Presstek, Inc. - Form 10Q
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
|
|
|
þ
|
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
|
|
|
|
|
For
the quarterly period ended June 30, 2007
|
|
|
|
|
|
or
|
|
|
|
o
|
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
|
|
|
|
|
For
the transition period from to
|
Commission
file number 0-17541
PRESSTEK,
INC.
(Exact
Name of Registrant as Specified in Its Charter)
|
|
|
Delaware
(State
or other Jurisdiction of
Incorporation
or Organization)
|
|
02-0415170
(I.R.S.
Employer Identification No.)
|
|
|
|
55
Executive Drive
Hudson,
New Hampshire
(Address
of Principal Executive Offices)
|
|
03051-4903
(Zip
Code)
|
Registrant’s
telephone number, including area code (603) 595-7000
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days.
Yes
þ
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Act. (Check
one):
Large
accelerated filer £ Accelerated
filer R Non-accelerated
filer £
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
o
No
þ
As
of
August 6, 2007, there were 36,543,682 shares of the Registrant’s Common Stock,
$0.01 par value, outstanding.
PRESSTEK,
INC.
INDEX
|
|
PAGE
|
PART
I
|
FINANCIAL
INFORMATION
|
|
|
|
|
Item
1.
|
Consolidated
Financial Statements
|
|
|
|
|
|
Consolidated
Balance Sheets as of June 30, 2007 and December 30, 2006
(Unaudited)
|
3
|
|
|
|
|
Consolidated
Statements of Income for the three and six months ended June 30,
2007 and
July 1, 2006 (Unaudited)
|
4
|
|
|
|
|
Consolidated
Statements of Cash Flows for the six months ended June 30, 2007 and
July
1, 2006 (Unaudited)
|
5
|
|
|
|
|
Notes
to Consolidated Financial Statements (Unaudited)
|
6
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
25
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
34
|
|
|
|
Item
4.
|
Controls
and Procedures
|
36
|
|
|
|
PART
II
|
OTHER
INFORMATION
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
37
|
|
|
|
Item
1A.
|
Risk
Factors
|
37
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
37
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
37
|
|
|
|
Item
6.
|
Exhibits
|
38
|
|
|
|
|
Signatures |
39
|
|
|
|
|
Exhibit
Index
|
40
|
|
|
|
|
|
|
ITEM
1. CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRESSTEK,
INC.AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
(in
thousands, except share and per share data)
|
(Unaudited)
|
|
|
|
June
30,
|
|
|
December
30,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
7,319
|
|
$
|
9,449
|
|
Accounts
receivable, net
|
|
|
56,125
|
|
|
53,158
|
|
Inventories
|
|
|
52,310
|
|
|
46,050
|
|
Deferred
income taxes
|
|
|
4,666
|
|
|
4,162
|
|
Other
current assets
|
|
|
3,138
|
|
|
2,600
|
|
Assets
of discontinued operations
|
|
|
97
|
|
|
3,321
|
|
Total
current assets
|
|
|
123,655
|
|
|
118,740
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
40,827
|
|
|
42,194
|
|
Goodwill
|
|
|
20,268
|
|
|
20,280
|
|
Intangible
assets, net
|
|
|
7,325
|
|
|
8,741
|
|
Deferred
income taxes
|
|
|
8,673
|
|
|
7,515
|
|
Other
noncurrent assets
|
|
|
1,081
|
|
|
544
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
201,829
|
|
$
|
198,014
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
Current
portion of long-term debt and capital lease obligation
|
|
$
|
7,038
|
|
$
|
7,037
|
|
Line
of credit
|
|
|
21,000
|
|
|
15,000
|
|
Accounts
payable
|
|
|
27,686
|
|
|
27,126
|
|
Accrued
expenses
|
|
|
14,773
|
|
|
10,471
|
|
Deferred
revenue
|
|
|
6,895
|
|
|
7,901
|
|
Liabilities
of discontinued operations
|
|
|
980
|
|
|
3,707
|
|
Total
current liabilities
|
|
|
78,372
|
|
|
71,242
|
|
|
|
|
|
|
|
|
|
Long-term
debt and capital lease obligation, less current portion
|
|
|
12,015
|
|
|
15,535
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
90,387
|
|
|
86,777
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (See Note 20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
Preferred
stock, $0.01 par value, 1,000,000 shares authorized, no shares
issued
|
|
|
-
|
|
|
-
|
|
Common
stock, $0.01 par value, 75,000,000 shares authorized, 36,541,557
and
|
|
|
|
|
|
|
|
35,662,318
shares issued and outstanding at June 30, 2007 and
|
|
|
|
|
|
|
|
December
30, 2006, respectively
|
|
|
365
|
|
|
357
|
|
Additional
paid-in capital
|
|
|
114,503
|
|
|
108,769
|
|
Accumulated
other comprehensive income
|
|
|
568
|
|
|
297
|
|
Retained
earnings
|
|
|
(3,994
|
)
|
|
1,814
|
|
Total
stockholders' equity
|
|
|
111,442
|
|
|
111,237
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$
|
201,829
|
|
$
|
198,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
|
|
|
|
|
|
|
|
PRESSTEK,
INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF INCOME
|
(in
thousands, except per-share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended
|
|
|
Six
months ended
|
|
|
|
June
30,
|
|
|
July
1,
|
|
|
June
30,
|
|
|
July
1,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
58,879
|
|
$
|
59,202
|
|
$
|
114,115
|
|
$
|
114,345
|
|
Service
and parts
|
|
|
9,872
|
|
|
11,680
|
|
|
19,788
|
|
|
23,864
|
|
Total
revenue
|
|
|
68,751
|
|
|
70,882
|
|
|
133,903
|
|
|
138,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
|
41,381
|
|
|
41,424
|
|
|
80,327
|
|
|
79,681
|
|
Service
and parts
|
|
|
8,773
|
|
|
8,694
|
|
|
16,471
|
|
|
16,979
|
|
Total
cost of revenue
|
|
|
50,154
|
|
|
50,118
|
|
|
96,798
|
|
|
96,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
18,597
|
|
|
20,764
|
|
|
37,105
|
|
|
41,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
1,621
|
|
|
1,680
|
|
|
3,255
|
|
|
3,225
|
|
Sales,
marketing and customer support
|
|
|
10,952
|
|
|
10,934
|
|
|
20,816
|
|
|
19,931
|
|
General
and administrative
|
|
|
9,003
|
|
|
3,791
|
|
|
15,257
|
|
|
9,126
|
|
Amortization
of intangible assets
|
|
|
715
|
|
|
753
|
|
|
1,422
|
|
|
1,529
|
|
Restructuring
and other charges
|
|
|
793
|
|
|
-
|
|
|
1,128
|
|
|
-
|
|
Total
operating expenses
|
|
|
23,084
|
|
|
17,158
|
|
|
41,878
|
|
|
33,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
|
|
(4,487
|
)
|
|
3,606
|
|
|
(4,773
|
)
|
|
7,738
|
|
Interest
and other income (expense), net
|
|
|
(993
|
)
|
|
(616
|
)
|
|
(1,890
|
)
|
|
(1,168
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before income taxes
|
|
|
(5,480
|
)
|
|
2,990
|
|
|
(6,663
|
)
|
|
6,570
|
|
Provision
(benefit) for income taxes
|
|
|
(626
|
)
|
|
411
|
|
|
(943
|
)
|
|
1,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
(4,854
|
)
|
|
2,579
|
|
|
(5,720
|
)
|
|
5,557
|
|
Income
(loss) from discontinued operations, net of tax
|
|
$
|
24
|
|
|
167
|
|
$
|
(88
|
)
|
|
(87
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(4,830
|
)
|
$
|
2,746
|
|
$
|
(5,808
|
)
|
$
|
5,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per share - basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$
|
(0.13
|
)
|
$
|
0.07
|
|
$
|
(0.16
|
)
|
$
|
0.16
|
|
Loss
from discontinued operations
|
|
|
0.00
|
|
|
0.01
|
|
|
(0.00
|
)
|
|
(0.01
|
)
|
|
|
$
|
(0.13
|
)
|
$
|
0.08
|
|
$
|
(0.16
|
)
|
$
|
0.15
|
|
Earnings
(loss) per share - diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$
|
(0.13
|
)
|
$
|
0.07
|
|
$
|
(0.16
|
)
|
$
|
0.15
|
|
Loss
from discontinued operations
|
|
|
0.00
|
|
|
0.01
|
|
|
(0.00
|
)
|
|
(0.00
|
)
|
|
|
$
|
(0.13
|
)
|
$
|
0.08
|
|
$
|
(0.16
|
)
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - basic
|
|
|
36,046
|
|
|
35,637
|
|
|
35,855
|
|
|
35,506
|
|
Dilutive
effect of options
|
|
|
-
|
|
|
419
|
|
|
-
|
|
|
456
|
|
Weighed
average shares outstanding - diluted
|
|
|
36,046
|
|
|
36,056
|
|
|
35,855
|
|
|
35,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
PRESSTEK,
INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(in
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Six
months ended
|
|
|
|
|
June
30,
|
|
|
July
1,
|
|
|
|
|
2007
|
|
|
2006
|
|
Operating
activities
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(5,808
|
)
|
$
|
5,470
|
|
Add
loss from discontinued operations
|
|
|
88
|
|
|
87
|
|
Income
(loss) from continuing operations
|
|
|
(5,720
|
)
|
|
5,557
|
|
Adjustments
to reconcile net income (loss) to net cash provided by (used in)
operating
activities:
|
|
|
|
|
|
|
|
Depreciation
|
|
|
3,487
|
|
|
3,489
|
|
Amortization
of intangible assets
|
|
|
1,375
|
|
|
1,529
|
|
Restructuring
and other charges
|
|
|
1,128
|
|
|
-
|
|
Provision
for warranty costs
|
|
|
1,988
|
|
|
1,531
|
|
Provision
for accounts receivable allowances
|
|
|
194
|
|
|
(131
|
)
|
Stock
compensation expense
|
|
|
2,797
|
|
|
61
|
|
Deferred
income taxes
|
|
|
(1,662
|
)
|
|
-
|
|
Loss
on disposal of assets
|
|
|
98
|
|
|
59
|
|
Changes
in operating assets and liabilities, net of effects from business
acquisitions and divestitures:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(2,646
|
)
|
|
(10,385
|
)
|
Inventories
|
|
|
(6,122
|
)
|
|
8,779
|
|
Other
current assets
|
|
|
(529
|
)
|
|
(1,717
|
)
|
Other
noncurrent assets
|
|
|
(907
|
)
|
|
(69
|
)
|
Accounts
payable
|
|
|
445
|
|
|
2,626
|
|
Accrued
expenses
|
|
|
(1,006
|
)
|
|
(5,348
|
)
|
Deferred
revenue
|
|
|
1,154
|
|
|
299
|
|
Net
cash provided by (used in) operating activities
|
|
|
(5,926
|
)
|
|
6,280
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
Purchase
of property, plant and equipment
|
|
|
(2,078
|
)
|
|
(2,180
|
)
|
Business
acquisitions, net of cash acquired
|
|
|
-
|
|
|
(395
|
)
|
Investment
in patents and other intangible assets
|
|
|
(56
|
)
|
|
(1,403
|
)
|
Net
cash used in investing activities
|
|
|
(2,134
|
)
|
|
(3,978
|
)
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
Net
proceeds from the exercise of stock options and the issuance of
common
stock
|
|
|
2,945
|
|
|
1,689
|
|
Repayments
of term loan and capital lease
|
|
|
(3,519
|
)
|
|
(3,517
|
)
|
Net
borrowings under line of credit agreement
|
|
|
6,000
|
|
|
1,430
|
|
Net
cash provided by (used in) financing activities
|
|
|
5,426
|
|
|
(398
|
)
|
|
|
|
|
|
|
|
|
Cash
provided by (used in) discontinued operations
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
411
|
|
|
1,034
|
|
Investing
activities
|
|
|
-
|
|
|
(178
|
)
|
Financing
activites
|
|
|
-
|
|
|
-
|
|
Net
cash provided by discontinued operations
|
|
|
411
|
|
|
856
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
93
|
|
|
191
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(2,130
|
)
|
|
2,951
|
|
Cash
and cash equivalents, beginning of period
|
|
|
9,449
|
|
|
5,615
|
|
Cash
and cash equivalents, end of period
|
|
$
|
7,319
|
|
$
|
8,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
1,637
|
|
$
|
1,030
|
|
Cash
paid for income taxes
|
|
$
|
293
|
|
$
|
415
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
June
30,
2007
(Unaudited)
1.
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
In
the
opinion of management, the accompanying consolidated financial statements of
Presstek, Inc. and its subsidiaries (“Presstek,” the “Company,” “we” or “us”)
contain all adjustments, including normal recurring adjustments, necessary
to
present fairly Presstek’s financial position as of June 30, 2007 and December
30, 2006, its results of operations for the three and six months ended June
30,
2007 and July 1, 2006 and its cash flows for the six months ended June 30,
2007
and July 1, 2006, in accordance with U.S. generally accepted accounting
principles (“U.S. GAAP”) and the interim reporting requirements of Form 10-Q.
Accordingly, certain information and footnote disclosures normally included
in
financial statements prepared in accordance with U.S. GAAP have been condensed
or omitted.
The
results of the three and six months ended June 30, 2007 are not necessarily
indicative of the results to be expected for the fiscal year ending December
29,
2007. The information contained in this Quarterly Report on Form 10-Q should
be
read in conjunction with the “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” “Quantitative and Qualitative Disclosures
About Market Risk” and the consolidated financial statements and notes thereto
included in the Company’s Annual Report on Form 10-K for the fiscal year ended
December 30, 2006, filed with the U.S. Securities and Exchange Commission
(“SEC”) on April 25, 2007.
The
Company’s operations are currently organized into two segments: (i) Presstek and
(ii) Lasertel. The Presstek segment is primarily engaged in the development,
manufacture, sale and servicing of the Company’s patented digital imaging
systems and patented printing plate technologies as well as traditional, analog
systems and related equipment and supplies for the graphic arts and printing
industries, primarily the short-run, full-color market segment. The Lasertel
segment manufactures and develops high-powered laser diodes and related laser
products for the Presstek segment and for sale to external customers. Any future
changes to this organizational structure may result in changes to the segments
currently disclosed.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its
subsidiaries. Intercompany transactions and balances have been
eliminated.
The
Company operates and reports on a 52- or 53-week, fiscal year ending on the
Saturday closest to December 31. Accordingly, the accompanying consolidated
financial statements include the thirteen and twenty-six week periods ended
June
30, 2007 (the “second quarter and first half of fiscal 2007 or the six months
ended June 30, 2007”) and July 1, 2006 (the “second quarter and first half of
fiscal 2006 or the six months ended July 1, 2006”).
Earnings
(Loss) per Share
Earnings
(loss) per share is computed in accordance with Statement of Financial
Accounting Standards (“SFAS”) No. 128, Earnings
per Share
(“SFAS
128”). Accordingly, basic earnings (loss) per share is computed by dividing net
income (loss) by the weighted average number of shares of common stock
outstanding during the period. For periods in which there is net income, diluted
earnings per share is determined by using the weighted average number
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June
30,
2007
(Unaudited)
of
common
shares and dilutive common equivalent shares outstanding during the period
unless the effect is antidilutive. Potential dilutive equivalent common shares
consist of the incremental common shares issuable upon the exercise of stock
options.
Approximately
2,056,000 and 844,000 options to purchase common stock were excluded from the
calculation of diluted earnings (loss) per share for the three months ended
June
30, 2007 and July 1, 2006, respectively, as their effect would be antidilutive.
Approximately 1,978,000 and 838,000 options to purchase common stock were
excluded from the calculation of diluted earnings per share for the six months
ended June 30, 2007 and July 1, 2006, respectively, as their effect would be
antidilutive.
Foreign
Currency Translation and Transactions
The
Company’s foreign subsidiaries use the local currency as their functional
currency. Accordingly, assets and liabilities are translated into U.S. dollars
at current rates of exchange in effect at the balance sheet date. Revenues
and
expenses from these subsidiaries are translated at average monthly exchange
rates in effect for the periods in which the transactions occur. The resulting
unrealized gains or losses are reported under the caption “Accumulated other
comprehensive income (loss)” in the Company’s Consolidated Balance
Sheets.
Gains
and
losses arising from foreign currency transactions are reported as a component
of
“Interest and other income (expense), net” in the Company’s Consolidated
Statements of Income. The Company recorded losses on foreign currency
transactions of approximately $0.1 million for each of the three months ended
June 30, 2007 and July 1, 2006 and $0.2 million for each of the six months
ended
June 30, 2007 and July 1, 2006, respectively.
Reclassifications
Certain
amounts in prior periods have been reclassified to conform to the current period
presentation.
Use
of Estimates
The
Company prepares its financial statements in accordance with U.S. GAAP. The
preparation of these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates and
assumptions
also affect the amount of reported revenue and expenses during the period.
Management believes the most judgmental estimates include those related to
product returns; warranty obligations; allowance for doubtful accounts;
slow-moving and obsolete inventories; income taxes; the valuation of goodwill,
intangible assets, long-lived assets and deferred tax assets; stock-based
compensation and litigation. The Company bases its estimates and assumptions
on
historical experience and various other appropriate factors, the results of
which form the basis for making judgments about the carrying values of assets
and liabilities and the amounts of revenue and expenses that are not readily
apparent from other sources. Actual results could differ from those
estimates.
For
a
complete discussion of our critical accounting policies and estimates, refer
to
our Annual Report on Form 10-K for the fiscal year ended December 30, 2006,
which was filed with the SEC on April 25, 2007. There were no significant
changes to the Company’s critical accounting policies during the six months
ended June 30, 2007, with the exception of the policy below.
Accounting
for Income Taxes
The
Company’s policy covering accounting for income taxes, which was disclosed in
its Annual Report on Form 10-K for the fiscal year ended December 30, 2006,
filed with the SEC on April 25, 2007, was expanded in the first
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June
30,
2007
(Unaudited)
quarter
of fiscal 2007 to include the adoption of FASB
Interpretation No. 48, Accounting
for Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109
("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income
taxes by prescribing the recognition threshold a tax position is required to
meet before being recognized in the financial statements. It also provides
guidance on derecognition, classification, interest and penalties, accounting
in
interim periods, disclosure, and transition.
Recent
Accounting Pronouncements
In
June
2006, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue
No. 06-3, How
Taxes Collected from Customers and Remitted to Governmental Authorities Should
Be Presented in the Income Statement (That Is, Gross versus Net
Presentation)
(“EITF
06-3”). EITF 06-3 is effective for periods beginning after December 15, 2006,
with earlier application permitted. EITF 06-3 requires disclosure of the
accounting policy for any tax assessed by a governmental authority that is
directly imposed on a revenue-producing transaction (i.e., sales, use, value
added) on a gross basis (included in revenues and costs) or net basis (excluded
from revenues and costs). The Company excludes these amounts from its revenues
and costs; accordingly, no additional disclosure will be required.
In
July 2006, the FASB issued FASB Interpretation No. 48, Accounting
for Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109
("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income
taxes by prescribing the recognition threshold a tax position is required to
meet before being recognized in the financial statements. It also provides
guidance on de-recognition, classification, interest and penalties, accounting
in interim periods, disclosure, and transition. FIN 48 was adopted by
Presstek in the first quarter of fiscal 2007. The adoption of FIN 48 did not
have a material impact on the consolidated results of operations and financial
condition.
In
September 2006, the FASB issued SFAS No. 157, Fair
Value Measurements
("SFAS 157"). SFAS 157 provides guidance for using fair value to
measure assets and liabilities. It also responds to investors' requests for
expanded information about the extent to which companies measure assets and
liabilities at fair value, the information used to measure fair value, and
the
effect of fair value measurements on earnings. SFAS 157 applies whenever
other standards
require (or permit) assets or liabilities to be measured at fair value, and
does
not expand the use of fair value in any new circumstances. SFAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007 and is required to be adopted by the Company in fiscal
2008. The Company is currently evaluating the effect that the adoption of
SFAS 157 will have on its consolidated results of operations and financial
condition but does not expect it to have a material impact.
In
February 2007, the FASB issued SFAS No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities - Including
an
amendment of FASB Statement No 115 ("SFAS
159"). SFAS 159 permits entities to choose to measure many financial instruments
and certain other items at fair value. SFAS 159 is effective for fiscal years
beginning after November 15, 2007. Early adoption is permitted, provided the
entity also elects to apply the provisions of SFAS 157. The Company is currently
evaluating the effect that the adoption of SFAS 159 will have on its
consolidated results of operations and financial condition but does not expect
it to have a material impact.
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June
30,
2007
(Unaudited)
2.
DISCONTINUED OPERATIONS
The
Company accounts for its discontinued operations under the provisions of SFAS
No. 144,
Accounting for Impairment or Disposal of Long-Lived Assets (“SFAS
144”). Accordingly, results of operations and the related expenses associated
with discontinued operations have been classified as “Income (loss) from
discontinued operations, net of tax” in the accompanying Consolidated Statements
of Income. Assets and liabilities of discontinued operations have been
reclassified and reflected on the accompanying Consolidated Balance Sheets
as
“Assets of discontinued operations” and “Liabilities of discontinued
operations.” For comparative purposes, all prior periods presented have been
reclassified on a consistent basis.
Precision
Lithograining Corp. - Analog Newspaper Business
On
December 28, 2006, the Audit Committee of the Company's Board of Directors
ratified a plan submitted by management to discontinue production in South
Hadley, Massachusetts of Precision-branded analog plates used in newspaper
applications.
Results
of operations of the discontinued analog newspaper business of Precision consist
of the following (in thousands, except per-share data):
|
Three
months ended
|
|
Six
months ended
|
|
June
30 , 2007
|
July
1, 2006
|
|
June
30, 2007
|
July
1, 2006
|
Revenue
|
$
--
|
$
3,350
|
|
$
195
|
$
6,588
|
Income
(loss) before income taxes
|
40
|
200
|
|
(148)
|
(58)
|
Provision
(benefit) from income taxes
|
16
|
33
|
|
(60)
|
29
|
Income
(loss) from discontinued operations
|
$
24
|
$
167
|
|
$
(88)
|
$
(87)
|
Earnings
(loss) per share
|
$0.00
|
$
0.01
|
|
$
(0.00)
|
$
(0.01)
|
Assets
and liabilities of discontinued operations consist of the following (in
thousands):
|
|
June
30, 2007
|
|
December
30, 2006
|
|
|
|
|
|
|
|
Receivables,
net
|
|
|
$
97
|
|
|
$
1,875
|
|
Inventories
|
|
|
--
|
|
|
1,446
|
|
Total
current assets
|
|
|
$
97
|
|
|
$
3,321
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
--
|
|
|
$
2,126
|
|
Accrued
expenses
|
|
|
980
|
|
|
1,581
|
|
Total
current liabilities
|
|
|
980
|
|
|
$
3,707
|
|
|
|
|
|
|
|
|
|
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June
30,
2007
(Unaudited)
3.
ACCOUNTS RECEIVABLE, NET
The
components of “Accounts receivable, net” in the Consolidated Balance Sheets are
as follows (in thousands):
|
June
30,
2007
|
|
December
30,
2006
|
|
|
|
|
Accounts
receivable
|
$
59,148
|
|
$
56,152
|
Less
allowances
|
(3,023)
|
|
(2,994)
|
|
$
56,125
|
|
$
53,158
|
4.
INVENTORIES
Inventories
include material, direct labor and related manufacturing overhead, and are
stated at the lower of cost (determined on a first-in, first-out basis) or
net
realizable value. Based upon a consideration of quantities on hand, actual
and
projected sales volume, slow-moving and obsolete inventory is written down
to
its net realizable value.
The
components of “Inventories” in the Consolidated Balance Sheets are as follows
(in thousands):
|
June
30,
2007
|
|
December
30,
2006
|
|
|
|
|
Raw
materials
|
$
3,261
|
|
$
3,434
|
Work
in process
|
7,360
|
|
7,102
|
Finished
goods
|
41,689
|
|
35,514
|
|
$
52,310
|
|
$
46,050
|
In
the
second quarter of fiscal 2007, the Company recorded charges of $2.7 million
related to changes to product plans for the Vector TX52 CtP product family.
Charges included a $1.1 million write-down of excess and obsolete equipment
and
parts inventory to net realizable value, warranty-related charges of $0.8
million (Note 9) and accrued liabilities of $0.8 million associated with non
cancelable purchase order obligations. In addition, during the second quarter
of
2007, the Company recorded $0.8 million of charges related to the write-off
of
service parts in the U.S. These charges are reflected in Cost of revenue in
the
accompanying Consolidated Statements of Income.
During
the six months ended June 30, 2007, the Company disposed of $0.9 million of
excess and obsolete inventories. The inventories disposed were primarily
comprised of machine components and repair parts relating to technology that
is
no longer manufactured, distributed, or serviced by the Company, and
had a net realizable value of $0 as of December 30, 2006.
5.
PROPERTY, PLANT AND EQUIPMENT, NET
The
components of “Property, plant and equipment, net”, in the Consolidated Balance
Sheets are as follows (in
thousands):
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June
30,
2007
(Unaudited)
|
June
30,
2007
|
|
December
30,
2006
|
|
|
|
|
Land
and improvements
|
$ 2,286
|
|
$
2,286
|
Buildings
and leasehold improvements
|
29,474
|
|
29,428
|
Production
and other equipment
|
57,366
|
|
56,462
|
Office
furniture and equipment
|
7,476
|
|
7,263
|
Construction
in process
|
2,855
|
|
1,886
|
Total
property, plant and equipment, at cost
|
99,457
|
|
97,325
|
Accumulated
depreciation
|
(58,630)
|
|
(55,131)
|
|
$
40,827
|
|
$
42,194
|
Construction
in process is generally related to production equipment and information
technology systems not yet placed into service. The amount reported at June
30,
2007 includes $2.1 million related to a new service management system, which
is
in the implementation phase. The Company is capitalizing all applicable costs
in
accordance with AICPA Statement of Position No. 98-1, Accounting
for Costs of Computer Software Developed or Obtained for Internal
Use,
and
estimates that the total cost of implementation will approximate $2.4 million.
The Company expects to fully implement its new service management system
in fiscal 2008.
The
Company recorded depreciation expense of $1.8 million in the second quarter
of
fiscal 2007 and fiscal 2006 and $3.5 million in the first six months of fiscal
2007 and fiscal 2006. Under the Company’s financing arrangements (see Note 7),
all property, plant and equipment is pledged as security.
6.
INTANGIBLE ASSETS AND GOODWILL
Intangible
assets consist of patents, intellectual property, license agreements, loan
origination fees and certain identifiable intangible assets resulting from
business combinations, including trade names, customer relationships,
non-compete covenants and software licenses.
The
Company commences amortization of intangible assets at the time the respective
asset has been placed into service. At June 30, 2007 and December 30, 2006,
the
Company had recorded $0.6 million and $0.7 million, respectively, of costs
related to patents and intellectual property not yet in service.
The
components of the Company’s intangible assets are as follows (in
thousands):
|
June
30, 2007
|
|
December
30, 2006
|
|
Cost
|
Accumulated
amortization
|
|
Cost
|
Accumulated
amortization
|
|
|
|
|
|
|
Patents
and intellectual property
|
$
11,124
|
$
7,565
|
|
$
11,277
|
$
7,206
|
Trade
names
|
2,360
|
2,127
|
|
2,360
|
1,776
|
Customer
relationships
|
4,583
|
1,796
|
|
4,583
|
1,443
|
Software
licenses
|
450
|
400
|
|
450
|
325
|
License
agreements
|
750
|
177
|
|
750
|
169
|
Non-compete
covenants
|
100
|
58
|
|
100
|
48
|
Loan
origination fees
|
332
|
251
|
|
332
|
144
|
|
$
19,699
|
$
12,374
|
|
$
19,852
|
$
11,111
|
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June
30,
2007
(Unaudited)
The
Company recorded amortization expense for its identifiable intangible assets
of
$0.7 million and $0.8 million in the second quarters of fiscal 2007 and fiscal
2006, respectively, and $1.4 million and $1.5 million in the first six months
of
fiscal 2007 and fiscal 2006, respectively. Estimated future amortization expense
for the Company’s intangible assets in service at June 30, 2007, is as follows
(in thousands):
Remainder
of fiscal 2007
|
$
1,023
|
Fiscal
2008
|
$
1,383
|
Fiscal
2009
|
$
1,243
|
Fiscal
2010
|
$
1,069
|
Fiscal
2011
|
$
818
|
Fiscal
2012
|
$
500
|
Thereafter
|
$
697
|
The
carrying amount of goodwill recorded by the Company’s Presstek reporting unit
was $20.3 million at June 30, 2007. There have been no changes to this amount
since December 30, 2006, except for the impact of foreign currency exchange.
In
accordance with SFAS No. 142, Goodwill
and Other Intangible Assets,
goodwill is tested annually, as of the first business day of the third quarter,
for impairment. The Company’s impairment review is based on a fair value test.
The Company uses its judgment in assessing whether goodwill may have become
impaired between annual impairment tests. Indicators such as unexpected adverse
business conditions, economic factors, unanticipated technological change or
competitive activities, loss of key personnel and acts by governments and courts
may signal that goodwill has been impaired. Should the fair value of a reporting
unit, as determined by the Company at any measurement date, fall below the
carrying value of the respective reporting unit’s net assets, an impairment will
be recorded in the period. There can be no assurance that goodwill will not
become impaired in future periods.
7.
FINANCING ARRANGEMENTS
The
components of the Company’s outstanding borrowings at June 30, 2007 and December
30, 2006 are as follows (in thousands):
|
June
30,
2007
|
|
December
30,
2006
|
|
|
|
|
Term
loan
|
$
19,000
|
|
$
22,500
|
Line
of credit
|
21,000
|
|
15,000
|
Capital
lease obligation
|
53
|
|
72
|
|
40,053
|
|
37,572
|
Less
current portion
|
(28,038)
|
|
(22,037)
|
Long-term
debt
|
$
12,015
|
|
$
15,535
|
The
Company’s Senior Secured Credit Facilities (the “Facilities”) include a $35.0
million five-year secured term loan (the “Term Loan”) and a $45.0 million
five-year secured revolving line of credit (the “Revolver”). The Company granted
a security interest in all of its assets in favor of the lenders under the
Facilities. In addition, under the Facilities agreement, the Company is
prohibited from declaring or distributing dividends to
shareholders.
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June
30,
2007
(Unaudited)
The
Company has the option of selecting an interest rate for the Facilities equal
to
either: (a) the then applicable London Inter-Bank Offer Rate plus 1.25% to
4.0%
per annum, depending on certain results of the Company’s financial performance;
or (b) the Prime Rate, as defined in the Facilities agreement, plus up to 1.75%
per annum, depending on certain results of the Company’s financial
performance.
The
Facilities are available to the Company for working capital requirements,
capital expenditures, business acquisitions and general corporate
purposes.
At
June
30, 2007 and December 30, 2006, the Company had outstanding balances on the
Revolver of $21.0 million and $15.0 million, respectively, with interest rates
of 7.8% and 7.1%, respectively. At June 30, 2007, the Company also had $12.3
million of outstanding letters of credit, thereby reducing the amount available
under the Revolver to $11.7 million at that date.
The
Term
Loan requires quarterly principal payments of $1.75 million, with a final
settlement of all remaining principal and unpaid interest on November 4, 2009.
At June 30, 2007 and December 30, 2006, outstanding balances under the Term
Loan
were $19.0 million and $22.5 million, respectively, with interest rates of
7.9%
and 7.1%, respectively.
The
weighted average interest rate on the Company’s short-term borrowings was 7.8%
at June 30, 2007.
Under
the
terms of the Revolver and the Term Loan, the Company is required to meet various
financial covenants on a quarterly and annual basis, including maximum funded
debt to EBITDA (a non-U.S. GAAP measurement that the Company defines as earnings
before interest, taxes, depreciation, amortization, and restructuring and other
charges), minimum fixed charge coverage, minimum tangible
capital base and current ratio covenants. At June 30, 2007, the
Company was in compliance with all financial and non-financial
covenants.
On
November 23, 2005, the Company acquired equipment of $0.1 million qualifying
for
capital lease treatment. The equipment is reflected in Property, plant and
equipment, net and the current and long-term principal amounts of the lease
obligation are included in current and long-term debt and capital lease
obligations in the Company’s Consolidated Balance Sheets.
The
Company’s Term Loan, Revolver, and capital lease principal repayment commitments
are as follows (in thousands):
Remainder
of 2007
|
$
24,518
|
2008
|
$
7,035
|
2009
|
$
8,500
|
The
amounts above do not reflect interest payments on any outstanding principal
balances for the Revolver and Term Loan because the interest rates on these
financing arrangements are not fixed.
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June
30,
2007
(Unaudited)
8.
ACCRUED EXPENSES
The
components of the Company’s “Accrued expenses” in the Consolidated Balance
Sheets at June 30, 2007 and December 30, 2006 are as follows (in
thousands):
|
June
30,
2007
|
|
December
30,
2006
|
|
|
|
|
Accrued
payroll and employee benefits
|
$
4,976
|
|
$
5,642
|
Accrued
warranty
|
2,710
|
|
1,729
|
Accrued
integration costs
|
497
|
|
511
|
Accrued
restructuring
|
997
|
|
233
|
Accrued
royalties
|
344
|
|
276
|
Accrued
legal fees
|
483
|
|
284
|
Accrued
purchase commitments
|
814
|
|
-
|
Other
|
3,952
|
|
1,796
|
|
$
14,773
|
|
$
10,471
|
9.
ACCRUED WARRANTY
Product
warranty activity in the first six months of fiscal 2007 is as follows (in
thousands):
Balance
at December 30, 2006
|
$
1,729
|
Additional
accruals for warranty
|
1,995
|
Utilization
of accrual for warranty obligations
|
(1,014)
|
Balance
at June 30, 2007
|
$
2,710
|
As
further described in Note 4, in the second quarter of fiscal 2007 the Company
increased warranty accruals related to the Vector TX52 product line by $0.8
million. The Company’s warranty obligations are affected by product failure
rates and repair or replacement costs incurred in supporting a product failure.
Should actual product repair or replacement costs differ from the Company’s
estimates, increases or decreases to its warranty accruals would be required.
10.
DEFERRED REVENUE
The
components of deferred revenue are as follows (in thousands):
|
June
30,
2007
|
|
December
30,
2006
|
|
|
|
|
Deferred
service revenue
|
$
6,521
|
|
$
7,505
|
Deferred
product revenue
|
374
|
|
396
|
|
$
6,895
|
|
$
7,901
|
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June
30,
2007
(Unaudited)
11.
ACCRUED INTEGRATION COSTS
In
2005
and 2004, the Company recorded integration cost accruals related to its 2004
ABDick business acquisition. The activity related to these integration cost
accruals for the first six months of fiscal 2007 is as follows (in
thousands):
|
Balance
December
30,
2006
|
Utilization
|
Currency
translation
|
Recoveries
|
Balance
June
30,
2007
|
|
|
|
|
|
|
Severance
and fringe benefits
|
$
487
|
$
--
|
$
6
|
$
--
|
$
493
|
Lease
termination and other costs
|
24
|
(9)
|
--
|
(11)
|
4
|
|
$
511
|
$
(9)
|
$
6
|
$
(11)
|
$
497
|
In
the
third and fourth quarter of fiscal 2006, the Company terminated 25 and 22,
respectively, of its ABDick service personnel in North America. As part of
the
allocation of the ABDick purchase price, the Company had previously accrued
certain severance costs related to headcount reductions. The accrual will be
utilized as payments are made to these terminated employees. The Company
anticipates that payments for these actions, as well as the remaining
initiatives related to the business acquisition, will be completed in fiscal
2007.
12.
RESTRUCTURING AND OTHER CHARGES
In
the
first six months of fiscal 2007, the Company recognized $1.1 million in
restructuring and other charges related to severance and separation costs under
employment contracts of former executives and restructuring activities in our
Canadian and European operations. As of December 30, 2006, the restructuring
accrual of $0.2 million related to severance programs involving 10 manufacturing
and administrative positions at the Presstek segment.
The
activity for the first six months of fiscal 2007 related to the Company’s
restructuring accruals is as follows (in thousands):
|
Balance
December
30,
2006
|
Charged
to expense
|
Utilization
|
Currency
translation
|
Recoveries
|
Balance
June
30,
2007
|
|
|
|
|
|
|
|
Severance
and fringe benefits
|
$
233
|
$
1,128
|
$
(350)
|
$
(3)
|
$
(11)
|
$997
|
The
Company anticipates that payments for these actions will be completed in fiscal
2007.
13.
STOCK-BASED COMPENSATION
The
Company has equity incentive plans that are administered by the Compensation
and
Stock Plan Committee of the Board of Directors (the “Committee”). The Committee
oversees and approves which employees receive grants, the number of shares
or
options granted and the exercise prices and other terms of the
awards.
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June
30,
2007
(Unaudited)
The
2003
Stock Option and Incentive Plan (the “2003 Plan”) provides for the award of
stock options, stock issuances and other equity interests in the Company to
employees, officers, directors (including those directors who are not an
employee or officer of the Company, such directors being referred to as
Non-Employee Directors), consultants and advisors of the Company and its
subsidiaries. The 2003 Plan provides for an automatic annual grant of 7,500
stock options to all active Non-Employee Directors and an option to purchase
25,000 shares is granted to newly elected non-employee directors. Additional
grants may be awarded at the discretion of the Board of Directors or Committee,
and on April 7, 2005, effective for fiscal 2005 forward, the Company’s Board of
Directors approved an additional annual grant of 7,500 options to re-elected
non-employee directors. A total of 2,000,000 shares of common stock, subject
to
anti-dilution adjustments, have been reserved under the 2003 Plan. For the
six
months ended June 30, 2007, 503,333 options were issued under the 2003 Plan,
of
which 20,000 were issued in the second quarter of 2007. There were no options
issued under the 2003 Plan for the six months ended July 1, 2006.
The
Company’s Employee Stock Purchase Plan (“ESPP”) is designed to provide eligible
employees of the Company and its participating U.S. subsidiaries an opportunity
to purchase common stock of the Company through accumulated payroll deductions.
The purchase price of the stock is equal to 85% of the fair market value of
a
share of common stock on the first day or last day of each three-month offering
period, whichever is lower. All employees of the Company or participating
subsidiaries who customarily work at least 20 hours per week and do not own
five
percent or more of the Company’s common stock are eligible to participate in the
ESPP. A total of 950,000 shares of the Company’s common stock, subject to
adjustment, have been reserved for issuance under this plan. The Company issued
32,951 shares of common stock under its ESPP for the six months ended June
30,
2007, of which 14,964 were issued in the second quarter of 2007. The Company
issued 20,411 shares of common stock under its ESPP for the six months ended
July 1, 2006, of which 10,243 were issued in the second quarter of
2006.
Effective
January 1, 2006, the Company adopted the fair value recognition provisions
of
SFAS No. 123R, Share-Based
Payment (“SFAS
123R”), using the modified prospective method, which requires measurement of
compensation cost at fair value on the date of grant and recognition of
compensation expense over the service period for awards expected to vest.
In
the
second quarter of fiscal 2007, the Company granted 300,000 shares of restricted
stock and 1,000,000 stock options to its President and Chief Executive Officer
(“CEO”) under a non-plan, non-qualified stock option agreement. The award of
restricted stock vested on May 10, 2007, the effective date of the CEO’s
employment agreement with the Company, but is subject to a one-year holding
period as defined in Rule 144 of the U.S. Securities and Exchange Commission
(“Rule 144”). The stock options granted under the stock option agreement provide
for vesting of 200,000 options on May 10, 2007, 200,000 options to vest over
the
period May 10, 2007 to January 1, 2008, and the remaining 600,000 options to
vest at a rate of 200,000 per annum over the period January 1, 2009 to January
1, 2011, subject to service conditions only.
Stock-based
compensation associated with stock option grants to all officers, directors,
and
employees is included as a component of “General and administrative expense” in
the Company’s Consolidated Statements of Income. Stock based compensation
expense for the three and six month periods ended June 30, 2007 and July
1, 2006
is as follows (in thousands):
|
Three
months ended
|
Six
months ended
|
Stock
option plan
|
June
30, 2007
|
July
1, 2006
|
June
30, 2007
|
July
1, 2006
|
|
|
|
|
|
2003
Plan
|
$
350
|
$
--
|
$ 641
|
$
--
|
ESPP
|
28
|
30
|
44
|
61
|
Restricted
Stock
|
613
|
--
|
613
|
--
|
Non-plan
non-qualified
|
1,500
|
--
|
1,500
|
--
|
Total
|
$
2,491
|
$ 30
|
$
2,798
|
$
61
|
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June
30,
2007
(Unaudited)
Valuation
Assumptions
2003
Plan Options
The
fair
value of the options to purchase shares of common stock granted in the second
quarter and first six months of fiscal 2007 under the 2003 Plan was estimated
on
the respective grant dates using the Black-Scholes valuation model with the
following assumptions:
|
Three
months ended
|
Six
months ended
|
|
June
30, 2007
|
June
30, 2007
|
|
|
|
Risk-free
interest rate
|
4.5%
|
4.5%
|
Volatility
|
54.0%
|
54.0%
|
Expected
life (in years)
|
5.6
|
5.6
|
Dividend
yield
|
--
|
--
|
Based
on
the above assumptions, the weighted average fair value of each option to
purchase a share of the Company’s common stock granted in the second quarter and
first six months of fiscal 2007 under the 2003 Plan was $3.94 and $3.33,
respectively.
ESPP
Rights
The
fair
value of the rights to purchase shares of common stock under the Company’s ESPP
was estimated on the commencement date of the offering period using the
Black-Scholes valuation model with the following assumptions:
|
Three
months ended
|
Six
months ended
|
|
June
30, 2007
|
July
1, 2006
|
June
30, 2007
|
July
1, 2006
|
|
|
|
|
|
Risk-free
interest rate
|
4.8%
|
5.0%
|
4.8%
|
4.7%
|
Volatility
|
45.1%
|
53.3%
|
46.6%
|
53.2%
|
Expected
life (in years)
|
.25
|
.25
|
.25
|
.25
|
Dividend
yield
|
--
|
--
|
--
|
--
|
Based
on
the above assumptions, the fair values of each stock purchase right under the
Company’s ESPP for the second quarter and first six months of fiscal 2007 was
$1.88 and $1.51, respectively.
Restricted
Stock Award
The
fair
value of the 300,000 restricted shares of common stock was derived by obtaining
the market value of the stock on the award date and applying a discount to
that
value due to the sale restrictions imposed by Rule 144. The market value was
calculated using the average of the high and low trading prices on the award
date multiplied by the number of shares. A discount rate of 17.2% was estimated
using a Black-Scholes put option model with the following
assumptions:
|
Three
months ended
|
Six
months ended
|
|
|
June
30, 2007
|
June
30, 2007
|
|
|
|
|
|
Risk-free
interest rate
|
4.9%
|
4.9%
|
|
Volatility
|
50.0%
|
50.0%
|
|
Expected
life (in years)
|
1.0
|
1.0
|
|
Dividend
yield
|
--
|
--
|
|
Non-Plan
Stock Options
The
fair
value of the options to purchase shares of common stock under the non-plan,
non-qualified stock option agreement with the Company’s President and CEO
granted in the second quarter of fiscal 2007 was estimated on the grant date
using the Black-Scholes valuation model with the following
assumptions:
|
Three
months ended
|
Six
months ended
|
|
June
30, 2007
|
June
30, 2007
|
|
|
|
Risk-free
interest rate
|
4.3%
|
4.3%
|
Volatility
|
48.0%
|
48.0%
|
Expected
life (in years)
|
4.1
|
4.1
|
Dividend
yield
|
--
|
--
|
Based
on
the above assumptions, the weighted average fair value of each option to
purchase a share of the Company’s common stock under the non-plan, non-qualified
stock option agreement with the Company’s President and CEO granted in the
second quarter of fiscal 2007 was $2.58.
Expected
volatilities are based on historical volatilities of Presstek’s common stock.
The expected life represents an estimate of the period of time that options
granted are expected to be outstanding giving consideration to vesting
schedules, contractual life, historical exercise and cancellation rates, and
in
the case of the ESPP, the purchase period. The risk-free rate is based on the
U.S. Government T-Bill rate for the period corresponding to the expected life
of
the options or ESPP purchase period.
Stock
Option Activity
Stock
option activity for the six months ended June 30, 2007 is summarized as
follows:
|
Shares
|
|
Weighted
average
exercise
price
|
|
Weighted
average remaining contractual life (years)
|
|
Aggregate
intrinsic value
|
|
|
|
|
|
|
|
|
Outstanding
at December 30, 2006
|
2,956,350
|
|
$
9.01
|
|
|
|
|
Granted
|
1,503,333
|
|
$
6.14
|
|
|
|
|
Exercised
|
(529,825)
|
|
$
5.23
|
|
|
|
|
Canceled/expired
|
(379,900)
|
|
$
8.17
|
|
|
|
|
Outstanding
at June 30, 2007
|
3,549,958
|
|
$
8.44
|
|
6.22
|
|
$3.7
million
|
|
|
|
|
|
|
|
|
Exercisable
at June 30, 2007
|
2,144,958
|
|
$
9.75
|
|
5.00
|
|
$1.3
million
|
During
the three and six months ended June 30, 2007, the total intrinsic value of
stock
options exercised was $0.8 million. There were no options exercised during
the
first quarter of fiscal 2007. The total intrinsic value of stock options
exercised during the three and six months ended July 1, 2006 was $0.2 million
and $1.0 million, respectively.
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June
30,
2007
(Unaudited)
14.
INTEREST AND OTHER INCOME (EXPENSE)
The
components of “Interest and other income (expense), net”, in the Company’s
Consolidated Statements of Income are as follows (in thousands):
|
Three
months ended
|
Six
months ended
|
|
June
30,
2007
|
|
July
1,
2006
|
June
30,
2007
|
|
July
1,
2006
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
33
|
|
$
16
|
$
41
|
|
$
43
|
|
Interest
expense
|
(875)
|
|
(553)
|
(1,636)
|
|
(1,030)
|
|
Other
income (expense), net
|
(151)
|
|
(79)
|
(295)
|
|
(181)
|
|
|
$
(993)
|
|
$
(616)
|
$
(1,890)
|
|
$
(1,168)
|
|
The
amounts reported as “Other income (expense), net”, include losses on foreign
currency transactions for each of the three months ended June 30, 2007 and
July
1, 2006 of $0.1 million and $0.2 million for each of the six months ended June
30, 2007 and July 1, 2006.
15.
INCOME TAXES
The
Company provides for income taxes at the end of each interim period based on
the
estimated effective tax rate for the full fiscal year. Cumulative adjustments
to
the tax provision are recorded in the interim period in which a change in the
estimated annual effective rate is determined.
The
Company’s effective tax benefit rate was 11.4% and 14.2% for the three and six
months ended June 30, 2007, respectively and the Company’s effective tax expense
rate was 13.7% and 15.4% for the three and six months ended July 1, 2006,
respectively. The Company’s effective tax rate for the first six months of 2007
differs from the U.S. federal statutory rate of 35% primarily due to certain
executive officer compensation, which is non-deductible for federal and state
tax purposes, as well as U.S. taxes on deemed foreign subsidiary dividends.
During
the fourth quarter of 2006, the Company reversed its deferred tax asset
valuation allowance. This valuation allowance previously had the effect of
reducing the Company’s tax rate for 2006 due to the tax rate benefits associated
with utilization of net operating loss carryforwards.
Effective
December 31, 2006, the Company adopted FASB Interpretation No. 48,
Accounting
for Uncertainty in Income Taxes
(“FIN
48”). FIN 48 prescribes a more-likely-than-not threshold for financial statement
recognition and measurement of a tax position taken or expected to be taken
in a
tax return. This interpretation also provides guidance on derecognition of
income tax assets and liabilities, classification of current and deferred income
tax assets and liabilities, accounting for interest and penalties associated
with tax positions, accounting for income taxes in interim periods and income
tax disclosures. There was no cumulative impact of adopting FIN 48 charged
or
credited to the opening balance of retained earnings.
As
of
June 30, 2007, Presstek is subject to examination in the U.S. federal tax
jurisdiction for the 1995-2006 tax years. The Company is also subject to
examination in various state and foreign jurisdictions for the 2004-2006 tax
years. While
we
believe we have adequately provided for all tax positions, amounts asserted
by
taxing authorities could be greater than our accrued position. Accordingly,
additional provisions on federal and foreign tax-related matters could be
recorded in the future as revised estimates are made or the underlying matters
are settled or otherwise resolved.
As
of
December 30, 2006 the total amount of unrecognized tax benefits was $1.8 million
of which $1.1 million would affect the effective tax rate if recognized. The
amount of unrecognized tax benefits increased by $0.2 million for the six months
ended June 30, 2007. The unrecognized tax benefits are comprised of the
aggregate tax effect of differences between tax return positions and the
benefits recognized in our financial statements. Presstek recognizes
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June
30,
2007
(Unaudited)
interest
and penalties on tax deficiencies as a component of tax expense. As of December
30, 2006 and June 30, 2007, there was no accrued interest or penalties
associated with unrecognized tax benefits.
16.
COMPREHENSIVE INCOME (LOSS)
Comprehensive
income (loss) is comprised of net income (loss), and all changes in equity
of
the Company during the
period from non-owner sources. These changes in equity are recorded as
adjustments to Accumulated other comprehensive income in the Company’s
Consolidated Balance Sheets. The primary component of Accumulated other
comprehensive income is unrealized gains or losses on foreign currency
translation. The components of comprehensive income (loss) are as follows (in
thousands):
|
Three
months ended
|
|
Six
months ended
|
|
June
30,
2007
|
|
July
1,
2006
|
|
June
30,
2007
|
|
July
1,
2006
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
$
(4,830)
|
|
$
2,746
|
|
$
(5,808)
|
|
$
5,470
|
|
Changes
in accumulated other comprehensive income:
|
|
|
|
|
|
|
|
|
Unrealized
foreign currency translation gains
|
432
|
|
279
|
|
271
|
|
318
|
|
Comprehensive
income (loss)
|
$
(4,398)
|
|
$
3,025
|
|
$
(5,537)
|
|
$
5,788
|
|
17.
SEGMENT AND GEOGRAPHIC INFORMATION
The
Company is a market-focused high-technology company that designs, manufactures
and distributes proprietary and non-proprietary solutions to the graphic arts
industries, primarily serving short-run, full-color customers worldwide. The
Company’s operations are currently organized into two segments: (i) Presstek and
(ii) Lasertel. Segment operating results are based on the current organizational
structure reviewed by the Company’s management to evaluate the results of each
business. A description of the types of products and services provided by each
segment follows.
· |
Presstek
is
primarily engaged in the development, manufacture, sale and servicing
of
our patented digital imaging systems and patented printing plate
technologies as well as traditional, analog systems and related equipment
and supplies for the graphic arts and printing industries, primarily
the
short-run, full-color market
segment.
|
· |
Lasertel
manufactures and develops high-powered laser diodes and related laser
products for Presstek and for sale to external
customers.
|
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June
30,
2007
(Unaudited)
Selected
operating results for each segment are as follows (in thousands):
|
Three
months ended
|
|
Six
months ended
|
|
June
30, 2007
|
|
July
1,
2006
|
|
June
30, 2007
|
|
July
1,
2006
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
Presstek
|
$
66,566
|
|
$
68,996
|
|
$
130,029
|
|
$
135,132
|
Lasertel
|
3,337
|
|
2,657
|
|
6,359
|
|
5,259
|
Total
revenue, including intersegment
|
69,903
|
|
71,653
|
|
136,388
|
|
140,391
|
Intersegment
revenue
|
(1,152)
|
|
(771)
|
|
(2,485)
|
|
(2,182)
|
|
$
68,751
|
|
$
70,882
|
|
$
133,903
|
|
$
138,209
|
|
|
|
|
|
|
|
|
Revenue
from external customers
|
|
|
|
|
|
|
|
Presstek
|
$
66,566
|
|
$
68,996
|
|
$
130,029
|
|
$
135,132
|
Lasertel
|
2,185
|
|
1,886
|
|
3,874
|
|
3,077
|
|
$
68,751
|
|
$
70,882
|
|
$133,903
|
|
$
138,209
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
|
|
|
|
|
|
|
Presstek
|
$
(4,820)
|
|
$
3,908
|
|
$
(4,991)
|
|
$
8,749
|
Lasertel
|
333
|
|
(302)
|
|
218
|
|
(1,011)
|
|
$
(4,487)
|
|
$
3,606
|
|
$
(4,773)
|
|
$
7,738
|
Intersegment
revenues and costs are eliminated from each segment prior to review of segment
results by the Company’s management. Accordingly, the amounts of intersegment
revenues and expenses allocable to each individual segment have been excluded
from the table above, except where otherwise indicated.
Asset
information for the Company’s segments as of June 30, 2007 and December 30, 2006
is as follows (in thousands):
|
June
30,
2007
|
|
December
30,
2006
|
|
|
|
|
Presstek
|
$
187,296
|
|
$
184,510
|
Lasertel
|
14,533
|
|
13,504
|
|
$
201,829
|
|
$
198,014
|
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June
30,
2007
(Unaudited)
The
Company’s classification of revenue by geographic area is determined by the
location of the Company’s customer. The following table summarizes revenue
information by geographic area (in thousands):
|
Three
months ended
|
|
Six
months ended
|
|
June
30,
2007
|
|
July
1,
2006
|
|
June
30,
2007
|
|
July
1,
2006
|
|
|
|
|
|
|
|
|
United
States
|
$
41,826
|
|
$
44,787
|
|
$
78,738
|
|
$
89,475
|
United
Kingdom
|
8,845
|
|
10,053
|
|
17,054
|
|
16,544
|
Canada
|
3,912
|
|
4,271
|
|
7,562
|
|
7,804
|
Germany
|
1,882
|
|
2,437
|
|
3,659
|
|
5,345
|
Japan
|
1,577
|
|
1,773
|
|
3,608
|
|
3,514
|
All
other
|
10,709
|
|
7,561
|
|
23,282
|
|
15,527
|
|
$
68,751
|
|
$
70,882
|
|
$133,903
|
|
$
138,209
|
The
Company’s long-lived assets by geographic area are as follows (in
thousands):
|
June
30,
2007
|
|
December
30,
2006
|
|
|
|
|
United
States
|
$
77,157
|
|
$
78,077
|
United
Kingdom
|
739
|
|
894
|
Canada
|
278
|
|
303
|
|
$
78,174
|
|
$
79,274
|
18.
MAJOR CUSTOMERS
The
Company did not have any customer that accounted for more than 10% of revenues
in the second quarter and first six months of fiscal 2007 or fiscal 2006, or
any
customer that accounted for more than 10% of outstanding accounts receivable
at
June 30, 2007 or December 30, 2006.
19.
RELATED PARTIES
The
Company engages the services of Amster, Rothstein & Ebenstein, a law firm of
which a member of the Company’s Board of Directors is a partner. Expenses
incurred for services from this law firm were $0.2 million and $0.5 million
for
the second quarter and first six months of fiscal 2007, respectively, and $1.1
million and $1.3 million for the second quarter and first six months of fiscal
2006, respectively.
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June
30,
2007
(Unaudited)
20.
COMMITMENTS AND CONTINGENCIES
Commitments
& Contingencies
On
October 30, 2006, a chemical was released from a mixing tank into a holding
pool
at our manufacturing plant in South Hadley, Massachusetts, which caused the
Company to temporarily cease digital and analog aluminum plate manufacturing
operations at this location. The chemical release was contained on-site, there
were no reported injuries, neighboring properties were not damaged and there
were no requirements for soil or groundwater remediation. Digital plate
manufacturing was restarted on November 6, 2006. On December 28, 2006, the
Audit
Committee of the Board of Directors ratified a plan to discontinue newspaper
application analog plate production at the facility. In connection with the
chemical release, the Company continues to work closely with federal, state,
and
local agencies regulating public health and the environment to complete a full
assessment of the cause and impact of this incident and bring the matter to
closure. In April and May of 2007, the Company executed consent orders and
settlement arrangements with the U.S. Department of Labor - Occupational Safety
and Health Administration (OSHA) and the Massachusetts Department of
Environmental Protection, respectively. Under these arrangements, the Company
agrees to corrective action to ensure compliance with all applicable
environmental regulations in the future. Expenses associated with and amounts
accrued for this incident as of June 30, 2007 are reflected in the financial
results of discontinued operations (Note 2). It is possible that costs in excess
of amounts accrued may be incurred. At this time, the Company has not
ascertained the future liability, if any, associated with a final resolution
of
this matter.
The
Company has change of control agreements with certain of its senior management
employees that provide them with benefits should their employment with the
Company be terminated other than for cause, as a result of disability or death,
or if they resign for good reason, as defined in these agreements, within a
certain period of time from the date of any change of control of the
Company.
From
time
to time the Company has engaged in sales of equipment that is leased by or
intended to be leased by a third party purchaser to another party. In certain
situations, the Company may retain recourse obligations to a financing
institution involved in providing financing to the ultimate lessee in the event
the lessee of the equipment defaults on its lease obligations. In certain such
instances, the Company may refurbish and remarket the equipment on behalf of
the
financing company, should the ultimate lessee default on payment of the lease.
In certain circumstances, should the resale price of such equipment fall below
certain predetermined levels, the Company would,
under these arrangements, reimburse the financing company for any such shortfall
in sale price (a “shortfall payment”). Generally, the Company’s liability for
these recourse agreements is limited to 9.9% or less of the amount outstanding.
The maximum amount for which the Company may be liable to the financial
institution for the shortfall payment was approximately $1.1 million at June
30,
2007.
Litigation
On
October 26, 2006, the Company was served with a complaint naming the Company,
together with certain of its former executive officers, as defendants in a
purported securities class action suit filed in the United States District
Court
for the District of New Hampshire. The suit claims to be brought on behalf
of
purchasers of Presstek’s common stock during the period from July 27, 2006
through September 29, 2006. The complaint alleges, among other things, that
the
Company and the other defendants violated Sections 10(b) and 20(a) of the
Exchange Act and Rule 10b-5 promulgated thereunder. The Company believes the
allegations are without merit and intends to vigorously defend against
them.
PRESSTEK,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June
30,
2007
(Unaudited)
In
March
2005, Presstek filed an action against CREO, Inc., in the United States District
Court for the District of New Hampshire for patent infringement. In this action,
Presstek alleges that CREO has distributed a product that violates a Presstek
US
Patent. Presstek seeks an order from the court that CREO refrain from offering
the infringing product for sale, from using the infringing material or
introducing it for the named purposes, or from possessing such infringing
material, and for the payment of damages associated with the infringement.
On
May 2, 2007, the court denied CREO’s motion to dismiss. Additional evidentiary
and procedural motions are anticipated through the third quarter of
2007.
In
September 2003, Presstek filed an action against Fuji Photo Film Corporation,
Ltd., in the District Court of Mannheim, Germany for patent infringement. In
this action, Presstek alleges that Fuji has manufactured and distributed a
product that violates Presstek European Patent 0 644 047 registered under number
DE 694 17 129 with the German Patent and Trademark Office. Presstek seeks an
order from the court that Fuji refrain from offering the infringing product
for
sale, from using the infringing material or introducing it for the named
purposes, and from possessing such infringing material. A trial was held in
November 2004 and March 2005, and Presstek awaits a final determination from
the
Courts.
In
July
2007, a wrongful termination case brought against the Company in a court in
Belgium by a former employee resulted in a preliminary judgment against the
Company of approximately $105,000. Additional proceedings to be conducted in
the
third quarter of 2007 may increase the judgment by a maximum of an additional
$60,000. The Company is contesting the judgment on the grounds that Belgian
law
was improperly imposed.
On
July
26, 2007, the Supreme Court of the State of New York dismissed the previously
reported lawsuit brought against the Company by MHR Capital Partners in
2005. The original suit alleged breach of contract and other claims
arising from the AB Dick acquisition. The Court granted the Company's
motion for summary judgment, dismissed the case against the Company, and
assessed "costs and disbursements" against the Plaintiffs and in favor of
the Company. The costs and disbursement will be the subject
of further proceedings. As of this filing, no appeal has been noticed
by the Plaintiffs.
On
August
6, 2007, an Arbitrator from the International Centre for Dispute Resolution
issued a partial award against the Company and in favor of Reda National Company
(“Reda”), a former Presstek distributor operating in the Middle East. In the
partial award the Arbitrator found that the Company had breached its agreement
with Reda and found the Company liable to Reda for arbitration costs, attorney’s
fees, and incidental expenses incurred by Reda in connection with the
arbitration. These costs are not presently known to the Company, however, these
costs are not expected to have a material adverse effect on the results of
operations or financial condition of the Company. The Arbitrator also ordered
that a further hearing to determine additional damages, if any, would be
scheduled.
Presstek
is a party to other litigation that it considers routine and incidental to
its
business; however, it does not expect the results of any of these actions to
have a material adverse effect on its business, results of operations, or
financial condition.
Item
2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
“Safe
Harbor” Statement under the Private Securities Litigation Reform Act of
1995:
Statements
other than those of historical fact contained in this Quarterly Report on Form
10-Q constitute “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995, including, without limitation,
statements regarding the following:
|
•
|
|
our
expectations of our financial and operating performance in 2007 and
beyond;
|
|
|
|
•
|
|
the
adequacy of internal cash and working capital for our
operations;
|
|
|
|
•
|
|
manufacturing
constraints and difficulties;
|
|
|
|
•
|
|
the
introduction of competitive products into the
marketplace;
|
|
|
|
•
|
|
management’s
plans and goals for our subsidiaries;
|
|
|
|
•
|
|
the
ability of the Company and its divisions to generate positive cash
flows
in the near-term, or to otherwise be profitable;
|
|
|
|
•
|
|
our
ability to produce commercially competitive products;
|
|
|
|
•
|
|
the
strength of our various strategic partnerships, both on manufacturing
and
distribution;
|
|
|
|
•
|
|
our
ability to secure other strategic alliances and
relationships;
|
|
|
|
•
|
|
our
expectations regarding the Company’s strategy for growth, including
statements regarding the Company’s expectations for continued product mix
improvement;
|
|
|
|
•
|
|
our
expectations regarding the balance, independence and control of our
business;
|
|
|
|
•
|
|
our
expectations and plans regarding market penetration, including the
strength and scope of our distribution channels and our expectations
regarding sales of Direct Imaging presses or computer-to-plate
devices;
|
|
|
|
•
|
|
the
commercialization and marketing of our technology;
|
|
|
|
•
|
|
our
expectations regarding performance of existing, planned and recently
introduced products;
|
|
|
|
•
|
|
the
adequacy of our intellectual property protections and our ability
to
protect and enforce our intellectual property rights;
and
|
|
|
|
•
|
|
the
expected effect of adopting recently issued accounting standards,
among
others.
|
Such
forward-looking statements involve a number of known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
risks, uncertainties and other factors that could cause or contribute to such
differences include:
|
•
|
|
market
acceptance of and demand for our products and resulting
revenues;
|
|
|
|
•
|
|
our
ability to meet our stated financial objectives;
|
|
|
|
•
|
|
our
dependency on our strategic partners, both on manufacturing and
distribution;
|
|
|
|
•
|
|
the
introduction of competitive products into the
marketplace;
|
|
|
|
•
|
|
the
availability and quality of Lasertel’s laser diodes;
|
|
|
|
•
|
|
the
performance and market acceptance of our recently-introduced products,
and
our ability to invest in new product development;
|
|
|
|
•
|
|
manufacturing
constraints or difficulties (as well as manufacturing difficulties
experienced by our sub-manufacturing partners and their capacity
constraints); and
|
|
|
|
•
|
|
the
impact of general market factors in the print industry generally
and the
economy as a whole, including the potential effects of
inflation.
|
The
words
“looking forward,” “looking ahead,” “believe(s),” “should,” “plan,” “expect(s),”
“project(s),” “anticipate(s),” “may,” “likely,” “potential,” “opportunity” and
similar expressions identify forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date of this report and readers are advised to consider such
forward-looking statements in light of the risks set forth herein. Presstek
undertakes no obligation to update any forward-looking statements contained
in
this Quarterly Report on Form 10-Q, except as required by law.
The
following discussion of our financial condition and results of operations should
be read in conjunction with our consolidated financial statements and related
notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This
discussion contains forward-looking statements, which involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements for many reasons, including the risks
described in “Part I, Item 1A, Risk Factors” of our Annual Report on Form 10-K
for the year ended December 30, 2006, as filed with the SEC on April 25,
2007.
Overview
of the Company
The
Company is a provider of high-technology, digital-based printing solutions
to
the commercial print segment of the graphics communications industry. The
Company designs, manufactures and distributes proprietary and non-proprietary
solutions aimed at serving the needs of a wide range of print service providers
worldwide. Our proprietary digital imaging and advanced technology consumables
offer superior business solutions for commercial printing focusing on the
growing need for short-run, high quality color applications. We are helping
to
lead the industry’s transformation from analog print production methods to
digital imaging technology. We are a leader in the development of advanced
printing systems using digital imaging equipment, workflow and consumables-based
solutions that economically benefit the user through streamlined operations
and
chemistry-free, environmentally responsible solutions. We are also a leading
sales and service channel across a broadly served market in the small to
mid-sized commercial, quick and in-plant printing segments. Our product
offerings cover a wide range of solutions to over 20,000 customers
worldwide.
Presstek’s
business model is a capital equipment and consumables (razor and blade) model.
In this model, approximately two-thirds of our revenue is recurring revenue.
Our
model is designed so that each placement of either a Direct Imaging Press or
a
Computer to Plate system generally results in recurring aftermarket revenue
for
consumables and service.
Through
our various operations, we:
· |
provide
advanced digital print solutions through the development and manufacture
of digital laser imaging equipment and advanced technology chemistry-free
printing plates, which we call consumables, for commercial and in-plant
print providers targeting the growing market for high quality, fast
turnaround short-run color
printing;
|
· |
are
a leading sales and services company delivering Presstek digital
solutions
and solutions from other manufacturing partners through our direct
sales
and service force and through distribution partners
worldwide;
|
· |
manufacture
semiconductor solid state laser diodes for Presstek imaging applications
and for use in external applications;
and
|
· |
manufacture
and distribute printing plates for conventional print
applications.
|
We
have
developed a proprietary system by which digital images are transferred onto
printing plates for Direct Imaging on-press applications (“DI”). Our advanced DI
technology is integrated into a Direct Imaging Press to produce a waterless,
easy to use, high quality printing press that is fully automated and provides
our users with competitive advantages over alternative print technologies.
We
believe that our process results in a DI press which, in combination with our
proprietary printing plates and streamlined workflow, produces a superior print
solution. By combining advanced digital technology with the reliability and
economic advantages of offset printing, we believe our customers are better
able
to grow their businesses, generate higher profits and better serve the needs
of
their customers.
Similar
digital imaging technologies are used in our computer-to-plate (“CtP”) systems.
Our Presstek segment also designs and manufactures CtP systems that incorporate
our technology to image our chemistry-free printing plates. Our chemistry-free
digital imaging systems enable customers to produce high-quality, full color
lithographic printed materials more quickly and cost effectively than
conventional methods that employ more complicated workflows and toxic chemical
processing. This results in reduced printing cycle time and lowers the effective
cost of production for commercial printers. Our solutions make it more cost
effective for printers to meet the increasing demand for shorter print runs,
higher quality color and faster turn-around times.
We
have
executed a major transformation in the way we go to market. In the past, we
had
been reliant on OEM partners to deliver our business solutions to customers.
Today, more than 90% of our sales are through our own distribution channels.
To
a lesser extent, we supply OEM press manufacturers with imaging kits complete
with optical assemblies and software, and spare parts, which are integrated
into
the manufacturers’ presses.
In
addition to marketing, selling and servicing our proprietary digital products,
we also market, sell and service traditional, or analog products for the
commercial print market. This analog equipment is manufactured by third party
strategic partners and the analog consumables are manufactured by either us
or
our strategic partners. The addition of these non-proprietary products and
our
ability to directly sell and service them was made possible by the ABDick and
Precision acquisitions, which we completed in 2004.
Our
operations are currently organized into two segments: (i) Presstek and (ii)
Lasertel. Segment operating results are based on the current organizational
structure reviewed by our management to evaluate the results of each business.
A
description of the types of products and services provided by each business
segment follows.
· |
Presstek
is
primarily engaged in the development, manufacture, sale and servicing
of
our business solutions using patented digital imaging systems and
patented
printing plate technologies. We also provide traditional, analog
systems
and related equipment and supplies for the graphic arts and printing
industries.
|
· |
Lasertel
manufactures and develops high-powered laser diodes and related laser
products for Presstek and for sale to external
customers.
|
We
generate revenue through four main sources: (i) the sale of our equipment,
including DI presses and CtP devices, and to a lesser extent imaging kits
complete with optical assemblies and software, and spare parts, which are
incorporated by leading press manufacturers into direct imaging presses for
the
graphic arts industry; (ii) the sale of high-powered laser diodes for the
graphic arts, defense and industrial sectors; (iii) the sale of our proprietary
and non-proprietary consumables and supplies; and (iv) the servicing of offset
printing systems and analog and CtP systems and related equipment.
Our
business strategy is centered on maximizing the sale of consumable products,
such as printing plates, and therefore our business efforts focus on the sale
of
“consumable burning engines” such as our DI presses and CtP devices, as well as
the servicing of customers using our business solutions. Our strategy centers
on
increasing the number of our DI and CtP units (together, referred to as CBEs),
which increases the demand for our consumables.
To
complement our direct sales efforts, in certain territories, we maintain
relationships with key press manufacturers such as Ryobi Limited, Heidelberger
Druckmaschinen AG, or Heidelberg, and Koenig & Bower AG, or KBA, who market
printing presses and/or press solutions that use our proprietary consumables.
Another
method of growing the market for consumables is to develop consumables that
can
be imaged by non-Presstek devices. In addition to expanding our base of our
CBEs, an element of our focus is to reach beyond our proprietary systems and
penetrate the installed base of CtP devices in all market segments with our
chemistry-free and process-free offerings. The first step in executing this
strategy was the launch of our proprietary Aurora chemistry-free printing plate
designed to be used with CBEs manufactured by thermal CtP market leaders, such
as Screen and Kodak. We continue to work with other CtP manufacturers to qualify
our consumables on their systems. We believe this shift in strategy
fundamentally enhances our ability to expand and control our
business.
We
operate and report on a 52- or 53-week, fiscal year ending on the Saturday
closest to December 31. Accordingly, the consolidated financial statements
include the financial reports for the 13-week and 26-week periods ended June
30,
2007, which we refer to as the second quarter and first half of fiscal 2007
or
the six months ended June 30, 2007, and the 13-week and 26-week periods ended
July 1, 2006, which we refer to as the second quarter and first half of fiscal
2006 or the six months ended July 1, 2006.
We
intend
the discussion of our financial condition and results of operations that follows
to provide information that will assist in understanding our consolidated
financial statements, the changes in certain key items in those financial
statements from year to year, and the primary factors that caused those changes,
as well as how certain accounting principles, policies and estimates affect
our
consolidated financial statements.
The
discussion of results of operations at the consolidated level is presented
together with results of operations by business segment.
RESULTS
OF OPERATIONS
Results
of operations in dollars and as a percentage of revenue were as follows (in
thousands of dollars):
|
Three
months ended
|
Six
months ended
|
|
June
30, 2007
|
July
1, 2006
|
June
30, 2007
|
July
1, 2006
|
|
|
%
of
revenue
|
|
%
of
revenue
|
|
%
of
revenue
|
|
%
of
revenue
|
Revenue
|
|
|
|
|
|
|
|
|
Product
|
$
58,879
|
85.6
|
$
59,202
|
83.5
|
$
114,115
|
85.2
|
$
114,345
|
82.7
|
Service
and parts
|
9,872
|
14.4
|
11,680
|
16.5
|
19,788
|
14.8
|
23,864
|
17.3
|
Total
revenue
|
68,751
|
100.0
|
70,882
|
100.0
|
133,903
|
100.0
|
138,209
|
100.0
|
|
|
|
|
|
|
|
|
|
Cost
of revenue
|
|
|
|
|
|
|
|
|
Cost
of product
|
41,381
|
60.2
|
41,424
|
58.4
|
80,327
|
60.0
|
79,681
|
57.6
|
Cost
of service and parts
|
8,773
|
12.8
|
8,694
|
12.3
|
16,471
|
12.3
|
16,979
|
12.3
|
Total
cost of revenue
|
50,154
|
73.0
|
50,118
|
70.7
|
96,798
|
72.3
|
96,660
|
69.9
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
18,597
|
27.0
|
20,764
|
29.3
|
37,105
|
27.7
|
41,549
|
30.1
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Research
and development
|
1,621
|
2.4
|
1,680
|
2.4
|
3,255
|
2.4
|
3,225
|
2.4
|
Sales,
marketing and customer support
|
10,952
|
15.9
|
10,934
|
15.4
|
20,816
|
15.6
|
19,931
|
14.4
|
General
and administrative
|
9,003
|
13.1
|
3,791
|
5.3
|
15,257
|
11.4
|
9,126
|
6.6
|
Amortization
of intangible assets
|
715
|
1.0
|
753
|
1.1
|
1,422
|
1.1
|
1,529
|
1.1
|
Restructuring
and other charges
|
793
|
1.2
|
--
|
--
|
1,128
|
0.8
|
--
|
--
|
Total
operating expenses
|
23,084
|
33.6
|
17,158
|
24.2
|
41,878
|
31.3
|
33,811
|
24.5
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
(4,487)
|
(6.5)
|
3,606
|
5.1
|
(4,773)
|
(3.6)
|
7,738
|
5.6
|
|
|
|
|
|
|
|
|
|
Interest
and other expense, net
|
(993)
|
(1.4)
|
(616)
|
(0.9)
|
(1,890)
|
(1.4)
|
(1,168)
|
(0.9)
|
Income
(loss) before income taxes
|
(5,480)
|
(8.0)
|
2,990
|
4.2
|
(6,663)
|
(5.0)
|
6,570
|
4.8
|
Provision
(benefit) for income taxes
|
(626)
|
(0.9)
|
411
|
0.6
|
(943)
|
(0.7)
|
1,013
|
0.7
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
(4,854)
|
(7.1)
|
2,579
|
3.6
|
(5,720)
|
(4.3)
|
5,557
|
4.0
|
Income
(loss) from discontinued operations, net of tax
|
24
|
0.0
|
167
|
0.3
|
(88)
|
(0.0)
|
(87)
|
(0.0)
|
Net
income (loss)
|
$(4,830)
|
(7.0)
|
$
2,746
|
3.9
|
$(5,808)
|
(4.3)
|
$
5,470
|
4.0
|
Three
and six months ended June 30, 2007 compared to three and six months ended July
1, 2006
Revenue
Revenue
Consolidated
revenues were $68.8 million and $133.9 million in the second quarter and first
half of fiscal 2007, respectively, compared to $70.9 million and $138.2 million
in the comparable prior year periods. The decline in revenues was primarily
the
result of lower PEARL-based DI plates (QMDI) and analog consumables revenues,
as
well as lower analog contract service revenues in North America.
Presstek
segment equipment revenues of $26.0 million and $49.5 million in the second
quarter and first half of 2007, respectively, increased $0.6 million, or 2.2%,
and $1.6 million, or 3.3%, from the comparable prior year periods. Overall
DI
equipment revenues of $19.9 and $36.3 million in the second quarter and first
half of 2007, respectively, represented increases of $4.2 million, or 26.7%,
and
$8.8 million, or 32.1%, compared to the same periods in 2006. Strong marketplace
demand for the 52DI press, which was introduced in the third quarter of 2006,
continued with unit sales reaching 18 and 33 in the second quarter and first
half of 2007, respectively. Partially offsetting DI equipment revenue increases
were reduced sales of CtP and analog equipment. Revenues from CtP equipment
declined from $6.2 million and $13.2 million in the second quarter and first
half of 2006, respectively, to $4.7 million and $9.0 million in the comparable
2007 periods. The decline in CtP sales was due in part to continued sales and
marketing emphasis on higher margin DI equipment units, as well as softness
in
demand associated with the Vector TX52. Lower analog equipment revenues reflect
the transition of our customer base from analog to digital technologies. Sales
of Presstek’s “growth portfolio” of equipment products, defined as Presstek
branded DI presses, DI kits, and CtP platesetters, increased by 20.2%, or $3.9
million, and 22.6%, or $7.9 million, in the second quarter and first half of
2007, respectively, compared to the same prior year periods. Overall, digital
equipment revenue as a percentage of total equipment revenue increased to 91.8%
and 89.2% in the second quarter and first half of 2007, respectively, compared
to 83.9% and 82.9% in the comparable prior year periods.
Revenue
for the Lasertel segment, including intercompany revenue, was $3.3 million
and
$6.4 million in the second quarter and first half of 2007, respectively, and
reflects increases of $0.7 million, or 25.6%, and $1.1 million, or 20.9%,
compared to the same prior year periods. The favorable increase in revenue
resulted principally from increased shipments on defense-related contracts
driven by one significant customer, as well as increased demand from the
Presstek segment for DI press imaging technology.
Sales
of
consumables product declined from $31.8 million and $63.4 million in the second
quarter and first half of 2006, respectively, to $30.7 million and $60.8 million
in the comparable 2007 periods. The decline resulted from the anticipated
slowdown of some of Presstek’s “traditional” line of products, including QMDI
plates and conventional consumables, and was consistent with industry trends.
QMDI plates declined from $6.7 million in the second quarter of 2006 to $5.2
million in the second quarter of 2007, a decrease of 23.2%. For the first half
of 2007, sales of QMDI plates declined by $2.9 million, or 22.1%, compared
to
the comparable 2006 period. Sales of conventional consumables declined from
$9.7
million and $19.9 million in the second quarter and first half of 2006,
respectively, to $8.4 million and $17.2 million in the comparable 2007 periods.
Partially offsetting this decline was sales of Presstek’s “growth portfolio” of
consumables, defined as 52DI, 34DI, and chemistry-free CtP plates. These
products grew from $7.7 million and $14.8 million in the second quarter and
first half of 2006, respectively, to $9.1 million and $18.0 million, or 18.2%
and 21.6%, respectively, in the comparable 2007 periods.
Service
and parts revenues of $9.9 million and $19.8 million in the second quarter
and
first half of fiscal 2007, respectively, reflect decreases of $1.8 million,
or
15.5%, and $4.1 million or 17.1%, from the comparable prior year periods. The
decrease reflects an anticipated shift away from our less profitable legacy
service contract base which, in the short term, is declining faster than our
digital service business is ramping up.
Cost
of Revenue
Consolidated
cost of revenue was $50.2 million and $96.8 million in the second quarter and
first half of 2007, respectively, and was essentially unchanged from the
comparable prior year periods. Cost of revenue for the second quarter and first
half of 2007 includes $2.7 million of charges for warranty, accrued purchase
commitments, and write-down of excess and obsolete inventory related to planned
changes to the Vector TX52 product line. Service and parts cost of revenue
for
the second quarter and six months ended June 30, 2007 includes a charge of
$0.8
million related to a write-down of field service parts inventory to net
realizable value.
Cost
of
product, consisting of costs of material, labor and overhead, shipping and
handling costs and warranty expenses, was $41.4 million and $80.3 million in
the
second quarter and first half of 2007.
Cost
of
product in the Presstek segment was $40.3 million and $78.2 million in the
second quarter and first half of 2007, respectively, compared to $40.0 million
and $77.1 million in the same prior year periods. The increase in both periods
resulted primarily from the $2.7 million charge for warranty, accrued purchase
commitments and excess and obsolete inventory write-down related to the Vector
TX52 product line, and was offset somewhat by lower revenues and favorable
product mix.
Cost
of
revenue in the Lasertel segment was $2.2 million and $4.6 million in the second
quarter and first half of 2007, respectively, compared to $2.2 million and
$4.7
million in the comparable prior year periods. Overall costs benefited from
improved margins on external sales.
Cost
of
service, including the charge of $0.8 million for field service parts inventory
recorded in the second quarter of 2007, was $8.8 million and $16.5 million
in
the second quarter and first half of 2007, respectively, compared to $8.7
million and $17.0 million in the same prior year period. These amounts represent
the costs of spare parts, labor and overhead associated with the ongoing service
of products. Service costs were favorably impacted by the termination of service
personnel in North America, the result of a restructuring plan intended to
realign our service organization with a declining analog revenue base.
Gross
Profit
Consolidated
gross profit as a percentage of total revenue was 27.0% and 27.7% in the second
quarter and first half of 2007, respectively, compared to 29.3% and 30.1% in
the
comparable prior year periods. Gross margins in the second quarter and first
half of 2007 were negatively impacted by 510 basis points and 260 basis points,
respectively, as a result of the $3.5 million charge for the Vector TX52 product
line and field service parts inventory charges.
Gross
profit as a percentage of product revenue was 29.7% and 29.6% in the second
quarter and first half of 2007, respectively, compared to 30.0% and 30.3% in
the
comparable prior year periods. Gross margins in the second quarter and first
half of 2007 were negatively impacted by 460 basis points and 240 basis points,
respectively, as a result of the $2.7 million charge for the Vector TX52 product
line. Gross margins in 2007 were favorably impacted by a higher mix of DI
revenues, which carry significantly higher margins, as a percentage of overall
revenues.
Gross
margin as a percentage of service revenue was 11.1% and 16.7% in the second
quarter and first half of 2007, respectively, compared to 25.6% and 28.8% in
the
same prior year periods. Service margins in the second quarter and first half
of
2007 were negatively impacted by 810 basis points and 400 basis
points, respectively, resulting from the $0.8 million charge for field service
parts inventory. Lower service margins also reflect a decline in the analog
contract revenue base, which more than offset cost savings resulting from prior
reductions in field service personnel.
Research
and Development
Research
and development expenses primarily consist of payroll and related expenses
for
personnel, parts and supplies, and contracted services required to conduct
our
equipment, consumables and laser diode development efforts.
Consolidated
research and development expenses of $1.6 million and $3.3 million in the second
quarter and first half of 2007, respectively, were essentially unchanged from
$1.7 million and $3.2 million in the comparable prior year periods.
Research
and development expenses for the Presstek segment were $1.3 million and $2.6
million in the second quarter and first half of 2007, respectively, compared
to
$1.4 million and $2.7 million in the comparable prior year periods.
Research
and development expenses for the Lasertel segment were $0.3 million in both
the
second quarter of 2007 and 2006, and $.7 million in the first half of 2007
compared to $0.5 million in the same prior year period. The increased expense
relates primarily to incremental parts and supplies consumed in the product
development process.
Sales,
Marketing and Customer Support
Sales,
marketing and customer support expenses primarily consist of payroll and related
expenses for personnel, advertising, trade shows, promotional expenses, and
travel costs associated with sales, marketing and customer support
activities.
Consolidated
sales, marketing and customer support expenses of $11.0 million in the second
quarter of 2007 were essentially unchanged from the comparable period in 2006.
For the first half of 2007, consolidated sales, marketing, and customer support
expenses were $20.8 million, an increase of $0.9 million from the comparable
prior year period.
Sales,
marketing and customer support expenses for the Presstek segment of $10.8
million in the second quarter of 2007 were unchanged from the comparable prior
year period. Expense of $20.5 million for the first half of 2007 reflects an
increase of $0.9M compared to the first half of 2006. The increase in expense
is
principally due to the continuing transition of our North American sales
channels from indirect to direct, together with an increase in costs in our
European operation necessary to support the growing revenue base.
Sales,
marketing and customer support expenses for the Lasertel segment were $0.2
million and $0.3 million in the second quarter and first half of 2007,
respectively, and were essentially unchanged from the same prior year
periods.
General
and Administrative
Consolidated
general and administrative expenses are primarily comprised of payroll and
related expenses for personnel and contracted professional services necessary
to
conduct our finance, information systems, human resources and administrative
activities.
Consolidated
general and administrative expenses were $9.0 million and $15.3 million in
the
second quarter and first half of fiscal year 2007, respectively, compared to
$3.8 million and $9.1 million in the comparable prior year periods. General
and
administrative expenses in the second quarter of 2007 include $1.5 million
in
stock compensation related to a restricted stock award to the CEO, and $1.0
million in stock compensation related to stock option grants to officers,
directors and employees. For the first half of 2007, stock compensation was
$1.5
million related to restricted stock and $1.3 million related to stock based
option grants to officers, directors and employees. General and administrative
expenses, including legal, accounting, and bad debt expenses, increased in
the
second quarter and first half of 2007 over the comparable prior year periods
due
primarily to patent defense and other legal activities, actions related to
the
Company’s remediation plans to address internal control matters, and an increase
in the expense associated with the allowance for doubtful accounts in the United
States.
General
and administrative expenses for the Presstek segment were $8.8 million in the
second quarter of 2007 compared to $3.5 million in the comparable prior year
period. The increased expense was due primarily to costs associated with the
restricted stock award, additional stock compensation expense related to stock
option grants, and increased legal, accounting, and bad debt expenses. For
the
first half of 2007, general and administrative expense for the Presstek segment
totaled $14.8 million compared to $8.5 million in the first half of 2006. The
increase in expense was due primarily to award of restricted stock to our CEO,
additional stock compensation expense on stock option grants to officers and
employees, increased professional fees related to the Company’s remediation
plans to address internal control matters, and increased bad debt
expense.
General
and administrative expenses for the Lasertel segment were $0.2 million and
$0.5
million in the second quarter and first half of 2007, respectively, compared
to
$0.3 million and $0.6 million in the comparable prior year periods. Lower
expenses are attributable to reduced payroll related costs.
Amortization
of Intangible Assets
Amortization
expense of $0.7 million and $1.4 million in the second quarter and first half
of
2007, respectively, declined modestly from $0.8 million and $1.5 million in
the
comparable prior year periods. These expenses relate to intangible assets
recorded in connection with the Company’s 2004 ABDick acquisition, patents and
other purchased intangible assets.
Restructuring
and Other Charges
Consolidated
restructuring and other charges of $0.8 million and $1.1 million in the second
quarter and first half of 2007, respectively, represent the cost of severance
and separation expenses for employment contracts of former executives, as well
as restructuring in our Canadian and European operations.
Interest
and Other Expense, Net
Consolidated
net interest expense of $0.8 million and $1.6 million in the second quarter
and
first half of 2007, respectively, increased from $0.6 million and $1.0 million
in the comparable prior year periods. Increased interest expenses are primarily
the result of higher balances on our revolving credit facility. Other expense,
comprised primarily of loss on foreign currency translation, was $0.1 million
and $0.2 million in the second quarter and first half of 2007, respectively,
compared to $0.1 million and $0.2 million in the comparable prior year
periods.
Benefit
for Income Taxes
The
Company’s effective tax rate is 11.4% for the second quarter of 2007 compared to
13.7% in the same period last year. For the first half of 2007, the effective
tax rate is 14.2% compared to 15.4% in the comparable period of 2006. The
decrease in the effective rate from the prior year comparable period is
primarily attributable to certain officer compensation, which is non-deductible
for federal and state tax purposes, and U.S. taxes on deemed foreign subsidiary
dividends.
Discontinued
Operations
The
Company accounts for its discontinued operations under the provisions of SFAS
No. 144,
Accounting for Impairment or Disposal of Long-Lived Assets (SFAS
144). Accordingly, results of operations and the related charges for
discontinued operations have been classified as “Loss from discontinued
operations, net of tax” in the accompanying Consolidated Statements of Income.
Assets and liabilities of discontinued operations have been reclassified and
reflected on the accompanying Consolidated Balance Sheets as “Assets of
discontinued operations” and “Liabilities of discontinued operations.” For
comparative purposes, all prior periods presented have been reclassified on
a
consistent basis.
Precision
Lithograining Corp. - Analog Newspaper Business
On
December 28, 2006, the Audit Committee of the Company's Board of Directors
ratified a plan submitted by management to discontinue production in South
Hadley, Massachusetts of Precision-branded analog plates used in newspaper
applications.
Results
of operations of the discontinued analog newspaper business of Precision consist
of the following (in thousands, except per-share data):
|
Three
months ended
|
|
Six
months ended
|
|
June
30 , 2007
|
July
1, 2006
|
|
June
30, 2007
|
July
1, 2006
|
Revenue
|
$
0
|
$
3,350
|
|
$
195
|
$
6,588
|
Income
(loss) before income taxes
|
40
|
200
|
|
(148)
|
(58)
|
Provision
(benefit) from income taxes
|
16
|
33
|
|
(60)
|
29
|
Income
(loss) from discontinued operations
|
$
24
|
$
167
|
|
$
(88)
|
$
(87)
|
Earnings
(loss) per share
|
$0.00
|
$
0.01
|
|
$
(0.00)
|
$
(0.00)
|
The
Company is winding down Precision operations in fiscal 2007 and accordingly
there were no substantial revenues from discontinued operations in the first
half of fiscal 2007. Revenues of $6.6 million in the first half of 2006 were
primarily associated with the manufacture and distribution of Precision analog
products to newspaper business customers. There were no significant operating
expenses incurred in the first half of fiscal 2007 and $0.04 million of
miscellaneous income was recognized as a result of the sale of scrap inventory.
Liquidity
and Capital Resources
Financial
Condition (Sources and Uses of Cash)
We
finance our operating and capital investment requirements primarily through
cash
flows from operations and borrowings. At June 30, 2007, we had $7.3 million
of
cash and cash equivalents and $45.3 million of working capital, compared to
$8.6
million of cash and $46.8 million of working capital at July 1,
2006.
Continuing
Operations
Our
operating activities consumed $5.9 million of cash in the six months ended
June
30, 2007. Cash used by operating activities resulted primarily from the net
loss, after adjustments for non-cash depreciation, amortization, provisions
for
warranty costs and restructuring and other charges, stock compensation expense
and losses on the disposal of assets. Net income and non-cash items were further
impacted by an increase in inventory levels of $6.1 million, an increase of
$2.6
million in accounts receivable and a decrease of $1.0 in deferred revenue.
The
increase in inventory levels was due primarily to a buildup of stock in
anticipation of increased sales demand and also reflects the longer lead time
for certain equipment purchases. The increase in accounts receivable primarily
reflects a higher mix of international revenues, which generally carry longer
payment terms, as well as timing of funding for equipment sold under third
party
and in-house leasing arrangements. Offsetting this was an increase in
miscellaneous accrued expenses of $1.2 million.
In
the
first six months of fiscal 2007, we used $2.1 million of net cash for investing
activities primarily to purchase additions to property, plant and equipment
consisting of production equipment and investments in our infrastructure,
including costs related to the implementation of a new service management
system.
Our
financing activities provided a $5.4 million source of cash, comprised of $6.0
million of cash received from borrowings on our current line of credit and
$2.9
million of proceeds from the exercise of stock options and the issuance of
common stock, offset by $3.5 million of repayments on our term
loan.
Discontinued
Operations
In
the
first six months of fiscal 2007, operating activities of discontinued operations
provided $0.4 million in cash as a result of a decrease of $1.8 million in
accounts receivable and a decrease of $1.4 million in inventory, partially
offset by a net decrease of $2.7 million in accounts payable and accrued
expenses and the net loss of $0.1 million.
Liquidity
Our
current Senior Secured Credit Facilities, referred to as the Facilities, include
a $35.0 million five year secured term loan, referred to as the Term Loan,
and a
$45.0 million five year secured revolving line of credit, referred to as the
Revolver, which replaced our then-existing term loan and revolver entered into
in October 2003. At June 30, 2007, we had $21.0 million outstanding under the
line of credit and $12.3 million outstanding under letters of credit, thereby
reducing the amount available under the Revolver to $11.7 million. At June
30,
2007, the interest rate on the outstanding balance of the Revolver was 7.8%.
Principal payments on the Term Loan are made in consecutive quarterly
installments of $1.75 million, with a final settlement of all remaining
principal and unpaid interest on November 4, 2009. The Facilities were used
to
partially finance the acquisition of the business of ABDick, and are available
for working capital requirements,capital
expenditures, acquisitions, and general corporate purposes. Borrowings under
the
Facilities bear interest at either (i) the London InterBank Offered Rate, or
LIBOR, plus applicable margins or (ii) the Prime Rate, as defined in the
agreement, plus applicable margins. The applicable margins range from 1.25%
to
4.0% for LIBOR, or up to 1.75% for the Prime Rate, based on certain financial
performance. At June 30, 2007, the effective interest rate on the Term Loan
was
7.9%.
Under
the
terms of the Revolver and Term Loan, we are required to meet various financial
covenants on a quarterly and annual basis, including maximum funded debt to
EBITDA, a non-U.S. GAAP measurement that we define as earnings before interest,
taxes, depreciation, amortization and restructuring and other charges/(credits),
minimum fixed charge coverage, minimum tangible capital base, and current
ratio covenants. At June 30, 2007, we were in compliance with all such
financial and non-financial covenants.
We
believe that existing funds, cash flows from operations, and cash available
under our Revolver should be sufficient to satisfy working capital requirements
and capital expenditures through the next twelve months. There can be no
assurance, however, that we will not require additional financing, or that
such
additional financing, if needed, would be available on acceptable
terms.
The
sale
of any equity or debt securities may result in additional dilution to our
stockholders, and we cannot be certain that additional financing will be
available in amounts or on terms acceptable to us, if at all. If we are unable
to obtain any required additional financing, we may be required to reduce the
scope of our planned research, development and commercialization activities,
which would reduce our use of cash but could harm out long-term financial
condition and operating results. Additional equity financing may be dilutive
to
the holders of our common stock and debt financing, if available, may involve
significant cash payment obligations and covenants that restrict our ability
to
operate our business.
Our
anticipated capital expenditures for fiscal 2007 range between $3.0 million
and
$5.0 million, including expenditures related to our computer systems
infrastructure and equipment to be used in the production of our DI and CTP
equipment and consumable products.
Commitments
and Contingencies
The
Company has change of control agreements with certain of its senior management
employees that provide them with benefits should their employment with the
Company be terminated other than for cause, as a result of disability or death,
or if they resign for good reason, as defined in these agreements, within a
certain period of time from the date of any change of control of the
Company.
From
time
to time we have engaged in sales of equipment that is leased by or intended
to
be leased by a third party purchaser to another party. In certain situations,
we
may retain recourse obligations to a financing institution involved in providing
financing to the ultimate lessee in the event the lessee of the equipment
defaults on its lease obligations. In certain such instances, we may refurbish
and remarket the equipment on behalf of the financing company, should the
ultimate lessee default on payment of the lease. In certain circumstances,
should the resale price of such equipment fall below certain predetermined
levels, we would, under these arrangements, reimburse the financing company
for
any such shortfall in sale price (a “shortfall payment”). The maximum contingent
obligation under these shortfall payment arrangements is estimated to be $1.1
million at June 30, 2007.
Effect
of Inflation
Inflation
has not had, and is not expected to have, a material impact on our financial
conditions or results of operations.
Critical
Accounting Policies and Estimates
General
Our
Management’s Discussion and Analysis of Financial Condition and Results of
Operations is based upon our consolidated financial statements, which have
been
prepared in accordance with U.S. generally accepted accounting principles.
The preparation of these financial statements requires management to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenue and expenses, and related disclosure of contingent assets and
liabilities. On an ongoing basis, we evaluate our estimates, including those
related to product returns; warranty obligations; allowances for doubtful
accounts; slow-moving and obsolete inventories; income taxes; the valuation
of
goodwill, intangible assets, long-lived assets and deferred tax assets;
stock-based compensation and litigation. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
For
a
complete discussion of our critical accounting policies and estimates, refer
to
our Annual Report on Form 10-K for the fiscal year ended December 30, 2006,
which was filed with the SEC on April 25, 2007. There were no significant
changes to the Company’s critical accounting policies during the six months
ended June 30, 2007, with the exception of the policy below.
Accounting
for Income Taxes
The
Company’s policy covering accounting for income taxes, which was disclosed in
its Annual Report on Form 10-K for the fiscal year ended December 30, 2006,
filed with the SEC on April 25, 2007, was expanded in the first quarter
of fiscal 2007 to include the adoption of FASB
Interpretation No. 48, Accounting
for Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109
("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income
taxes by prescribing the recognition threshold a tax position is required
to
meet before being recognized in the financial statements. It also provides
guidance on derecognition, classification, interest and penalties, accounting
in
interim periods, disclosure, and transition.
Recent
Accounting Pronouncements
In
June
2006, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue
No. 06-3, How
Taxes Collected from Customers and Remitted to Governmental Authorities Should
Be Presented in the Income Statement (That Is, Gross versus Net
Presentation)
(“EITF
06-3”). EITF 06-3 is effective for periods beginning after December 15, 2006,
with earlier application permitted. EITF 06-3 requires disclosure of the
accounting policy for any tax assessed by a governmental authority that is
directly imposed on a revenue-producing transaction (i.e., sales, use, value
added) on a gross basis (included in revenues and costs) or net basis (excluded
from revenues and costs). The
Company excludes these amounts from its revenues and costs; accordingly,
no
additional disclosure will be required.
In
July 2006, the FASB issued FASB
Interpretation No. 48, Accounting
for Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109
("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income
taxes by prescribing the recognition threshold a tax position is required to
meet before being recognized in the financial statements. It also provides
guidance on derecognition, classification, interest and penalties, accounting
in
interim periods, disclosure, and transition. FIN 48 was adopted by Presstek
in the first quarter of fiscal 2007. The adoption of FIN 48 did not have a
material impact on the consolidated results of operations and financial
condition.
In
September 2006, the FASB issued SFAS No. 157, Fair
Value Measurements
("SFAS 157"). SFAS 157 provides guidance for using fair value to
measure assets and liabilities. It also responds to investors' requests for
expanded information about the extent to which companies measure assets and
liabilities at fair value, the information used to measure fair value, and
the
effect of fair value measurements on earnings. SFAS 157 applies whenever
other standards
require (or permit) assets or liabilities to be measured at fair value, and
does
not expand the use of fair value in any new circumstances. SFAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007 and is required to be adopted by the Company in fiscal
2008. The Company is currently evaluating the effect that the adoption of
SFAS 157 will have on its consolidated results of operations and financial
condition but does not expect it to have a material impact.
In
February 2007, the FASB issued Statement of Financial Accounting Standards
No.
159, The
Fair Value Option for Financial Assets and Financial Liabilities - Including
an
amendment of FASB Statement No 115 ("SFAS
159"). SFAS 159 permits entities to choose to measure many financial instruments
and certain other items at fair value. SFAS 159 is effective for fiscal years
beginning after November 15, 2007. Early adoption is permitted, provided the
company also elects to apply the provisions of SFAS 157. The Company is
currently evaluating the effect that the adoption of SFAS 159 will have on
its consolidated results of operations and financial condition but does not
expect it to have a material impact.
Off-Balance
Sheet Arrangements
We
do not
participate in transactions that generate relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as
structured finance or special purpose entities (“SPEs”), which would have been
established for the purpose of facilitating off-balance sheet arrangements
or
other contractually narrow or limited purpose. At June 30, 2007, we were not
involved in any unconsolidated SPE transactions.
Item
3.
Quantitative and Qualitative Disclosures About Market
Risk
We
are
exposed to a variety of market risks, including changes in interest rates
primarily as a result of our borrowing and investing activities, commodity
price
risk and foreign currency fluctuations. The Company has established procedures
to manage its fluctuations in interest rates and foreign currency exchange
rates.
Our
long-term borrowings are in variable rate instruments, with interest rates
tied
to either the Prime Rate or the LIBOR. A 100 basis point change in these rates
would have an impact of approximately $0.2 million on our annual interest
expense, assuming consistent levels of floating rate debt with those held at
June 30, 2007.
Commodity
price movements create a market risk by affecting the price we must pay for
certain raw materials. The Company purchases aluminum for use in manufacturing
consumables products and is embedded in certain components we purchase from
major suppliers. From time to time, we enter into agreements with certain
suppliers to manage price risks within a specified range of prices; however,
our
suppliers generally pass on significant commodity price changes to the Company
in the form of revised prices on future purchases. In general, the Company
has
not used commodity forward or option contracts to manage this market
risk.
The
Company operates foreign subsidiaries in Canada and Europe and is exposed to
foreign currency exchange rate risk inherent in our sales commitments,
anticipated sales, anticipated purchases and assets and liabilities denominated
in currencies other than the U.S. dollar. Presstek routinely evaluates whether
the foreign exchange risk associated with its foreign currency exposures acts
as
a natural foreign currency hedge for other offsetting amounts denominated in
the
same currency. In general, the Company does not hedge the net assets or net
income of its foreign subsidiaries. In addition, certain key customers and
strategic partners are not located in the United States. As
a
result, these parties may be subject to fluctuations in foreign exchange rates.
If their home country currency were to decrease in value relative to the United
States dollar, their ability to purchase and market our products could be
adversely affected and our products may become less competitive to them. This
may have an adverse impact on our business. Likewise, certain major suppliers
are not located in the United States and thus, such suppliers are subject to
foreign exchange rate risks in transactions with us. Decreases in the value
of
their home country currency, versus that of the United States dollar, could
cause fluctuations in supply pricing which could have an adverse effect on
our
business.
Item
4. Controls and Procedures
(a)
Evaluation of Disclosure Controls and Procedures
As
of
June 30, 2007, we have, under the supervision and with the participation of
Presstek’s management, including its Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of the design and operation of Presstek’s
disclosure controls and procedures pursuant to Rules 13a-15(e) promulgated
under
the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the
period covered by this report.
Based
on
their evaluation, the Company’s Chief Executive Officer and its Chief Financial
Officer concluded that the Company’s disclosure controls and procedures were not
effective as of June 30, 2007, at the reasonable assurance level, because of
the
material weakness described below. Notwithstanding the existence of the material
weakness described below, management has concluded that the consolidated
financial statements in this Form 10-Q fairly present, in all material respects,
the Company’s financial position, results of operations and cash flows for the
periods and dates presented.
(b)
Changes in Internal Control Over Financial Reporting
In
its
Management’s
Report on Internal Control over Financial Reporting, included
in Item 9A of the Company’s Annual Report on Form 10-K for the year ended
December 30, 2006, filed with the U.S. Securities and Exchange Commission
(“SEC”) on April 25, 2007, the
Company determined that there was a control deficiency that constituted a
material weakness, as described below.
The
Company did not maintain a sufficient complement of personnel with the
appropriate level of accounting knowledge, experience, and training in the
application of U.S. generally accepted accounting principles (“U.S. GAAP”) to
analyze, review, and monitor accounting for transactions that are significant
or
non-routine. As a result, the Company did not prepare adequate contemporaneous
documentation that would provide a sufficient basis for an effective evaluation
and review of the accounting for transactions that are significant or
non-routine. This material weakness resulted in errors in the preliminary
December 30, 2006 consolidated financial statements and more than a remote
likelihood that a material misstatement of the Company’s annual or interim
financial statements would not be prevented or detected.
Due
to
the material weakness described above, management concluded that its internal
control over financial reporting was not effective as of December 30, 2006.
The
Company continues to engage in substantial efforts to remediate the material
weakness disclosed above and expects to remediate this weakness by December
29, 2007, or as soon as practicable. The following remedial actions have been
or
continue to be implemented to address the material weakness:
· |
On
February 28, 2007, the Company announced the appointment of Jeffrey
A.
Cook as Senior Vice President and Chief Financial Officer of the
Company,
succeeding Moosa E. Moosa, who departed from the Company effective
as of
that date.
|
· |
Effective
April 3, 2007, the Audit Committee of the Board of Directors established
a
Financial Reporting Task Force to develop a corrective action plan
to
ensure full remediation of the material weakness. This Task Force,
which
reports directly to the Audit Committee and is led by the Senior
Vice
President and Chief Financial Officer, met six times since its
establishment to develop, review, and approve specific remediation
action
plans to address these matters.
|
· |
During
March 2007, a new Financial Reporting Manager was appointed to manage
all
SEC-related activities including accounting guidance and periodic
reporting.
|
· |
The
Company’s Senior Vice President and Chief Financial Officer has been
authorized to engage third party professionals to advise the Company
in
connection with the remediation of existing
deficiencies.
|
· |
In
the first quarter of 2007, the Company undertook a review to ensure
that
the finance, accounting and tax functions are staffed in accordance
with
the required competencies. The Finance organization has been strengthened
by the addition of personnel to address complex accounting and financial
reporting requirements and is nearing completion of its hiring objectives.
|
· |
On
May 23, 2007, the Company announced the appointment of Wayne L. Parker,
CPA as Director of Internal Audit. Mr. Parker joins Presstek with
significant industry experience, having served as Director of
Sarbanes-Oxley Compliance for the Graphic Communications Group of
Eastman
Kodak Company and Director of Internal Audit for Kodak Polychrome
Graphics, LLC. In his role with Presstek he will report directly
to the
Audit Committee and have responsibility for directing the internal
audit
function, leading Sarbanes-Oxley compliance activities, and developing
and
implementing monitoring controls and other procedures in the Internal
Audit organization.
|
· |
The
Company has begun an initiative to provide additional training to
finance,
accounting and tax professionals regarding new and evolving areas
in U.S.
GAAP.
|
· |
The
Company implemented a process that ensures the timely documentation,
review, and approval of complex accounting transactions by qualified
accounting personnel.
|
· |
The
Company introduced a requirement that analysis of all significant
non-routine transactions must be documented, reviewed, and approved
by
senior financial management.
|
Many
of
the remedial measures described above relate to the introduction of additional
personnel into the organization and involve controls in our system of internal
controls which rely extensively on manual review and approval, therefore, the
successful operation of these controls, for, at least, several quarters may
be
required prior to management being able to conclude that the material weakness
has been fully remediated.
Other
than the foregoing measures, certain of which were not fully implemented as
of
June 30, 2007, to remediate the material weaknesses described above, there
has
been no change in the Company's internal control over financial reporting during
the quarter ended June 30, 2007, that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART
II OTHER INFORMATION
Item
1. Legal Proceedings
During
the six months ended June 30, 2007, there have been no material changes to
legal
proceedings from those considered in our Annual Report on From 10-K for the
year
ended December 30, 2006, filed with the U.S. Securities and Exchange Commission
(“SEC”) on April 25, 2007.
Item
1A. Risk Factors
Significant
factors that could impact the Company’s financial condition or results of
operations are included in the Company’s Annual Report on Form 10-K for the year
ended December 30, 2006, filed with the U.S. Securities and Exchange Commission
(“SEC”) on April 25, 2007.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
On
May
10, 2007, under the terms of an Employment Agreement, the Company issued to
its
chief executive officer, Jeffrey Jacobson, in consideration of Mr. Jacobsen’s
agreement to enter into employment with the Company, 300,000 shares of the
Company’s common stock. The issuance of such stock was exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended,
was
made pursuant to NASDAQ Rule 4350(i)(1)(A)(iv) as an inducement material to
Mr.
Jacobsen entering into employment with the Company, and was approved by the
Compensation Committee of the Company’s Board of Directors.
Item
4. Submission of Matters to a Vote of Security Holders
(a) On
June
7, 2007, the Company held its Annual Meeting of Stockholders. Proxies for the
meeting were solicited pursuant to the SEC’s Regulation 14A.
(b) The
information included in Item 4(c)(1) below is incorporated herein by
reference.
(c) At
such
meeting, the stockholders of the Company voted:
(1)
To
elect eight directors to the Company’s Board of Directors for the ensuing year.
The votes cast were as follows:
Nominees
|
Votes
For
|
Votes
Against
|
Votes
Withheld
|
Abstained
|
Broker
Non-Votes
|
|
|
|
|
|
|
Edward
J. Marino*
|
31,265,140
|
N/A
|
617,759
|
N/A
|
N/A
|
John
W. Dreyer
|
31,367,672
|
N/A
|
515,227
|
N/A
|
N/A
|
Daniel
S. Ebenstein
|
26,492,638
|
N/A
|
5,390,261
|
N/A
|
N/A
|
Dr.
Lawrence Howard
|
27,129,130
|
N/A
|
4,753,769
|
N/A
|
N/A
|
Michael
D. Moffitt
|
31,187,855
|
N/A
|
695,044
|
N/A
|
N/A
|
Brian
Mullaney
|
31,395,005
|
N/A
|
487,894
|
N/A
|
N/A
|
Steven
N. Rappaport
|
26,983,294
|
N/A
|
4,899,605
|
N/A
|
N/A
|
Donald
C. Waite, III
|
31,148,155
|
N/A
|
734,744
|
N/A
|
N/A
|
*On
May
21, 2007, the Company issued supplemental proxy materials removing Mr. Marino’s
nomination as a director and replacing it with the nomination of Mr.
Jacobson. Mr. Jacobson was elected to the Board on June 7, 2007. On June
7, 2007 the Board of Directors of the Company accepted the resignation of Board
Member Edward J. Marino, effective as of that date and appointed Jeffrey
Jacobson, the Company’s President and Chief Executive Officer to the vacancy
created by Mr. Marino’s resignation.
(2)
To
ratify the selection of KPMG LLP as the Company’s independent registered public
accounting firm for 2007. The proposal was ratified as 31,769,724 shares voted
for, 97,274 shares voted against and 15,901 shares abstained.
Item
6. Exhibits
Exhibit
No.
|
Description
|
|
|
10.1
|
Employment
Agreement by and between Presstek, Inc. and Jeffrey Jacobson dated
May 10,
2007 (Previously filed as an Exhibit to the Company’s Form 10-Q filed on
May 15, 2007 and incorporated by reference herein.)
|
|
|
10.2
|
Stock
Option Agreement by and between Presstek, Inc. and Jeffrey Jacobson
dated
May 10, 2007 (Previously filed as an Exhibit to the Company’s Form 10-Q
filed on May 15, 2007 and incorporated by reference
herein.)
|
|
|
31.1
|
Certification
of the Chief Executive Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
Certification
of the Chief Financial Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
Certification
of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
32.2
99.1
|
Certification
of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
Revised
supplemental table showing further breakout of Presstek revenue and
financial results as of and for the three and six month period
ended June 30, 2007. (Previously filed as an Exhibit to the Company’s Form
8-K filed on July 26,2007)
|
|
|
PRESSTEK,
INC.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
PRESSTEK,
INC.
(Registrant)
|
Date:
August 9, 2007
|
|
|
Jeffrey
A. Cook
Senior
Vice President and Chief Financial Officer
(Duly
Authorized Officer and Principal Financial Officer)
|
PRESSTEK,
INC.
EXHIBIT
INDEX
Exhibit
No.
|
Description
|
|
|
|
|
|
|
10.1
|
Employment
Agreement by and between Presstek, Inc. and Jeffrey Jacobson dated
May 10,
2007 (Previously filed as an Exhibit to the Company’s Form 10-Q filed on
May 15, 2007 and incorporated by reference herein.)
|
|
|
10.2
|
Stock
Option Agreement by and between Presstek, Inc. and Jeffrey Jacobson
dated
May 10, 2007 (Previously filed as an Exhibit to the Company’s Form 10-Q
filed on May 15, 2007 and incorporated by reference
herein.)
|
|
|
31.1
|
Certification
of the Chief Executive Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
Certification
of the Chief Financial Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
Certification
of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
32.2
|
Certification
of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
99.1
|
Revised
supplemental table showing further breakout of Presstek revenue and
financial results as of and for the three and six month period ended
June 30, 2007. (Previously filed as an Exhibit to the Company’s Form 8-K
filed on July 26,2007)
|
|
|
|
|