[TRANSACT TECHNOLOGIES INCORPORATED LOGO]
TRANSACT TECHNOLOGIES REPORTS
FOURTH QUARTER AND FULL YEAR 2004 RESULTS
- Full year 2004 revenue increased to $59.8 million, 15%
year-over-year growth; Fourth quarter 2004 revenue was $14.6 million
- Gross margin improved to 36.8% in 2004 from 29.8% in 2003
- Operating margin increased to 14.1% in 2004 from 5.2% in 2003
- EPS increased 325% in 2004 over the prior year to $0.51 per
diluted share
Wallingford, CT, March 3, 2005 - TransAct Technologies Incorporated
(Nasdaq: TACT), a leading producer of transaction-based printers for customers
worldwide, today announced financial results for the fourth quarter and full
year ended December 31, 2004.
Bart C. Shuldman, Chairman, President and Chief Executive Officer of TransAct
Technologies, said, "2004 was a year of execution and growth across all areas of
TransAct's business. We achieved revenue and earnings growth as a result of our
powerful brand, innovative products and the Company's focus on the opportunities
in each of our key markets."
Revenue for the full year 2004 increased 15% to $59.8 million, compared to $52.1
million in the same period a year ago. The Company achieved net income in
accordance with generally accepted accounting principles in the United States
("GAAP"), for the full year 2004 of $5.5 million compared to GAAP net income of
$1.5 million in 2003. Earnings per share for the full year on a GAAP basis were
$0.51 per diluted share compared to $0.12 per diluted share a year ago. The per
share data in both periods reflect the three-for-two stock split of the
Company's common stock distributed in April 2004. The per share amounts for both
the fourth quarter and year ended December 31, 2003 have been revised from
previously reported per share amounts as a result of the application of new
accounting guidance requiring the allocation of net income to both common and
participating preferred stock for the purposes of computing earnings per common
share.
Gaming and Lottery market revenues and POS and Banking market revenues increased
11% and 21%, respectively, in 2004 compared to 2003. In addition, the Company
benefited from growth in the TransAct Services Group, which achieved
year-over-year revenue growth of 18%. TransAct's expanding installed base of
printers and focus on this growing source of recurring revenue contributed to
the increase in aftermarket sales.
During the fourth quarter of 2004, the Company announced the signing of an
agreement with IGT for the integration of TransAct's Epic 950(TM) casino printer
to become a standard option on all IGT slot machine platforms. As part of this
agreement, in the fourth quarter of 2004, TransAct incurred expenses of
approximately $350,000 of the expected $500,000 of integration costs and expects
to incur the remaining $150,000 in the first quarter 2005. The Company also
recorded a charge in the fourth quarter of 2004 of approximately $70,000 for
severance costs related to the move of its marketing and services departments
from its Ithaca, NY facility to its headquarters in Wallingford, CT. And
finally, TransAct decreased its restructuring accrual by $225,000 in the fourth
quarter of 2004 based on a revised estimate of its remaining lease costs for its
Wallingford, CT facility.
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During the fourth quarter of 2003, the Company increased its restructuring
accrual by $1,128,000 to provide for the remaining lease costs associated with
its manufacturing facility in Wallingford, CT. In addition, the Company recorded
a charge to cost of sales of $740,000 in the fourth quarter of 2003, in
connection with a royalty for the usage of certain Seiko Epson patents.
Excluding the above items for 2004 and 2003, the Company's pro-forma net income
for the year ended December 31, 2004 was $5.6 million or $0.52 per diluted
share, compared to pro-forma net income for the year ended December 31, 2003 of
$2.7 million or $0.24 per diluted share.
Revenue for the fourth quarter ended December 31, 2004 was $14.6 million,
compared to $14.7 million in the same period a year ago. Revenues in POS and
Banking and in the Transact Services Group were in line with expectations for
the fourth quarter of 2004. However, Gaming and Lottery sales were short of
expectations, as the growth in international gaming printer sales was not enough
to overcome a downturn in domestic casino sales in the month of December.
GAAP net income in the fourth quarter of 2004 increased to $1.0 million, or
$0.10 per diluted share, compared to a loss of $201,000, or $(0.03) per diluted
share, in the fourth quarter of 2003. Included in the GAAP results for the
fourth quarter of 2004 are expenses for IGT integration costs and the
reorganization of the marketing and services functions totaling $420,000, and a
decrease to the restructuring accrual of $225,000. The GAAP results for the
fourth quarter of 2003 include the restructuring and patent-related charges
totaling $1.9 million, as described above. Excluding these items for 2004 and
2003, pro-forma net income in the fourth quarter of 2004 was $1.2 million, or
$0.11 per diluted share, compared to pro-forma net income in the fourth quarter
of 2003 of $1.0 million, or $0.09 per diluted share. For further information
regarding the presentation of pro-forma non-GAAP financial measures, please
refer to the "Financial Presentation" paragraph below.
Steven A. DeMartino, Executive Vice President and Chief Financial Officer of
TransAct Technologies, commented, "We achieved record profitability this year as
a result of our top line growth and significant focus on cost controls and
operating leverage. Diluted earnings per share increased 325% to $0.51 on
year-over-year revenue growth of 15%. Operating margin improved to 14.1% for the
full year 2004 from 5.2% for the full year 2003. Cash flow in 2004 was strong,
enabling us to end the year with over $8.6 million in cash and cash equivalents
and no debt."
LOOKING FORWARD
Mr. Shuldman said, "Over the last several years we have run our Company as a
very lean organization, especially in our sales and service organizations, as we
focused our efforts on totally revamping our product lines. Now, with our much
improved balance sheet and over $8 million of cash and no debt, we believe
TransAct is in the best financial condition in the Company's history. We have
many new products, many new relationships with important and strategic
customers, and a new and highly profitable TransAct Services Group. We believe
this is an ideal time for us to increase our investment back into our business
to ramp up our revenues and earnings."
"Therefore, to increase our market penetration we plan to strategically invest
$2.5 million in the business during 2005. We expect that this investment will
accelerate our revenue growth and with our operating leverage, should lead to a
doubling of revenue and a tripling of diluted earnings per share from 2004 to
2008. This investment will be made during the first half of 2005, with most
coming during the first quarter, and will be made across three areas. The first
is a $1.2 million investment in sales and marketing related to the hiring of
additional sales staff. Each business unit is adding sales people to address the
many opportunities we see in front of them. The second is a $400,000 investment
in engineering expenses for the development of new products, four of which we
expect to
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launch in 2005. Lastly, we anticipate spending $900,000 in operations expenses
related to the opening and staffing of our new service center in Las Vegas and
the hiring of additional services personnel in our Wallingford service center,
as we broaden our reach and aggressively pursue the high margin opportunities of
the TransAct Services business."
Mr. Shuldman continued, "With the successful launch of our Epic 950(TM) thermal
printer, and the accelerating growth in the new international markets, we
believe we have the necessary momentum for growth in the worldwide gaming
market. Given the additions we are making in our sales force, IGT's ongoing
approval of our Epic 950(TM) and the demand we are beginning to see from both
Europe and Australia, we expect revenues in our Gaming and Lottery business unit
to grow in the second half of 2005."
"We also expect to see growth in the second half of 2005 in our POS and Banking
unit as we launch two new products this year and expect to close at least one
new significant banking deal. With our new organization structure, industry
leading inkjet and thermal technology and now our added sales people, we feel
good about the growth prospects of our POS and Banking unit later this year."
"And finally, TransAct Services Group, our highly profitable after-market
business unit, should continue to grow as the base of installed printers grows.
We have added sales people to focus on growing our service contract business as
well as our consumables and spare parts business, including inkjet cartridges,
paper and ribbons. And we have added a new service center located in Las Vegas
to address the many opportunities in the casino market and to also give us a
local presence for repair services for our POS and Banking business."
Mr. Shuldman concluded, "Overall, we expect revenues for 2005 will be in the
range of $70 million to $74 million, with net income in the range of $0.58 to
$0.65 per diluted share, after taking into the account the $2.5 million
investment we plan to make. In the first quarter of 2005, we anticipate revenues
will be about $13 million and expect net income for the first quarter of 2005
will be in the range of $0.02 to $0.04 per diluted share. We expect the decline
in domestic gaming sales that we experienced in December 2004 to continue
through the first half of 2005. However, we anticipate revenues in all our
markets to start growing in the second half of 2005 as our organizational
changes and sales initiatives take effect."
FINANCIAL PRESENTATION
The Company has provided pro-forma non-GAAP financial measures because
the Company believes that these amounts are helpful to investors and others to
more accurately assess the ongoing nature of TransAct's core operations. The
pro-forma non-GAAP measures exclude the effects in fiscal 2004 of the charges
associated with the IGT integration project and the reorganization of the
Company's marketing and services functions, and the decrease in the
restructuring accrual. The pro-forma non-GAAP measures exclude the effects in
2003 of the restructuring and patent-related charges. These items have been
excluded from pro-forma non-GAAP financial measures, as management does not
believe that they are representative of underlying trends in the Company's
performance. Their exclusion provides investors and others with additional
information to more readily assess the Company's operating results. The Company
uses the non-GAAP financial measures internally to focus management on the
results of the Company's core business. The presentation of this additional
non-GAAP information is not considered superior to or a substitute for the
financial information prepared in accordance with GAAP.
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INVESTOR CONFERENCE CALL / WEBCAST DETAILS
TransAct will review detailed fourth quarter and full year 2004 results and
forward looking guidance during a conference call and online slide presentation
for investors and analysts on Thursday, March 3, 2005 at 5:00PM ET. The
conference call-in number is 913-981-5520. The online slide presentation can be
accessed from the Company's website at http://www.shareholder.com/transact-
tech/medialist.cfm . A replay of the call will be available from 8:00PM ET on
Thursday, March 3 through midnight ET on Thursday, March 10 by telephone at
719-457-0820. The password for the replay is 4847552. Investors can also access
the conference call via a live webcast on the Company's website at www.transact-
tech.com. A replay of the call will be archived on that website for one week.
ABOUT TRANSACT TECHNOLOGIES INCORPORATED
TransAct (Nasdaq: TACT) designs, develops, manufactures and markets
transaction-based printers under the ithaca(R) name. In addition, the Company
markets related consumables, spare parts and service. The Company's printers are
used worldwide to provide receipts, tickets, coupons, register journals and
other documents. TransAct focuses on two core markets: point-of-sale (POS) and
banking, and gaming and lottery. TransAct sells its products to original
equipment manufacturers, value-added resellers and selected distributors, as
well as directly to end-users. The Company's product distribution spans across
the Americas, Europe, the Middle East, Africa, the Caribbean Islands and the
South Pacific. For further information, visit TransAct's web site located at
www.transact-tech.com.
FOR TRANSACT TECHNOLOGIES:
Steve DeMartino, Chief Financial Officer, 203-269-1198 Ext. 6059 or David
Pasquale, 646-536-7006, or Denise Roche, 646-536-7008, both with The Ruth Group
# # #
FORWARD-LOOKING STATEMENTS:
The Company's forward-looking statements in this press release are subject to a
number of risks and uncertainties. Risks and uncertainties include, but are not
limited to, customer acceptance and market share gains, both domestically and
internationally, in the face of substantial competition from competitors that
have broader lines of products and greater financial resources; introduction of
new products into the marketplace by competitors; successful product
development; dependence on significant customers; dependence on significant
vendors; the ability to recruit and retain quality employees as the Company
grows; dependence on third parties for sales outside the United States,
including Australia, New Zealand, Europe and Latin America; economic and
political conditions in the United States, Australia, New Zealand, Europe and
Latin America; marketplace acceptance of new products; risks associated with
foreign operations; availability of third-party components at reasonable prices;
and the absence of price wars or other significant pricing pressures affecting
the Company's products in the United States or abroad. Actual results may differ
materially from those discussed in, or implied by, the forward-looking
statements. The forward-looking statements speak only as of the date of this
release and the Company assumes no duty to update them to reflect new, changing
or unanticipated events or circumstances.
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TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended Three months ended
(In thousands, except per share amounts) December 31, December 31,
2004 2003
-------------------------------------- ---------------------------------------
GAAP Adjust- Pro Forma GAAP Adjust- Pro Forma
Basis ments Basis Basis ments Basis
--------- --------- --------- --------- --------- ---------
Net sales $ 14,596 $ - $ 14,596 $ 14,660 $ - $ 14,660
Cost of sales 9,486 - 9,486 10,589 (740)e 9,849
--------- --------- --------- --------- --------- ---------
Gross profit 5,110 - 5,110 4,071 (740) 4,811
--------- --------- --------- --------- --------- ---------
Operating expenses:
Engineering, design and product
development costs 910 (350)a 560 619 - 619
Selling and marketing expenses 1,277 (70)b 1,207 1,466 - 1,466
General and administrative expenses 1,567 - 1,567 1,167 - 1,167
Business consolidation and
restructuring expenses (225) 225 c - 1,128 (1,128)f -
--------- --------- --------- --------- --------- ---------
3,529 (195) 3,334 4,380 (1,128) 3,252
--------- --------- --------- --------- --------- ---------
Operating income (loss) 1,581 195 1,776 (309) 1,868 1,559
--------- --------- --------- --------- --------- ---------
Other income (expense):
Interest, net 12 - 12 (27) - (27)
Other, net (21) - (21) (64) - (64)
--------- --------- --------- --------- --------- ---------
(9) - (9) (91) - (91)
--------- --------- --------- --------- --------- ---------
Income (loss) before income taxes 1,572 195 1,767 (400) 1,868 1,468
Income taxes 546 69 d 615 (199) 658 d 459
--------- --------- --------- --------- --------- ---------
Net income (loss) $ 1,026 $ 126 $ 1,152 $ (201) $ 1,210 $ 1,009
========= ========= ========= ========= ========= =========
Net income (loss) available to common
shareholders $ 1,026 $ 1,152 $ (290) $ 856
Net income (loss) per share:
Basic $ 0.10 $ 0.12 $ (0.03) $ 0.10
Diluted $ 0.10 $ 0.11 $ (0.03) $ 0.09
Shares used in per share calculation:
Basic 9,921 9,921 8,871 8,871
Diluted 10,486 10,486 8,871 9,743
a Engineering costs associated with the integration of TransAct's Epic 950(TM)
casino printer by IGT.
b Charge related to the move of the Company's marketing and services
departments.
c Decrease in restructuring accrual due to a revised estimate of the remaining
lease costs for the Company's Wallingford, CT facility.
d The tax effect on the adjustments was calculated using a tax rate of 35.2% for
the 2004 and 2003 periods presented.
e Charge to cost of sales in connection with a royalty for the usage of certain
Seiko Epson patents.
f Restructuring charge related to the lease costs associated with the Company's
Wallingford, CT facility.
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TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Year ended Year ended
(In thousands, except per share amounts) December 31, December 31,
2004 2003
------------------------------------- -------------------------------------
GAAP Adjust- Pro Forma GAAP Adjust- Pro Forma
Basis ments Basis Basis ments Basis
--------- --------- --------- --------- --------- ---------
Net sales $ 59,847 $ - $ 59,847 $ 52,098 $ - $ 52,098
Cost of sales 37,805 - 37,805 36,555 (740)e 35,815
--------- --------- --------- --------- --------- ---------
Gross profit 22,042 - 22,042 15,543 (740) 16,283
--------- --------- --------- --------- --------- ---------
Operating expenses:
Engineering, design and product -
Development 2,715 (350) a 2,365 2,276 2,276
Selling and marketing 5,111 (70) b 5,041 4,968 - 4,968
General and administrative 5,990 - 5,990 4,483 - 4,483
Business consolidation and
restructuring (225) 225 c - 1,128 (1,128) f -
--------- --------- --------- --------- --------- ---------
13,591 (195) 13,396 12,855 (1,128) 11,727
--------- --------- --------- --------- --------- ---------
Operating income 8,451 195 8,646 2,688 1,868 4,556
--------- --------- --------- --------- --------- ---------
Other income (expense):
Interest, net 4 - 4 (210) - (210)
Write-off of deferred financing costs - - - (103) - (103)
Other, net (18) - (18) (122) - (122)
--------- --------- --------- --------- --------- ---------
(14) - (14) (435) - (435)
--------- --------- --------- --------- --------- ---------
Income before income taxes 8,437 195 8,632 2,253 1,868 4,121
Income taxes 2,979 69 d 3,048 725 658 d 1,383
--------- --------- --------- --------- --------- ---------
Net income $ 5,458 $ 126 $ 5,584 $ 1,528 $ 1,210 $ 2,738
========= ========= ========= ========= ========= =========
Net income available to common
shareholders $ 5,236 $ 5,360 $ 1,087 $ 2,210
Net income per share:
Basic $ 0.55 $ 0.56 $ 0.13 $ 0.25
Diluted $ 0.51 $ 0.52 $ 0.12 $ 0.24
Shares used in per share calculation:
Basic 9,593 9,593 8,690 8,690
Diluted 10,231 10,231 9,335 9,335
See footnote explanations on the previous page.
SUPPLEMENTAL INFORMATION - SALES BY MARKET:
Three months ended Year ended
December 31, December 31,
--------------------------- ---------------------------
2004 2003 2004 2003
-------- -------- -------- --------
Point of sale $ 6,156 $ 5,553 $ 25,124 $ 20,745
Gaming and lottery 8,440 9,107 34,723 31,353
-------- -------- -------- --------
Total net sales $ 14,596 $ 14,660 $ 59,847 $ 52,098
======== ======== ======== ========
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TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, December 31,
(In thousands) 2004 2003
----------- -----------
ASSETS:
Current assets:
Cash and cash equivalents $ 8,628 $ 498
Receivables, net 8,910 9,074
Inventories 8,074 8,061
Refundable income taxes 510 -
Deferred tax assets 2,370 2,340
Other current assets 586 509
----------- -----------
Total current assets 29,078 20,482
----------- -----------
Fixed assets, net 3,177 3,607
Goodwill, net 1,469 1,469
Deferred tax assets 274 684
Other assets 101 119
----------- -----------
5,021 5,879
----------- -----------
Total assets $ 34,099 $ 26,361
=========== ===========
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY:
Current liabilities:
Current portion of term loan $ - $ 90
Accounts payable 3,804 3,288
Accrued liabilities 3,395 2,892
Accrued restructuring expenses 420 480
Accrued patent license fees 417 408
Deferred revenue, current portion 717 1,537
----------- -----------
Total current liabilities 8,753 8,695
----------- -----------
Long-term portion of term loan - 330
Long-term portion of accrued restructuring 1,034 1,645
Long-term portion of accrued patent license fees - 750
Accrued product warranty 153 169
Deferred revenue 444 523
----------- -----------
1,631 3,417
----------- -----------
Total liabilities 10,384 12,112
----------- -----------
Commitments and contingencies
Redeemable convertible preferred stock - 3,902
----------- -----------
Shareholders' equity:
Common stock 70 60
Additional paid-in capital 17,431 8,441
Retained earnings 7,112 1,769
Unamortized restricted stock compensation (1,067) (30)
Accumulated other comprehensive income 169 107
----------- -----------
Total shareholders' equity 23,715 10,347
----------- -----------
Total liabilities and shareholders' equity $ 34,099 $ 26,361
=========== ===========
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