$
|
2,477,031
|
|
$
|
1,887,163
|
Adjusted EBITDA: Non-GAAP Financial Performance
Measure
The Company uses Adjusted EBITDA as a non-GAAP financial
performance measurement. Adjusted EBITDA is calculated by the
Company by adding back to net income (loss) interest, income taxes,
depreciation and amortization expense as further adjusted to add
back stock-based compensation expense and non-recurring items, such
as costs related to the Company's merger with Lexington Technology
Group. Adjusted EBITDA is provided to investors to supplement
the results of operations reported in accordance with GAAP.
Management believes that Adjusted EBITDA provides an
additional tool for investors to use in comparing its financial
results with other companies in the industry, many of which also
use Adjusted EBITDA in their communications to investors. By
excluding non-cash charges such as amortization, depreciation and
stock-based compensation, as well as non-operating charges for
interest and income taxes, investors can evaluate the Company's
operations and its ability to generate cash flows from operations
and can compare its results on a more consistent basis to the
results of other companies in the industry. Management also uses
Adjusted EBITDA to evaluate potential acquisitions, establish
internal budgets and goals, and evaluate performance of its
business units and management. The Company considers Adjusted
EBITDA to be an important indicator of the Company's operational
strength and performance of its business and a useful measure of
the Company's historical and prospective operating trends. However,
there are significant limitations to the use of Adjusted EBITDA
since it excludes interest income and expense and income taxes and
non-recurring items such as costs related to the Company's merger
with Lexington Technology Group, all of which impact the Company's
profitability and operating cash flows, as well as depreciation,
amortization and stock-based compensation. The Company believes
that these limitations are compensated by clearly identifying the
difference between the two measures. Consequently, Adjusted EBITDA
should not be considered in isolation or as a substitute for net
income and loss presented in accordance with GAAP. Adjusted EBITDA
as defined by the Company may not be comparable with similarly
named measures provided by other entities. The
following is a reconciliation of net income (loss) to Adjusted
EBITDA loss:
|
|
Years Ended
December 31
|
|
Three Months Ended
December 31
|
|
|
2013
|
2012
|
%
change
|
|
2013
|
2012
|
%
change
|
|
|
(unaudited)
|
(unaudited)
|
|
|
(unaudited)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
$
2,594,000
|
$
(4,281,000)
|
-161%
|
|
$
(800,000)
|
$
(1,116,000)
|
-28%
|
Add back:
|
|
|
|
|
|
|
|
|
Depreciation &
Amortization
|
2,966,000
|
845,000
|
251%
|
|
1,354,000
|
247,000
|
448%
|
|
Stock based
compensation
|
1,895,000
|
847,000
|
124%
|
|
315,000
|
215,000
|
47%
|
|
Interest
expense
|
246,000
|
228,000
|
8%
|
|
87,000
|
51,000
|
71%
|
|
Amortization of note
discount and loss on debt extinquishment
|
72,000
|
260,000
|
-72%
|
|
-
|
11,000
|
-100%
|
|
Income
Taxes
|
(10,949,000)
|
19,000
|
-57726%
|
|
(1,753,000)
|
5,000
|
-35160%
|
|
Impairment of
intangible assets
|
517,000
|
-
|
100%
|
|
-
|
-
|
100%
|
|
Professional fees and
other costs incurred in conjunction with the Merger with Lexington
Technology Group
|
677,000
|
768,000
|
-12%
|
|
-
|
307,000
|
-100%
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
(1,982,000)
|
$
(1,314,000)
|
-51%
|
|
$
(797,000)
|
$
(280,000)
|
-185%
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA, by
group (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Printed
Products
|
$
1,604,000
|
$
330,000
|
386%
|
|
$
597,000
|
$
306,000
|
95%
|
|
Technology
Management
|
(1,213,000)
|
178,000
|
-781%
|
|
(602,000)
|
(130,000)
|
363%
|
|
Corporate, less
Merger costs
|
(2,373,000)
|
(1,822,000)
|
30%
|
|
(792,000)
|
(456,000)
|
74%
|
|
|
|
|
|
|
|
|
|
|
|
$
(1,982,000)
|
$
(1,314,000)
|
-51%
|
|
$
(797,000)
|
$
(280,000)
|
-185%
|
|
|
|
|
|
|
|
|
|
SOURCE Document Security Systems, Inc.