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Peerless Systems Corp. Reports Operating Results (10-Q)

December 11, 2009 | About:
10qk

10qk

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Peerless Systems Corp. (PRLS) filed Quarterly Report for the period ended 2009-10-31.

Peerless Systems Corporation is a leading provider of software-based embedded imaging and networking systems to original equipment manufacturers of digital document products. Digital document products include monochrome and color printers, copiers, fax machines and scanners, as well as multifunction products that perform a combination of these imaging functions. In order to process digital text and graphics, digital document products rely on a core set of imaging software and supporting electronics, collectively known as an embedded imaging system. Peerless Systems Corp. has a market cap of $39.4 million; its shares were traded at around $2.4001 with a P/E ratio of 7.3 and P/S ratio of 3.8.

Highlight of Business Operations:

Consolidated revenues for the three months ended October 31, 2009 decreased $0.6 million, or 41%, to $1.0 million as compared with $1.6 million for the three months ended October 31, 2008. Year-to-date net sales decreased $4.2 million, or 52% to $4.0 million for the nine months ended October 31, 2009 as compared to $8.2 million for the nine months ended October 31, 2008. These overall decreases in revenues were primarily attributable to the sale of the Company s intellectual property to KMC, and declines in the demand for (a) our technologies, (b) third party technologies we are licensed to sell, and (c) the requirement for traditional engineering services.

In the third quarter of 2010, we invested $9.3 million comprised of common stock and warrants of Highbury, and the subsequent exercise of such warrants. We received from Highbury a $4.8 million dividend on our shares of Highbury common stock. As of October 31, 2009, we held 3,070,355 shares of common stock of Highbury recorded at fair value of approximately $12.6 million. Subsequently, we filed a definitive proxy statement with the SEC on November 25, 2009, to (i) nominate Timothy Brog, Chairman of Peerless s Board, for election as a director of Highbury and (ii) make precatory stockholder proposals to eliminate Highbury s classified Board of Directors and poison pill. There is no assurance that we will be successful in any of these matters.

Our total assets at October 31, 2009 were $53.5 million, an increase of 4% from $51.6 million as of January 31, 2009. Total stockholders equity at October 31, 2009 was $51.6 million, an increase of 16% from $44.5 million as of January 31, 2009, primarily the result of the net income generated by the restructuring of one of our license agreements, the release of escrow funds received from KMC in May 2009 and dividends received from the marketable securities we hold. Our cash and investment portfolio at October 31, 2009 was $49.5 million, an increase of 10.7% from $44.7 million as of January 31, 2009, and the ratio of current assets to current liabilities was 42.5:1, which is an increase from the 9.2:1 ratio as of January 31, 2009. The increase was primarily the result of the reduction to accrued licensing cost for which the reduced amount has been disbursed in the current year and a reversal for technologies licensed by the Company to a customer due to an agreement amending a third party technology license agreement. Our operations provided $4.1 million in cash reflecting the $4.8 million increase in dividends, during the three months ended October 31, 2009, compared to $4.3 million in cash used by operations during the quarter ended October 31, 2008.

At October 31, 2009, our principal source of liquidity, cash and cash equivalents was $36.9 million; a decrease of $7.8 million from January 31, 2009. The decrease is primarily due to the purchase of common stock and warrants of Highbury and the subsequent exercise of such warrants. These securities have a cost basis of $12.5 million. As of October 31, 2009, the Company owned 3,070,355 shares of Highbury common stock. We do not have a credit facility and may require additional long-term capital to finance any acquisition, merger or other transaction we may determine to pursue.

Our net income in the third quarter of fiscal year 2010 was $4.4 million, or $0.26 per basic and diluted share, compared to a net loss of $(1.2) million, or $(0.06) per basic share and diluted share, in the third quarter of fiscal year 2009. The increase was primarily due to the fact that we received a $4.8 million dividend on our shares of Highbury common stock.

Consolidated revenues were $1.0 million for the third quarter of fiscal year 2010, compared to $1.6 million for the third quarter of fiscal year 2009. Engineering services and maintenance revenues were $0.3 million, for the third quarter of fiscal year 2010 and 2009.

Read the The complete ReportPRLS is in the portfolios of John Buckingham of AL FRANK ASSET MANAGEMENT INC, John Rogers of ARIEL CAPITAL MANAGEMENT LLC.

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10qk
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