American Bank Note Holographics Reports Fourth Quarter and Full Year 2005 Financial Results.ROBBINSVILLE, N.J. -- American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Bank Note Holographics, Inc. ("ABNH ABNH American Bank Note Holographics, Inc " or the "Company") (OTC Bulletin Board OTC Bulletin Board An electronic quotation listing of the bid and asked prices of OTC stocks that do not meet the requirements to be listed on the NASDAQ stock-listing system. : ABHH) a world leader in the origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real , production and marketing of holograms for security applications, today announced financial results for the fourth quarter and full year ended December December: see month. 31, 2005. Sales in the fourth quarter of 2005 were $10.1 million, compared with $5.5 million in the fourth quarter of 2004, an increase of $4.6 million or 83%. Sales for the full year of 2005 totaled $32.3 million, compared with $21.3 million in 2004, an increase of $11.0 million or 52%. The Company reported a net loss of ($2.8) million or ($0.15) per share in the fourth quarter of 2005 as compared to net income of $0.5 million or $0.02 per share in the fourth quarter of 2004. The Company reported a net loss of ($0.6) million or ($0.03) per share for the full year in 2005 compared to net income of $1.8 million or $0.10 per share for the full year in 2004. The 2005 fourth quarter and full year results included pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charges of approximately $5.0 million, as detailed below, in connection with the previously reported decision of Visa International ("Visa") to discontinue dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: the use of the current version of the Company's HoloMag product. The 2005 fourth quarter and full year results also included pre-tax charges of approximately $2.2 million and $2.8 million, respectively, in connection with the Company's previously announced move and facilities consolidation program. On March 14, 2006, Visa informed the Company, as well as its member financial institutions and card manufacturers, that it is discontinuing the use of the current version of HoloMag based on what Visa describes as an infrequently in·fre·quent adj. 1. Not occurring regularly; occasional or rare: an infrequent guest. 2. occurring technical problem at the point of sale that results from a combination of factors including low humidity humidity, moisture content of the atmosphere, a primary element of climate. Humidity measurements include absolute humidity, the mass of water vapor per unit volume of natural air; relative humidity (usually meant when the term humidity environments at the point of sale, point of sale equipment with a relatively low tolerance to electrostatic discharge (hardware, testing) Electrostatic Discharge - (ESD) One kind of test that hardware usually has to pass to prove it is suitable for sale and use. The hardware must still work after is has been subjected to some level of electrostatic discharge. ("ESD (1) (Electronic Software Distribution) Distributing new software and upgrades via the network rather than individual installations on each machine. See ESL. ") and higher electrostatic Stationary electrical charges in which no current flows. For example, laser printers and copier machines place a positive charge of the image on a drum, and negatively charged toner is attracted onto the drum. The toner is then transferred to positively charged paper and fused to the paper by heat. conductivity conductivity /con·duc·tiv·i·ty/ (kon?duk-tiv´i-te) the capacity of a body to transmit a flow of electricity or heat; the conductance per unit area of the body. con·duc·tiv·i·ty n. 1. of cards with HoloMag compared to conventional magnetic stripes A small length of magnetic tape adhered to credit cards, badges, permits, passes and tokens. The tape is read by magnetic stripe readers incorporated into ATMs, identification readers and payment terminals. . As a result of Visa's decision, the Company's results of operations for the quarter and year ended December 31, 2005 were materially affected. The pre-tax charge amounting to approximately $5.0 million, including approximately $4.8 million recorded in cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold , was principally related to the value of the Company's HoloMag inventory. Also included in the charge were increases in the allowance for doubtful accounts Allowance for Doubtful Accounts An estimation made by a company and documented on its balance sheet for receivables that might go uncollected. Notes: It is standard practice for a company to have funds set aside for money that cannot be collected. and the warranty provision for potential non-ESD related warranty claims. Sales of HoloMag to Visa authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: card manufacturers began in the quarter ended September 30, 2005 and amounted to approximately $2.3 million in that quarter. In the quarter ended December 31, 2005 HoloMag sales to Visa authorized card manufacturers amounted to approximately $3.8 million. Sales of VISA HoloMag continued to grow in the first quarter of 2006 compared to the prior quarter until the announcement by Visa on March 14, 2006. Accordingly, the Company expects its total sales in the quarter ending March 31, 2006 will be higher than its sales in the quarter ended December 31, 2005 and the Company's sales are expected to decline thereafter as a result of the cessation cessation Vox populi The stopping of a thing. See Smoking cessation. of the current Visa HoloMag program. Kenneth H. Traub, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of ABNH, commented, "The significant achievements of 2005 were unfortunately overshadowed by Visa's recent decision to discontinue the use of the current version of our HoloMag product. The launch of HoloMag was a major undertaking for our Company as we created secure, custom products for the leading payment card brands and implemented and supported this program with over 100 card manufacturers worldwide. HoloMag was responsible for approximately $8.4 million of our $11.0 million of sales growth in 2005. While Visa was the largest user of HoloMag in 2005 we continue to supply HoloMag to other major payment brands. Visa card issuers will again be using the traditional Dove holograms that we and one other company supply. We are also developing a second generation HoloMag product that addresses the ESD issue and remain committed to supporting the needs of the payment card industry." Mr. Traub continued, "In addition to the expansion of the HoloMag program, we launched new secure identity documents as well product authentication (1) Verifying the integrity of a transmitted message. See message integrity, e-mail authentication and MAC. (2) Verifying the identity of a user logging into a network. programs and expanded existing customer relationships in each of our markets. As a result, despite the disruption disruption /dis·rup·tion/ (dis-rup´shun) a morphologic defect resulting from the extrinsic breakdown of, or interference with, a developmental process. of closing both of our former facilities and moving into our new facility this year, we recorded sales growth exceeding 50% in 2005. In 2005 we succeeded in significantly strengthening our organization. We have built a great team at ABNH with world class talent augmenting our technology, manufacturing, quality assurance, marketing, finance and administrative capabilities. We are all committed to supporting our customers' needs for innovative solutions to improve the security of documents and products worldwide." Mark J. Bonney, Executive Vice President and CFO See Chief Financial Officer. of the Company stated "In the quarter ended December 31, 2005, in addition to the charges recorded in connection with the Visa issue as discussed above, we recorded the major costs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our consolidation program. For the year, costs for the rent on our abandoned facility in Elmsford, New York Elmsford is a village in Westchester County, New York, United States. The population was 4,676 at the 2000 census. As a village, it is located in the Town of Greenburgh. The village is named after a large elm tree that once grew in the community. , moving costs, employee severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs and employee relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. costs totaled approximately $2.8 million. The consolidation of our facilities has enabled significant enhancements in the efficiency of our operations. We have also installed new equipment to broaden our capabilities and enhance the features of our products. Further, while our new facility is 50% larger than the total of our prior two facilities, the total rent is significantly less. We invested approximately $5 million in capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) in 2005 on facilities and equipment. After these investments we concluded the year with over $9 million of cash and no debt." The Company reported that it filed its Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. with the Securities and Exchange Commission on March 31, 2006. About American Bank Note Holographics, Inc. American Bank Note Holographics is a world leader in the origination, production, and marketing of holograms. The Company's products are used primarily for security applications such as counterfeiting counterfeiting, manufacturing spurious coins, paper money, or evidences of governmental obligation (e.g., bonds) in the semblance of the true. There must be sufficient resemblance to the genuine article to deceive a person using ordinary caution. protection of transaction cards, identity documents, documents of value, pharmaceuticals and other consumer and industrial products. The Company's headquarters is in Robbinsville, NJ. For more information, visit www.abnh.com. ABNH Forward-Looking Statement forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Certain statements contained in this release, including without limitation, statements containing the words "believes," "intends," "expects," "anticipates," and words of similar import, constitute "forward-looking statements" within the meaning of the private securities litigation reform act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such forward-looking statements are based on current management expectations. Numerous factors, including those disclosed herein, those related to transaction card industry trends and those detailed in our filings with the Securities and Exchange Commission (as set forth under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2005), may cause results to differ materially from those anticipated in the forward-looking statements. Many of the factors that will determine our future results are beyond our capability to control or predict. These statements are subject to risks and uncertainties and therefore actual results may differ materially. Readers should not place undue reliance on such forward-looking statements which reflect management's view only as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" . We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. This release and prior releases are available on the ABNH website at www.abnh.com.
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
BALANCE SHEETS
(In thousands, except share data)
December 31, December 31,
2005 2004
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 9,114 $ 11,357
Short-term investments - 1,989
Accounts receivable, net of allowance for
doubtful accounts of $500 and $180 6,019 3,889
Inventories, net 2,940 3,394
Deferred income taxes, net 2,968 983
Prepaid expenses and other 331 317
Income tax receivable 401 -
----------- -----------
Total current assets 21,773 21,929
Machinery, equipment and leasehold
improvements, net of accumulated
depreciation and amortization of $8,852 and
$10,062 7,224 3,172
Deferred income taxes, net 411 -
Other assets 76 110
----------- -----------
Total Assets $ 29,484 $ 25,211
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 3,820 $ 1,519
Accrued expenses 3,834 2,040
Customer advances 204 69
Income taxes payable 359 1,058
----------- -----------
Total current liabilities 8,217 4,686
Long-Term Liabilities 1,957 1,211
----------- -----------
Total liabilities 10,174 5,897
----------- -----------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, authorized 5,000,000
shares; no shares issued or outstanding - -
Common stock, par value $.01 per share,
authorized 40,000,000 shares; issued and
outstanding 18,715,469 shares and
18,515,907 shares 187 185
Additional paid-in capital 24,729 24,058
Unearned compensation on restricted stock (96) -
Accumulated deficit (5,510) (4,929)
----------- -----------
Total Stockholders' Equity 19,310 19,314
----------- -----------
Total Liabilities and Stockholders' Equity $ 29,484 $ 25,211
=========== ===========
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- -------------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenue:
Sales $ 10,083 $ 5,514 $ 32,299 $ 21,263
Royalty income 10 - 20 13
-------- -------- -------- --------
10,093 5,514 32,319 21,276
Costs and expenses:
Cost of goods sold, excluding
depreciation and
amortization 9,181 2,218 19,368 9,161
Selling and administrative 2,480 1,790 8,850 7,070
Research and development 391 303 1,263 1,270
Depreciation and amortization 542 335 1,297 830
Facility consolidation 2,169 149 2,769 242
-------- -------- -------- --------
14,763 4,795 33,547 18,573
-------- -------- -------- --------
Operating (loss) income (4,670) 719 (1,228) 2,703
Other income:
Interest 76 44 259 121
Patent and other settlements - - - 178
-------- -------- -------- --------
Total other income 76 44 259 299
-------- -------- -------- --------
(Loss) income before (benefit)
provision for income taxes (4,594) 763 (969) 3,002
(Benefit) provision for income
taxes (1,837) 306 (388) 1,201
-------- -------- -------- --------
Net (loss) income $ (2,757) $ 457 $ (581) $ 1,801
======== ======== ======== ========
Net (loss) income per share:
Basic $ (0.15) $ 0.02 $ (0.03) $ 0.10
======== ======== ======== ========
Diluted (1) $ (0.15) $ 0.02 $ (0.03) $ 0.10
======== ======== ======== ========
Weighted average number of
shares:
Basic 18,684 18,504 18,593 18,489
Diluted (1) 18,684 19,157 18,593 18,907
(1) Diluted (loss) income per share would have been anti-dilutive for
the quarter ended December 31, 2005 if based on fully diluted
shares adjusted to reflect stock options exercised.
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