[TRANSACT TECHNOLOGIES INCORPORATED LOGO]
TRANSACT TECHNOLOGIES REPORTS
THIRD QUARTER 2005 RESULTS
Wallingford, CT, November 8, 2005 - TransAct Technologies Incorporated (Nasdaq:
TACT), a leading producer of transaction-based printers for customers worldwide,
today announced financial results for the three months ended September 30, 2005.
Revenues for the third quarter of 2005 were $14.2 million, compared to $15.5
million in the same period a year ago. The Company earned net income for the
third quarter of 2005 of $0.7 million compared to net income of $1.6 million in
the same period of 2004. Earnings per share for the three months ended September
30, 2005 were $0.07 per diluted share compared to $0.15 per diluted share in the
same period a year ago. TransAct's financial results for the third quarter of
2005 were consistent with the latest guidance provided on September 6, 2005 for
net income in the range of $0.06 to $0.08 per diluted share on revenue in the
$14 million range.
Revenues for the nine months ended September 30, 2005 were $38.6 million,
compared to $45.3 million in the same period a year ago. The Company earned net
income for the first nine months of 2005 of $1.1 million compared to net income
of $4.4 million in the comparable year-ago period. Earnings per share for the
first nine months of 2005 were $0.11 per diluted share compared to $0.41 per
diluted share in the same period a year ago.
GAMING AND LOTTERY
Gaming and Lottery revenue for the third quarter of 2005 was $5.8 million
compared to $8.9 million in the same period of 2004. The domestic gaming market
remained weak and was impacted further by the effects of Hurricane Katrina and
the loss of revenue from one OEM customer as it works through an inventory
issue. Despite these issues in the domestic gaming market, the overall gaming
market revenue decline was impacted positively by the continued significant
growth in international gaming sales. Sales in the international gaming market,
excluding lottery, reached $3.1 million in the third quarter, an increase of
over 300% from the same period last year and over 100% sequentially. The growth
in international gaming revenue, excluding lottery, which reached $5.6 million
for the first nine months of 2005, limited the impact of the issues in the
domestic market.
Lottery revenue, excluding gaming sales, was down approximately $1.5 million
compared to the same quarter of last year due to a purchase by GTECH for the
last of the legacy impact printers in the third quarter 2004 that did not repeat
in the third quarter of 2005. Overall, orders from GTECH have been down in the
first nine months of 2005 compared to the same period of 2004, due to timing of
orders as well as from shipments of legacy printers in 2004 that did not recur
in 2005. GTECH orders are expected to return to historical levels in 2006.
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POS AND BANKING
POS and Banking revenue was $5.5 million in the third quarter of 2005 compared
to $4.0 million in the third quarter of 2004. This growth was primarily
attributable to shipments of BANKjet(R) 1500 printers to a top-tier financial
services company as announced in June 2005. Excluding banking, POS revenue
decreased by 11% in the third quarter of 2005 compared to the third quarter of
2004 due primarily to a decrease in sales of legacy impact printers. However,
for the first nine months of 2005, POS revenue, excluding banking, increased by
12% compared to the same period of 2004 reflecting the increasing adoption of
TransAct's new line of thermal and inkjet printers and increasing sales in the
international markets.
TRANSACT SERVICES GROUP
Revenue from the TransAct Services Group, which includes spare parts,
consumables and services, was $2.8 million in the third quarter of 2005, a 9%
increase from $2.6 million in the year-ago period. Overall, for the first nine
months of 2005, revenue from TransAct Services Group grew 14% over the same
period of last year. This growth is largely attributable to the additions the
Company made to its sales team and the opening of the west coast services
center.
OPERATIONS AND FINANCE
Steven A. DeMartino, Executive Vice President and Chief Financial Officer of
TransAct Technologies, commented, "This was another challenging quarter but one
in which we continued to execute well against our business strategy. Gross
margin for the third quarter of 2005 decreased to 32.2% from 38.1% in the third
quarter of 2004 due to the lower level of sales and due to higher component
costs in the third quarter of 2005 as we transition from our Model 850 thermal
ticket casino printer to our new Epic 950(TM) thermal ticket casino printer. We
expect gross margin on the Epic 950(TM) printer will improve in the fourth
quarter of 2005, as planned, as we complete the final transition for the
sourcing of components from domestic to overseas vendors. Operating expenses
were in line with our expectations, and we ended the quarter with $4.5 million
in cash and cash equivalents and no debt."
As part of the stock repurchase program authorized by the Company's Board of
Directors in March 2005, during the third quarter, the Company repurchased
286,900 shares for approximately $2.1 million, bringing the total buyback as of
September 30, 2005 to 408,900 shares, and a total of $3.1 million.
LOOKING FORWARD
Bart C. Shuldman, Chairman, President and Chief Executive Officer of TransAct
Technologies, said, "Sales this quarter were impacted by what is happening in
our domestic gaming and lottery business unit, which included a one-time order
in 2004 that did not repeat this year, a continued customer inventory issue,
overall slowdown in the domestic gaming market and the effect of Hurricane
Katrina. This is not an ideal set of market conditions but we continue to grow
our market share in all our markets. These issues have not dampened our
optimistic long-term outlook for TransAct based on growth we are seeing in the
rest of our business units and because we expect some of the issues in our
domestic gaming and lottery market to end early in 2006. In the interim, to
offset the decline in Gaming and Lottery revenue, we continue to pursue
initiatives to grow both our domestic and international market share. During the
quarter we announced a major deal with JCM American Corporation, the industry
leader in currency handling systems. Under our letter of intent, JCM's sales
force will offer TransAct's gaming thermal printers in North and South America
in combination with JCM's many bill acceptor and currency handling products. On
the international front, we continue to have great success in our gaming
business, which has grown significantly for the past three consecutive quarters.
We continue to see increasing adoption of our Epic 950(TM) thermal printer in
key
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international markets including Australia and Europe and have assembled the
sales team and infrastructure needed to further grow our market share
worldwide."
"Our POS and Services businesses continue to be strong contributors. The key
growth initiatives launched earlier this year, which include the introduction of
new products, the expansion of international sales across all of our business
units and the addition of sales professionals in our TransAct Services Group
have positioned TransAct to grow market share and benefit from the return of the
domestic gaming market."
Mr. Shuldman concluded, "In the current fourth quarter of 2005, we are
experiencing the normal year-end softness of our POS and banking business, and
our domestic gaming customers continue to suffer from the after-effects of
Hurricane Katrina. We expect revenues for the fourth quarter to be approximately
$12.5 million with net income of approximately $0.02 per diluted share. As we
look forward to 2006, however, our customers' forecasts and favorable market
responses to our 2005 initiatives as outlined above, are pointing toward a year
of growth in both revenue and profit."
INVESTOR CONFERENCE CALL/WEBCAST DETAILS
TransAct will review detailed third quarter 2005 results and forward looking
guidance during a conference call today at 5:00PM EDT. The conference call-in
number is 201-689-8471. A replay of the call will be available from 8:00PM ET on
Tuesday, November 8 through midnight ET on Tuesday, November 15 by telephone at
201-612-7415. The account number to access the replay is 3055 and the password
is 171456. 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.
CONTACTS:
Steven 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:
Certain statements in this press release include forward-looking statements.
Forward-looking statements generally can be identified by the use of
forward-looking terminology, such as "may", "will", "expect", "intend",
"estimate", "anticipate", "believe", "project" or "continue" or the negative
thereof or other similar words. All forward-looking statements involve risks and
uncertainties, including, 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;
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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; price
wars or other significant pricing pressures affecting the Company's products in
the United States or abroad; and the outcome of lawsuits between TransAct and
FutureLogic, Inc. 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 INCOME
(UNAUDITED)
Three months ended Nine months ended
(In thousands, except per share amounts) September 30, September 30,
- ---------------------------------------- ------------- -------------
2005 2004 2005 2004
-------- -------- -------- --------
Net sales $ 14,210 $ 15,482 $ 38,592 $ 45,251
Cost of sales 9,634 9,585 26,085 28,319
-------- -------- -------- --------
Gross profit 4,576 5,897 12,507 16,932
-------- -------- -------- --------
Operating expenses:
Engineering, design and product development 637 643 2,107 1,805
Selling and marketing 1,627 1,254 4,523 3,834
General and administrative 1,624 1,528 4,578 4,423
-------- -------- -------- --------
3,888 3,425 11,208 10,062
-------- -------- -------- --------
Operating income 688 2,472 1,299 6,870
-------- -------- -------- --------
Other income (expense):
Interest, net 19 4 59 (8)
Other, net 7 4 22 3
-------- -------- -------- --------
26 8 81 (5)
-------- -------- -------- --------
Income before income taxes 714 2,480 1,380 6,865
Income tax provision 40 855 276 2,433
-------- -------- -------- --------
Net income $ 674 $ 1,625 $ 1,104 $ 4,432
======== ======== ======== ========
Net income available to common shareholders $ 674 $ 1,625 $ 1,104 $ 4,201
Net income per common share:
Basic $ 0.07 $ 0.16 $ 0.11 $ 0.44
Diluted $ 0.07 $ 0.15 $ 0.11 $ 0.41
Shares used in per share calculation:
Basic 9,817 9,853 9,932 9,483
Diluted 10,078 10,556 10,268 10,278
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TRANSACT TECHNOLOGIES INCORPORATED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, December 31,
(In thousands) 2005 2004
-------- --------
ASSETS:
Current assets:
Cash and cash equivalents $ 4,498 $ 8,628
Receivables, net 9,366 8,910
Inventories 7,597 8,074
Refundable income taxes 510 510
Deferred tax assets 2,614 2,370
Other current assets 391 586
-------- --------
Total current assets 24,976 29,078
-------- --------
Fixed assets, net 4,100 3,177
Goodwill, net 1,469 1,469
Deferred tax assets 191 274
Other assets 563 101
-------- --------
6,323 5,021
-------- --------
Total assets $ 31,299 $ 34,099
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 3,559 $ 3,804
Accrued liabilities 3,188 3,812
Accrued restructuring 420 420
Deferred revenue 394 717
-------- --------
Total current liabilities 7,561 8,753
-------- --------
Accrued restructuring 701 1,034
Accrued product warranty 139 153
Deferred revenue 330 444
-------- --------
1,170 1,631
-------- --------
Total liabilities 8,731 10,384
-------- --------
Shareholders' equity:
Common stock 102 100
Additional paid-in capital 19,237 17,401
Retained earnings 8,216 7,112
Unamortized restricted stock compensation (1,955) (1,067)
Accumulated other comprehensive income 103 169
Treasury stock, at cost (3,135) --
-------- --------
Total shareholders' equity 22,568 23,715
-------- --------
$ 31,299 $ 34,099
======== ========
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