Document Security Systems, Inc. Announces Fourth Quarter and 2011 Year-End Financial Results

Mar 19, 2012, 16:42 ET from Document Security Systems, Inc.

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 Years Ended December 31,

For The Three Months Ended 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.



RELATED LINKS

http://www.documentsecurity.com