American Bank Note Holographics, Inc (ABHH.OB), a leading company in the origination, production and marketing of holograms for security applications, announced financial results for the third quarter ended September 30, 2007.
Sales in the third quarter of 2007 totaled $8.5 million, an increase of 29.4% from $6.6 million in the third quarter of 2006. American Bank’s sales growth can be attributed to an increase of holographic product sales, in particular the recently introduced second generation HoloMag, HoloStripe, and HoloCard cards.
Sales in the first nine months of 2007 decreased by the value of $1.2 million, or 4.9%, to $23.7 million from $24.9 million in the comparable period in 2006. Sales during 2006 included $5.0 million of revenue from the discontinued Visa and MasterCard HoloMag programs, which was not contributable during 2007.
Net income in the third quarter of 2007 increased 177% to $2.1 million, or $0.10 per fully diluted share, from net income of $0.7 million, or $0.04 per share, in the third quarter of 2006, and increased 70% from $1.2 million, or $0.06 per share, in the second quarter of 2007. Net income was increased due in part to improved operational efficiencies, resulting in a reduced fixed cost infrastructure and operational leverage. The third quarter of 2007 also included additional costs because manufacturing overruns on certain products due to the transition to new materials which amounted to approximately $0.5 million (pre-tax) were recognized. This cost will be reduced or eliminated in future periods.
On October 23, 2007, the company was notified that MasterCard is seeking reimbursement for certain costs associated with the suspension of their HoloMag program. MasterCard has stated that those costs “now exceed $1.9 million”, but the company is reviewing their claim at this time. Kenneth H. Traub, President and CEO of ABNH, commented, “We value our relationship with MasterCard and will work with them to try to resolve this request amicably and expeditiously.”
Mr. Traub commented, “ABNH’s strong third quarter performance reflects the continued momentum we are building as a result of developing and marketing an expanded product line into growing markets, combined with a more efficient operating infrastructure. Governments and major corporations are increasingly recognizing the global threat of counterfeiting, and we are delivering proven and effective solutions that enhance security and branding for significant and growing markets. Our strong organization, manufacturing infrastructure, technological leadership, expanding product line, and healthy balance sheet position us well to address the growing needs of these markets.”
Mark J. Bonney, Executive Vice President and CFO, stated, “ABNH’s results in the third quarter demonstrate the significant financial benefits and operating leverage gained from sales growth with new and existing customers and lower cost manufacturing and administrative operations. While this quarter did include certain reserve reversals that contributed to the growth in net income, it was also burdened with manufacturing costs that we believe are substantially behind us now as well as costs associated with our review of strategic alternatives. Continued revenue growth, cost efficiencies and operating leverage have all contributed to strong improvements in earnings and earnings per share on both a year-over-year and a sequential basis. Further, this profitability is translating into solid cash flow generation as we ended the quarter with over $19 million in cash and no debt.”
Let us hear your thoughts below:
