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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended
September 27, 2003
OR
[_] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from
___________ to ___________
Commission File No. 0-17541
---------------------------
PRESSTEK, INC.
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(Exact name of registrant as specified in its charter)
Delaware 02-0415170
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
55 Executive Drive, Hudson, New Hampshire 03051-4903
----------------------------------------------------
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (603) 595-7000
--------------
-----------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
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 [X] No [_]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [_]
As of November 5, 2003, there were 34,192,111 shares of the registrant's common
stock, $.01 par value per share, outstanding.
================================================================================
PRESSTEK, INC.
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Balance Sheets as of September 27, 2003 (unaudited) and
December 28, 2002 3
Statements of Operations for the three and nine months
ended September 27, 2003 and September 28, 2002 (unaudited)
4
Statements of Cash Flows for the nine months ended
September 27, 2003 and September 28, 2002 (unaudited)
5
Notes to Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 23
Item 4. Controls and Procedures 23
PART II OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 6. Exhibits and Reports on Form 8-K 25
Signatures 27
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRESSTEK, INC.
September 27, December 28,
BALANCE SHEETS 2003 2002
(In thousands, except share data) (unaudited)
- -----------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 26,657 $ 17,563
Accounts receivable, net of allowance for losses
of $1,981 and $2,170, in fiscal 2003 and 2002, respectively 14,713 15,108
Inventories 11,896 11,715
Other current assets 1,221 554
- -----------------------------------------------------------------------------------------------------------------
Total current assets 54,487 44,940
- -----------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, NET 47,348 52,291
OTHER ASSETS:
Patent application costs and license rights, net 3,487 4,409
Other 556 156
- -----------------------------------------------------------------------------------------------------------------
Total other assets 4,043 4,565
- -----------------------------------------------------------------------------------------------------------------
TOTAL $ 105,878 $ 101,796
=================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 3,279 $ 3,045
Accounts payable 4,272 3,331
Accrued expenses 9,160 9,992
- -----------------------------------------------------------------------------------------------------------------
Total current liabilities 16,711 16,368
- -----------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT, NET OF CURRENT PORTION 11,086 13,662
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized
1,000,000 shares; no shares issued or outstanding - -
Common stock, $.01 par value; authorized 75,000,000 shares;
issued and outstanding 34,184,590 shares at
September 27, 2003; 34,125,481 shares at December 28, 2002 342 341
Additional paid-in capital 97,668 97,403
Accumulated deficit (19,929) (25,978)
- -----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 78,081 71,766
- -----------------------------------------------------------------------------------------------------------------
TOTAL $ 105,878 $ 101,796
=================================================================================================================
See accompanying notes to financial statements
3
PRESSTEK, INC.
STATEMENTS OF OPERATIONS (unaudited)
FOR THE THREE AND NINE MONTHS ENDED
(In thousands, except per share data)
Three Months Ended Nine Months Ended
- --------------------------------------------------------------------------------------------------------------------------------
September 27, September 28, September 27, September 28,
2003 2002 2003 2002
- --------------------------------------------------------------------------------------------------------------------------------
REVENUE:
Product sales $ 19,266 $ 19,962 $ 62,598 $ 57,717
Royalties and fees from licensees 492 1,024 2,121 3,359
- --------------------------------------------------------------------------------------------------------------------------------
Total revenue 19,758 20,986 64,719 61,076
- --------------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of products sold 12,105 13,293 37,947 41,964
Research and product development 1,667 1,982 5,491 7,319
Sales, marketing and customer support 2,857 2,363 8,771 8,068
General and administrative 2,100 2,514 7,065 7,830
Special charges -- -- 550 5,961
- --------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 18,729 20,152 59,824 71,142
- --------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS 1,029 834 4,895 (10,066)
OTHER INCOME (EXPENSE), NET:
Interest, net (97) (224) (369) (679)
Other, net 76 11 97 28
- --------------------------------------------------------------------------------------------------------------------------------
Total other expense, net (21) (213) (272) (651)
- --------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 1,008 621 4,623 (10,717)
PROVISION FOR INCOME TAXES -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS 1,008 621 4,623 (10,717)
- --------------------------------------------------------------------------------------------------------------------------------
DISCONTINUED OPERATIONS:
Income from discontinued operations 1,429 -- 1,429 --
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM DISCONTINUED OPERATIONS 1,429 -- 1,429 --
- --------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 2,437 $ 621 $ 6,052 $(10,717)
================================================================================================================================
EARNINGS (LOSS) PER SHARE - BASIC:
From continuing operations $ 0.03 $ 0.02 $ 0.14 $ (0.31)
================================================================================================================================
From discontinued operations $ 0.04 $ 0.00 $ 0.04 $ 0.00
================================================================================================================================
EARNINGS (LOSS) PER SHARE - BASIC $ 0.07 $ 0.02 $ 0.18 $ (0.31)
================================================================================================================================
EARNINGS (LOSS) PER SHARE - DILUTED:
From continuing operations $ 0.03 $ 0.02 $ 0.13 $ (0.31)
================================================================================================================================
From discontinued operations $ 0.04 $ 0.00 $ 0.04 $ 0.00
================================================================================================================================
EARNINGS (LOSS) PER SHARE - DILUTED $ 0.07 $ 0.02 $ 0.17 $ (0.31)
================================================================================================================================
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING - BASIC 34,177 34,125 34,158 34,124
================================================================================================================================
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING - DILUTED 34,625 34,127 34,329 34,124
================================================================================================================================
See accompanying notes to financial statements
4
PRESSTEK, INC.
STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
September 27, September 28,
For the Nine Months Ended 2003 2002
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS - OPERATING ACTIVITIES:
Net income (loss) $ 6,052 $ (10,717)
Less income from discontinued operations (1,429) --
Income (loss) from continuing operations 4,623 (10,717)
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by (used in) operating
activities of continuing operations:
Special charges and discontinued programs and operations 550 10,696
Depreciation and amortization 6,618 7,208
Provision for warranty and other costs 1,336 876
Provision for losses on accounts receivable 1,077 670
Changes in operating assets and liabilities:
Accounts receivable (681) 2,477
Inventories (181) 1,261
Other current assets (667) 53
Accounts payable 941 1,337
Accrued expenses (1,249) (1,191)
Other (192) (326)
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 12,175 12,344
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS - INVESTING ACTIVITIES:
Purchases of property, plant and equipment (1,005) (1,200)
Proceeds from sale of equipment -- 203
- -----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (1,005) (997)
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS - FINANCING ACTIVITIES:
Net proceeds from stock option exercises 266 61
Repayment of mortgage term loan (901) (792)
Proceeds under lease line of credit -- 3,000
Repayment of lease line of credit (1,441) (1,166)
Repayment of revolving line of credit -- (967)
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (2,076) 136
- -----------------------------------------------------------------------------------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS 9,094 11,483
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 17,563 2,492
- -----------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS END OF PERIOD $ 26,657 $ 13,975
=================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 602 $ 763
=================================================================================================================
Income taxes $ -- $ --
=================================================================================================================
See accompanying notes to financial statements
5
PRESSTEK, INC.
NOTES TO FINANCIAL STATEMENTS (unaudited)
SEPTEMBER 27, 2003
1. Basis of Presentation and Significant Accounting Policies
---------------------------------------------------------
Nature of Business - Presstek, Inc. ("Presstek", or "the Company") is a
manufacturer, developer and marketer of digital laser imaging and chemistry-free
plate technologies for the printing and graphic arts industries. Presstek's
products and applications incorporate its patented direct imaging ("DI(R)"),
technologies and consumables for computer-to-plate, ("CTP") and direct-to-press
applications. The Company's subsidiary, Lasertel, Inc. ("Lasertel") is engaged
in the manufacture and development of high-powered laser diodes for the Company
and external customers.
The Company operates in two reportable segments, the Digital Imaging Products
segment and the Lasertel segment. The Digital Imaging Products segment is
primarily engaged in the development, manufacture and sale of patented digital
imaging systems and printing plate technologies for CTP and direct-to-press
applications. The Lasertel segment is primarily engaged in the manufacture and
development of high-powered laser diodes for Presstek and other customers.
Basis of Presentation - The financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Certain prior period amounts have been
reclassified for comparative purposes. The unaudited financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and in accordance with Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The financial information included in this quarterly report should
be read in conjunction with the Company's audited financial statements and
related notes thereto for the fiscal year ended December 28, 2002. The December
28, 2002 information has been derived directly from the annual financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation have been included and all such adjustments were normal
and recurring. Operating results for the three and nine months ended September
27, 2003 are not necessarily indicative of the results that may be expected for
the fiscal year ending January 3, 2004.
Fiscal Year - The Company operates and reports on a 52 or 53 week fiscal year
ending on the Saturday closest to December 31. Accordingly, the financial
statements include the thirteen-week periods ended September 27, 2003 ("the
third quarter of fiscal 2003") and September 28, 2002 ("the third quarter of
fiscal 2002"), and the thirty-nine week periods ended September 27, 2003 ("the
first nine months of fiscal 2003"), and September 28, 2002 ("the first nine
months of fiscal 2002").
Use of Estimates - The Company prepares its financial statements in accordance
with accounting principles generally accepted in the United States. The
preparation of these financial statements requires management to make estimates
and judgments that affect the reported amounts of assets and liabilities and
related disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses during
the reporting period. The Company evaluates its estimates, including those
related to product returns, allowances for doubtful accounts, inventories,
long-lived assets, warranty obligations, and litigation on an on-going basis.
The Company bases its 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.
Revenue Recognition - The Company recognizes revenue when persuasive evidence of
an agreement exists, delivery has occurred or services have been rendered, the
price to the customer is fixed or determinable, and collection is reasonably
assured.
6
The Company records revenue for product sales net of estimated returns, which
are adjusted periodically, based upon historical rates of return. Revenue and
related royalties for products sold where installation is not required is
recorded at the time of shipment. Revenue for products that require
installation, for which the installation is not deemed inconsequential, is
recognized upon completion of installation and customer acceptance. Revenue
related to service maintenance agreements is recognized ratably over the
duration of the particular contract. Certain fees and other reimbursements are
recognized as revenue when the related services have been performed or the
revenue otherwise earned. Deferred revenue includes certain customer advances
received as a result of the Company's distribution agreements. This revenue is
recognized as product is shipped or services are performed.
Stock-Based Compensation - The Company accounts for stock options and other
equity instruments granted to employees under the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), as permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). APB 25 provides for
compensation cost to be recognized over the vesting period of the options based
on the difference, if any, between the fair market value of the Company's stock
and the option price on the grant date. As the Company has only issued fixed
term stock option grants at or above the quoted market price on the date of the
grant, there is no compensation expense recognized in the accompanying financial
statements. The Company adopted the disclosure provisions of SFAS 123, which
requires the Company to provide pro forma disclosure of net income and earnings
per share as if the optional fair value method had been applied to determine
compensation costs for the Company's stock-based compensation plans.
Accordingly, the Company's net income (loss) and earnings (loss) per share for
the three and nine months ended September 27, 2003 and September 28, 2002, would
have been reduced to the pro forma amounts indicated in the following table:
Three months ended Nine months ended
-------------------------------------------------------- ------------------------------- -------------------------------
September 27, September 28, September 27, September 28,
(In thousands except per share data) 2003 2002 2003 2002
-------------------------------------------------------- --------------- --------------- --------------- ---------------
Net income (loss), as reported $ 2,437 $ 621 $ 6,052 $(10,717)
Less: total stock-based employee compensation expense
determined
under the fair value method (596) (413) (1,929) (2,704)
-------------------------------------------------------- --------------- --------------- --------------- ---------------
Adjusted net income (loss) $ 1,841 $ 208 $ 4,123 $(13,421)
======================================================== =============== =============== =============== ===============
Net income (loss) per common share, as reported:
Basic $ 0.07 $ 0.02 $ 0.18 $ ( 0.31)
======================================================== =============== =============== =============== ===============
Diluted $ 0.07 $ 0.02 $ 0.17 $ ( 0.31)
======================================================== =============== =============== =============== ===============
Adjusted net income (loss) per common share:
Basic $ 0.05 $ 0.01 $ 0.12 $ (0.39)
======================================================== =============== =============== =============== ===============
Diluted $ 0.05 $ 0.01 $ 0.12 $ (0.39)
======================================================== =============== =============== =============== ===============
The above adjusted net income (loss) and net income (loss) per share do not
consider any related tax benefit from stock option exercises.
7
The Company used the Black-Scholes option-pricing model to estimate the fair
value of $3.36 and $3.43 for each stock option issued in the third quarter and
first nine months of fiscal 2003 and 2002, respectively, using the following
weighted average assumptions:
Three months ended Nine months ended
- -------------------------- ------------------------------- -------------------------------
September 27, September 28, September 27, September 28,
2003 2002 2003 2002
- -------------------------- --------------- --------------- --------------- ---------------
Dividend yield None None None None
Expected volatility 70.85% 74.57% 72.70% 74.57%
Risk free interest rate 3.55% 3.43% 3.28% 3.43%
Expected option life 6.59 6.45 6.59 6.45
In June 2003, the Company's shareholders approved the 2003 Stock Option and
Incentive Plan, ("2003 Plan") which provides for grants of stock options, stock
issuances and other equity interests in the Company to employees, officers,
directors and advisors of the Company. The number of shares of common stock
authorized for issuance under the 2003 Plan is 2,000,000 shares.
Effect of New Accounting Pronouncements - In January 2003, the Emerging Issues
Task Force ("EITF") issued EITF Issue No. 00-21, Accounting for Revenue
Arrangements with Multiple Deliverables ("EITF 00-21"). EITF 00-21 addresses
certain aspects of the accounting by a vendor for arrangements under which it
will perform multiple revenue generating activities; specifically, how to
determine whether an arrangement involving multiple deliverables contains more
than one unit of accounting and how arrangement consideration should be measured
and allocated to the separate units of accounting in the arrangement. EITF 00-21
does not change otherwise applicable revenue recognition criteria. EITF 00-21 is
effective for revenue arrangements entered into in fiscal periods beginning
after June 15, 2003. The adoption of EITF 00-21 did not have a material effect
on the Company's financial statements.
In January 2003, the Financial Accounting Standards Board ("FASB"), issued
Interpretation No. 46, "Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin No. 51, ("FIN No. 46")" which
requires all variable interest entities ("VIEs") to be consolidated by the
primary beneficiary. The primary beneficiary is the entity that holds the
majority of the beneficial interests in the VIE. In addition, the interpretation
expands disclosure requirements for both variable interest entities that are
consolidated, as well as VIEs from which the entity is the holder of a
significant amount of the beneficial interests, but not the majority. The
disclosure requirements of this interpretation are effective for all financial
statements issued after January 31, 2003. The consolidation requirements of this
interpretation are effective for all periods beginning after June 15, 2003. The
Company does not have any VIEs, therefore the adoption of this interpretation
did not have a material effect on its results of operations or financial
condition.
In April 2003, the FASB issued Statement of Financial Accounting Standards,
("SFAS"), No. 149, "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities." SFAS No. 149 amends and clarifies the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities under SFAS No, 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 149 is generally
effective for contracts entered into or modified after June 29, 2003 and for
hedging relationships designated after June 29, 2003. The adoption of this
statement did not have a material effect on the Company's results of operations
or financial condition.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
requires that certain financial instruments, which under previous guidance were
accounted for as equity, must now be accounted for as liabilities. The financial
instruments affected include mandatorily redeemable stock, certain financial
instruments that require or may require the issuer to buy back some of its
shares in exchange for cash or other assets and certain obligations that can be
settled with shares of stock. SFAS No. 150 is effective for all financial
instruments entered into or modified after May 31, 2003 and must be applied to
existing financial
8
instruments effective June 29, 2003. The adoption of this statement did not have
a material effect on the Company's results of operations or financial condition.
2. Inventories
-----------
Inventories consisted of the following at September 27, 2003 and December 28,
2002:
(In thousands) September 27, 2003 December 28, 2002
--------------------------------------------------- ------------------ -------------------
Raw materials $ 1,625 $ 2,162
Work in process 3,853 4,179
Finished goods 6,418 5,374
--------------------------------------------------- ------------------ -------------------
Total inventories $ 11,896 $ 11,715
=================================================== ================== ===================
3. Property, Plant and Equipment, Net
----------------------------------
Property, plant and equipment, net consisted of the following at September 27,
2003 and December 28, 2002:
(In thousands, at cost) September 27, 2003 December 28, 2002
--------------------------------------------------- ------------------ -------------------
Land and improvements $ 2,038 $ 2,038
Buildings and leasehold improvements 24,518 24,456
Production equipment and other 46,671 46,023
Office furniture and equipment 4,752 4,545
--------------------------------------------------- ------------------ -------------------
77,979 77,062
Less accumulated depreciation (30,631) (24,771)
--------------------------------------------------- ------------------ -------------------
Total property, plant and equipment, net $ 47,348 $ 52,291
=================================================== ================== ===================
4. Accrued Expenses
----------------
Accrued expenses consisted of the following at September 27, 2003 and December
28, 2002:
(In thousands) September 27, 2003 December 28, 2002
--------------------------------------------------- ------------------ -------------------
Accrued payroll and benefits $ 2,527 $ 2,152
Accrued warranty 887 1,089
Accrued special charges 2,930 3,226
Other current liabilities 2,171 1,687
Deferred revenue 645 389
Net current liabilities of discontinued operations -- 1,449
--------------------------------------------------- ------------------ -------------------
Total accrued expenses $ 9,160 $ 9,992
=================================================== ================== ===================
5. Long-Term Debt
--------------
Long-term debt consisted of the following at September 27, 2003 and December 28,
2002:
(In thousands) September 27, 2003 December 28, 2002
--------------------------------------------------- ------------------ -------------------
Mortgage term loans $ 6,516 $ 7,417
Lease line of credit 7,849 9,290
--------------------------------------------------- ------------------ -------------------
14,365 16,707
Less current portion (3,279) (3,045)
--------------------------------------------------- ------------------ -------------------
Total long-term debt, net of current portion $ 11,086 $ 13,662
=================================================== ================== ===================
9
In October 2003, the Company renegotiated its existing credit facilities,
entering into a $50.0 million senior secured credit facility jointly with two
lenders. This new credit facility includes a $35.0 million revolving line of
credit (the "Revolver") and a $15.0 million term loan (the "Term Loan"). These
credit facilities are secured by all of the Company's assets, and bear interest,
at the Company's election, at either the Prime rate or the LIBOR rate, plus an
applicable margin based on certain financials ratios, ranging from a minimum of
..25% to a maximum of 2.5%.
The Revolver is a five-year loan, expiring in September 2008, under which the
Company may borrow a maximum of $35.0 million, reduced by the amount of all
letters of credit outstanding. Advances under the Revolver may be used to
finance working capital requirements, capital expenditures, and future
acquisitions as permitted under the loan agreement. At October 15, 2003, the
Company had $35.0 million available under the revolving line of credit loan,
reduced by $5.5 million outstanding under standby letters of credit.
The Term Loan is a five-year loan in the amount of $15.0 million. Under the Term
Loan, principal and interest payments will be made in nineteen quarterly
installments of $535,714 plus interest, with a final payment of all remaining
principal, and accrued and unpaid interest due on September 30, 2008. At October
15, 2003, the effective interest rate was 3.65%. Proceeds from the Term Loan
were used to re-finance all debt outstanding under our previous credit
facilities.
Under the terms of the Revolver and Term Loan, the Company is required to meet
various financial covenants on a quarterly and annual basis, including maximum
funded debt to EBITDA and minimum fixed charge coverage convents. As of
September 27, 2003, the Company was in compliance with all financial covenants.
6. Discontinued Operations
-----------------------
During the third quarter of fiscal 2003, the Company filed a joint motion for
dismissal of a lawsuit that PPG, Inc. ("PPG") brought against the Company's
subsidiary, Delta V Technologies, Inc., whose operations were discontinued in
fiscal 1999. As a result of the dismissal, the Company reversed all previously
recorded liabilities associated with this discontinued operation in the third
quarter of fiscal 2003, resulting in net income of $1.4 million from
discontinued operations in the quarter.
7. Income Taxes
------------
The Company did not record a provision for federal or state income taxes for the
third quarter and first nine months of fiscal 2003, as a result of the
utilization of net operating loss carryforwards. The Company did not record a
provision for federal or state income taxes for the third quarter and first nine
months of fiscal 2002, as a result of tax losses incurred in the nine months
ended September 28, 2002.
10
8. Earnings (Loss) Per Share
-------------------------
The following represents the calculation of basic and diluted earnings (loss)
per share for the three and nine months ended September 27, 2003 and September
28, 2002:
Three months ended Nine months ended
- --------------------------------------------------------------- ------------------------------ -------------------------------
September 27, September 28, September 27, September 28,
(In thousands, except per share data) 2003 2002 2003 2002
- --------------------------------------------------------------- -------------- --------------- --------------- ---------------
Income (loss) from
continuing operations $ 1,008 $ 621 $ 4,623 $ (10,717)
Income from
discontinued operations 1,429 -- 1,429 --
-------------- --------------- --------------- ---------------
Net income (loss) $ 2,437 $ 621 $ 6,052 $ (10,717)
============== =============== =============== ===============
Weighted average common shares
outstanding - Basic 34,177 34,125 34,158 34,124
Effect of assumed conversion of
stock options 448 2 171 --
-------------- --------------- --------------- ---------------
Weighted average common shares
outstanding - Diluted 34,625 34,127 34,329 34,124
============== =============== =============== ===============
Earnings (loss) per share - Basic:
From continuing operations $ 0.03 $ 0.02 $ 0.14 $ (0.31)
============== =============== =============== ===============
From discontinued operations $ 0.04 $ 0.00 $ 0.04 $ 0.00
============== =============== =============== ===============
Earnings (loss) per share - Basic $ 0.07 $ 0.02 $ 0.18 $ (0.31)
============== =============== =============== ===============
Earnings (loss) per share - Diluted:
From continuing operations $ 0.03 $ 0.02 $ 0.13 $ (0.31)
============== =============== =============== ===============
From discontinued operations $ 0.04 $ 0.00 $ 0.04 $ 0.00
============== =============== =============== ===============
Earnings (loss) per share - Diluted $ 0.07 $ 0.02 $ 0.17 $ (0.31)
============== =============== =============== ===============
Options and warrants to purchase 1,590,427 and 2,412,275 shares of common stock
at exercise prices ranging from $6.10 to $22.75 per share were outstanding
during a portion of the third quarter and first nine months of fiscal 2003,
respectively, but were not included in the computation of diluted earnings per
share as the exercise prices of the options and warrants were greater than the
average market price of the shares of common stock during those periods.
Options and warrants to purchase 3,993,045 shares of common stock at exercise
prices ranging from $3.35 to $26.94 per share were outstanding during a portion
of the third quarter of fiscal 2002, but were not included in the computation of
diluted earnings per share as the exercise prices of the options and warrants
were greater than the average market price of the shares of common stock during
that period. All options and warrants outstanding during the first nine months
of fiscal 2002 were not included in the computation of diluted earnings per
share as their effect would be anti-dilutive.
9. Comprehensive Income
--------------------
Comprehensive income is comprised of net income and all changes in stockholder's
equity except those due to investments by owners and distributions to owners.
For the third quarter and first nine months of fiscal 2003 and fiscal 2002,
comprehensive income was comprised solely of net income.
11
10. Segment Information
-------------------
The following table presents a summary of the Company's operations by segment
for the three and nine months ended September 27, 2003 and September 28, 2002:
Digital Imaging Inter-
(In thousands) Products Lasertel Segment Total
----------------------------------------------- --------------- ------------ ------------ ------------
Three months ended September 27, 2003
----------------------------------------------- --------------- ------------ ------------ ------------
Revenue $ 19,348 $ 1,608 $ (1,198) $ 19,758
Income (loss) from operations 1,738 (709) -- 1,029
Total assets 91,229 14,649 -- 105,878
Three months ended September 28, 2002
----------------------------------------------- --------------- ------------ ------------ ------------
Revenue $ 20,961 $ 1,321 $ (1,296) $ 20,986
Income (loss) from operations 2,781 (1,947) 834
Total assets 85,486 16,535 102,021
Nine months ended September 27, 2003
----------------------------------------------- --------------- ------------ ------------ ------------
Revenue $ 63,706 $ 5,066 $ (4,053) $ 64,719
Income (loss) from operations 7,673 (2,778) 4,895
Total assets 91,229 14,649 105,878
Nine months ended September 28, 2002
----------------------------------------------- --------------- ------------ ------------ ------------
Revenue $ 61,050 $ 1,555 $ (1,529) $ 61,076
Income (loss) from operations (3,872) (6,194) (10,066)
Total assets 85,486 16,535 102,021
11. Discontinued Programs and Special Charges
-----------------------------------------
In the second quarter of fiscal 2003, the Company expanded its repositioning
actions to reduce costs, which had been initiated in the second quarter of
fiscal 2002. The Company recorded a charge of $550,000 in the second quarter of
fiscal 2003, primarily related to severance and benefit costs, as a result of
headcount reductions in April 2003.
The Company recorded a charge of $4.7 million to cost of products sold and $6.0
million in special charges in the second quarter of fiscal 2002. These charges
included inventory, equipment and other asset write-downs, severance and fringe
benefit costs, and executive and other contractual obligations.
The following tables summarize the activity related to the discontinued programs
and special charges and accrued balances for the nine months ended September 27,
2003:
Balance at Additional provisions Utilization
December 28, through through Balance at
(In thousands) 2002 September 27, 2003 September 27, 2003 September 27, 2003
- ----------------------------------------- --------------- ----------------------- -------------------- --------------------
Equipment and other asset
write-downs $ 39 $ -- $ -- $ 39
Discontinued programs 1,501 (2) 1,499
Executive contractual obligations 1,257 (323) 934
Severance and fringe benefits 262 550 (414) 398
Lease termination and other costs 167 (107) 60
- ----------------------------------------- --------------- ----------------------- -------------------- --------------------
Total accrued special charges
and discontinued programs $ 3,226 $ 550 $ (846) $ 2,930
========================================= =============== ======================= ==================== ====================
Deferred revenue associated with
discontinued programs $ 120 $ -- $ (70) $ 50
========================================= =============== ======================= ==================== ====================
The cumulative cash paid by the Company at September 27, 2003 as a result of the
forgoing repositioning actions totaled $2.7 million. The Company anticipates the
remaining payments related to the discontinued programs and special charges will
be completed by May 2005.
12. Other Information
-----------------
On September 16, 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, or from possessing such infringing
material.
In August 2003, the Company was served with a lawsuit filed on June 2, 2003, in
the United States District Court for the District of New Hampshire against the
Company and two of its former officers, captioned "James B. Zouras v. Robert
Hallman et al." The lawsuit allegedly was filed on behalf of all purchasers of
the Company's common stock between December 10, 1999 and July 16, 2001 and
alleges, among other things, that misstatements were made to the investing
public regarding an arbitration proceeding commenced in 1999 and concluded in
2001 with one of the Company's customers. The complaint does not specify the
amount of any damages being claimed. The Company disputes all material
allegations of the complaint and intends to vigorously defend the litigation.
In December 1999, PPG, Inc. brought suit against Delta V Technologies, Inc.
("Delta V"), a subsidiary of the Company, and Presstek. The suit alleged that
Delta V sold to PPG certain vacuum coating equipment that did not meet certain
product specifications. PPG sought damages in excess of $7.0 million. PPG sought
to hold Presstek liable for the alleged breach of contract by its subsidiary,
Delta V, on a theory of indirect liability. Presstek and Delta V answered PPG's
complaint. Delta V asserted a counterclaim against PPG for PPG's failure to make
the final installment payment in excess of $400,000 for Delta V's work. In
November 2002, the U.S. District Court granted summary judgment in favor of
Presstek, because, as a matter of law, PPG was unable to demonstrate any grounds
upon which to hold Presstek liable for any alleged breach of contract by Delta
V. In August 2003, PPG and Delta V reached a settlement in this matter and the
suit was dismissed with prejudice.
13
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:
Certain statements 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 statements regarding our expectations
for our financial and operating performance in 2003 and beyond; the adequacy of
internal cash and working capital for our operations; the strength of our
various strategic partnerships (both on manufacturing and distribution); our
ability to secure other strategic alliances and relationships; our expectations
regarding Presstek's strategy for growth; our expectations and plans regarding
market penetration, including the strength and scope of our distribution
channels and our expectations regarding sales of DI presses in Europe; our
expectations regarding our new OEM relationships with Heidelberg Druckmaschinen,
AG, ("Heidelberg"); our expectations regarding the sale of our products and use
of our technology including pricing; our expectations regarding the manufacture
and performance of existing, planned and recently introduced products; the
effects, market acceptance, or pricing of competitive products, including the
impact of a competitive plate product introduced by a strategic partner; the
placement of orders for direct imaging kits; our expectations regarding the
effects and benefits of the Company's streamlining of operations and reductions
in force, 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 factors that could cause or contribute to such
differences include, but are not limited to, our dependency on our strategic
partners (both on manufacturing and distribution); uncertainty surrounding
patent protection, shortages of critical or sole-source component supplies; the
availability and quality of Lasertel's laser diodes; manufacturing constraints
or difficulties (as well as manufacturing difficulties experienced by our
sub-manufacturing partners and their capacity constraints); the impact of
general market factors in the print industry generally and the economy as a
whole; market acceptance of and demand for our products and resulting revenues;
the introduction and market acceptance of competitive products; risk and impact
of litigation; and other risks detailed in the Company's reports on file with
the Securities and Exchange Commission, including its Annual Report on Form 10-K
for the fiscal year ended December 28, 2002, as well as those discussed
elsewhere in this report. 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 the
statements were made and readers are advised to consider such forward-looking
statements in light of the risks set forth below. Presstek undertakes no
obligation to update any forward-looking statements contained in this Quarterly
Report on Form 10-Q.
BACKGROUND
Presstek, Inc. ("Presstek(R)", "we" or "us"), incorporated in Delaware in 1987,
is a manufacturer, developer and marketer of digital laser imaging and
chemistry-free plate technologies for the printing and graphic arts industries.
Presstek's products and applications incorporate its patented Direct Imaging
("DI(R)") technologies and consumables for computer-to-plate ("CTP") and
direct-to-press applications. Presstek's DI technology enables "direct to press"
imaging, whereby the printing plates are imaged on the press directly from
digital files, bypassing numerous prepress procedures and chemical processes in
preparing jobs for presswork. Our CTP or off-press imaging allows operators of
conventional printing presses the ability to image plates directly from digital
files to the CTP device. The printer then uses these plates as they would a
traditional plate, but without the chemical processes required for conventional
plates.
Our patented DI thermal laser diode product family enables customers to produce
high quality, full-color lithographic printed materials more quickly and cost
effectively than conventional methods. Our DI technology eliminates photographic
darkrooms, film, and chemical processing, which results in reduced
14
turn-around time and lowers the effective cost of production for commercial
printers. We are a leader in our industry with an environmentally friendly
process that avoids the chemicals associated with plate development. Our DI
technologies, which use digital information and high-powered semiconductor laser
diodes to create images on our patented printing plate materials, are marketed
to leading press manufacturers and are used in our Dimension(R) series of CTP
systems. Presstek's Dimension CTP systems incorporate our patented ProFire(R)
laser imaging technology and use our chemistry free printing plate, Anthem(R).
Presstek's CTP workflow and automated DI printing technology not only complement
digital publishing technology, they also are designed to help printers meet the
short-run, quick turn-around, color demands of the marketplace. By significantly
increasing the efficiency with which jobs are prepared for print, Presstek's
technology is designed to make shorter printing runs more feasible at lower
costs. Presstek's technology utilizes the offset lithographic method of applying
ink to paper that we believe is universally accepted by printers and consumers,
and produces the versatile, high-quality characteristics they require.
Lasertel, Inc. ("Lasertel"), a subsidiary of Presstek, is primarily engaged in
the manufacture and development of high-powered laser diodes. Lasertel's
products include semiconductor lasers and active components for the graphics,
industrial and defense industries. Lasertel offers high-powered laser diodes in
both standard and customized configurations, including chip on sub-mount,
un-mounted bars, and fiber-coupled devices, to support various applications.
We operate and report on a 52 or 53 week fiscal year, ending on the Saturday
closest to December 31. Accordingly, the financial statements include the
thirteen-week periods ended September 27, 2003 ("the third quarter of fiscal
2003") and September 28, 2002 ("the third quarter of fiscal 2002"), and the
thirty-nine week periods ended September 27, 2003 ("the first nine months of
fiscal 2003"), and September 28, 2002 ("the first nine months of fiscal 2002").
We operate in two reportable segments, the Digital Imaging Products segment and
the Lasertel segment. The Digital Imaging Products segment is primarily engaged
in the development, manufacture and sale of Presstek's patented digital imaging
systems and printing plate technologies for CTP and direct-to-press
applications. The Lasertel segment is primarily engaged in the manufacture and
development of high-powered laser diodes for Presstek and other customers.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
GENERAL
Presstek's Management's Discussion and Analysis of Financial Condition and
Results of Operations are based upon our consolidated financial statements,
which have been prepared in accordance with generally accepted accounting
principles as adopted in the United States. The preparation of these financial
statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, and related disclosure of contingent
assets and liabilities, and the reported amounts of revenue and expenses during
the reporting period. On an on-going basis, Presstek evaluates its estimates,
including those related to product returns, allowances for doubtful accounts,
inventories, long-lived assets, warranty obligations, and litigation. Presstek
bases its 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.
We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements. Presstek's significant accounting policies are presented
in Note 1 of our financial statements in our Annual Report on Form 10-K for the
fiscal year ended December 28, 2002, filed with the Securities Exchange
Commission on March 28, 2003.
15
REVENUE RECOGNITION
Presstek recognizes revenue when persuasive evidence of an agreement exists,
delivery has occurred or services have been rendered, the price to the customer
is fixed or determinable, and collection is reasonably assured.
We record revenue for product sales net of estimated returns, which are adjusted
periodically, based upon historical rates of return. Revenue and related
royalties for products sold where installation is not required is recorded at
the time of shipment. Revenue for products that require installation, for which
the installation is not deemed inconsequential, is recognized upon completion of
installation and customer acceptance. Revenue related to service maintenance
agreements is recognized ratably over the duration of the particular contract.
Certain fees and other reimbursements are recognized as revenue when the related
services have been performed or the revenue otherwise earned. Deferred revenue
includes certain customer advances received as a result of our distribution
agreements. This revenue is recognized as product is shipped or services are
performed.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Presstek evaluates its accounts receivable on an ongoing basis and establishes
an allowance for doubtful accounts based on specific customer circumstances and
on its historical rate of write-offs. We include any accounts receivable
balances that are determined to be uncollectible, along with a general reserve,
in an overall allowance for doubtful accounts. After all attempts to collect a
receivable have failed, the receivable is written off against the allowance.
While we believe the allowance for doubtful accounts as of September 27, 2003 is
adequate, actual write-offs might exceed the recorded allowance.
PRODUCT WARRANTIES
Presstek warrants its products against defects in material and workmanship for
various periods, determined by the product, generally from a period of ninety
days to a period of one year from the date of installation. We provide for the
estimated cost of product warranties at the time revenue is recognized. While we
engage in product quality programs and processes, our warranty obligation is
affected by product failure rates, material usage and service costs incurred in
correcting a product failure. Should actual product failure rates, material
usage or service costs differ from our estimates, revisions to the estimated
warranty liability would be required.
INVENTORY VALUATION
Inventories are valued at the lower of cost or net realizable value, with cost
determined using the first-in, first-out method. We assess the recoverability of
inventory to determine whether adjustments for impairment are required.
Inventory that is in excess of future requirements is written down to its
estimated value based upon forecasted demand for its products. If actual demand
is less favorable than what has been forecasted by management, additional
inventory write-downs may be required.
LONG-LIVED ASSETS
Long-lived assets, such as intangible assets and property and equipment, are
evaluated for impairment when events or changes in circumstances indicate that
the carrying amount of the assets may not be recoverable through the estimated
undiscounted future cash flows from the use of these assets. When any such
impairment exists, the related assets will be written down to fair value.
16
RESULTS OF OPERATIONS
REVENUE
Revenue for the third quarter and first nine months of fiscal 2003 of $19.8
million and $64.7 million, respectively, consisted of product sales, customer
support revenue, royalties and license fees. Revenue for the third quarter
decreased $1.2 million or 6%, as compared to $21.0 million for the third quarter
of fiscal 2002. Revenue for the first nine months of fiscal 2003 increased $3.6
million or 6%, as compared to $61.1 million for the first nine months of 2002.
Product sales for the Digital Imaging Products segment, including the sale of
equipment and consumables, were $18.4 million and $60.1 million for the third
quarter and first nine months of fiscal 2003, respectively, a decrease of $1.3
million or 7% and an increase of $3.4 million or 6%, as compared to $19.7
million and $56.7 million for the third quarter and first nine months of fiscal
2002, respectively. The decrease in product sales for the third quarter of
fiscal 2003 was primarily due to volume decreases in the sale of our consumable
products, as well as decreased shipments of direct imaging kits to Heidelberg,
partially offset by increased sales of presses and CTP equipment. The increase
in product sales for the first nine months of fiscal 2003 was due primarily to
volume increases in sales of the Karat 46 press to Koenig & Bauer, AG ("KBA"),
the KPG DI press to Kodak Polychrome Graphics ("KPG"), as well as our CTP
platesetter products, partially offset by decreases in shipments of direct
imaging kits to Heidelberg for use in the Quickmaster DI, and shipments to Xerox
Corporation ("Xerox") of the DocuColor 233DI.
The revenue generated from the sale of consumable products was $12.2 million and
$39.5 million for the third quarter and first nine months of fiscal 2003,
respectively, a decrease of $1.6 million or 12% and $127,000 or less than 1%, as
compared to $13.8 million and $39.7 million in the third quarter and first nine
months of fiscal 2002, respectively. These decreases are primarily related to
volume decreases in sales of our Quickmaster DI consumables, as well as price
reductions on sales of these consumables through select dealers in our European
distribution channel.
In July 2003, we entered into OEM agreements with Heidelberg and Heidelberg USA
that provide us with certain preferred supplier rights, which vary based on
territory, time period and sales volume. Under the terms of the OEM agreements,
which include minimum volume commitments from Heidelberg and Heidelberg USA, we
will manufacture and supply Heidelberg branded consumable plate products for the
Heidelberg Quickmaster DI press. Shipments to Heidelberg of the branded
consumable product began in August 2003.
Consumable product revenue includes sales under our agreements with Heidelberg
and its distributors of $3.3 million and $12.3 million for the third quarter and
first nine months of fiscal 2003, a decrease of $3.4 million or 51% and $4.8
million or 28%, respectively, as compared to $6.7 million and $17.1 million in
the third quarter and first nine months of fiscal 2002. These decreases are
primarily the result of a re-alignment of Quickmaster DI consumable inventory
levels in the Heidelberg channel from the Presstek branded product to the
Heidelberg OEM consumable product.
As previously disclosed, in March 2003, we expanded the product offerings to
select dealers in our European distribution channel to include the sale of
Quickmaster DI consumables. In connection with this offering, we reduced pricing
on our full line of spooled consumables distributed through this distribution
channel by up to 20%. This new pricing reduced the revenue we generated from
sales of our spooled consumable products by approximately $140,000 in the third
quarter of fiscal 2003. This new pricing, in addition to the pricing under our
new OEM agreements with Heidelberg, may result in a further reduction of revenue
generated from spooled consumables sales of up to $750,000 in the fourth quarter
of fiscal 2003. While the expected lost revenue resulting from the price
reduction may be offset by increased revenue from increased volume of spooled
consumable sales derived from additional presses installed and increased usage
of spooled consumables, there can be no assurance that this expected lost
revenue will be offset. In addition, market conditions may require us to expand
the regions in which we offer reduced prices, or to further reduce our spooled
consumable prices, which could further reduce our
17
revenues in 2003 and beyond. This could have a material adverse effect on our
business, results of operations and financial position.
Revenue generated from services related to customer support, including
installation and service contract revenue, was $470,000 and $1.5 million for the
third quarter and first nine months of fiscal 2003, respectively, an increase of
$201,000 or 75% and $500,000 or 50%, as compared to $269,000 and $1.0 million
for the third quarter and first nine months of fiscal 2002, respectively. These
increases relate primarily to the sale of service maintenance agreements related
to our CTP Dimension products.
Royalties and fees from licensees for the third quarter and first nine months of
fiscal 2003 were $491,000 and $2.1 million, a decrease of $533,000 or 52% and
$1.3 million or 38%, as compared to $1.0 million and $3.4 million for the third
quarter and first nine months of fiscal 2002, respectively. These decreases
relate primarily to decreased shipments to Heidelberg of direct imaging kits
used in the Quickmaster DI. Heidelberg has indicated, as a result of the global
economic slowdown, that it has an inventory of direct imaging kits on hand to
support its production requirements for at least six months. We currently
believe that orders for direct imaging kits may not resume until sometime in
fiscal 2004, however, there can be no assurance that any orders will be received
at this time.
Revenue generated under our agreements with Heidelberg and its distributors was
$3.5 million and $14.9 million for the third quarter and first nine months of
fiscal 2003, a decrease of $4.8 million or 58%, and $8.6 million or 37%,
respectively, as compared to $8.3 million and $23.5 million in the third quarter
and first nine months of fiscal 2002, respectively. These decreases are due
primarily to decreased shipments to Heidelberg of direct imaging kits used in
the Quickmaster DI, as well as decreased consumable shipments. Revenue from
Heidelberg represented 18% and 23% of total revenue for the third quarter and
first nine months of fiscal 2003, as compared to 38% and 42% of total revenue
for the third quarter and first nine months of fiscal 2002, respectively.
Heidelberg announced in March 2003 that it planned to introduce a competitive
plate product, as an alternative to Presstek's PEARLdry for the Quickmaster DI.
While the impact to our business from this competitive plate has not been
material to date, it is still too early to estimate the impact this plate may
have on our business in the future. The introduction of a competitive plate
could reduce the revenue generated by Presstek under its agreements with
Heidelberg, including the OEM agreements entered into in July 2003. It could
also lead to downward pricing pressure on our full line of spooled consumable
products, which could have a material adverse effect on our business, results of
operations or financial condition.
Revenue generated under our agreements with KBA and its distributors was $2.0
million and $7.0 million for the third quarter and first nine months of fiscal
2003, respectively, an increase of $1.1 million or 133% and $3.6 million or
106%, as compared to $858,000 and $3.4 million for the comparable periods in
fiscal 2002, respectively. These increases are primarily the result of increased
press sales to KBA.
As previously disclosed, in March 2003, we negotiated the termination of our
supply and distribution agreement with Xerox for DocuColor DI presses. Xerox
will no longer sell the DocuColor 233 DI-4, the DocuColor 400 DI-4 and the
DocuColor 400 DI-5 presses and related consumables. The revenue generated from
the sale of these presses was not material in fiscal 2002, and as a result, the
termination of this agreement is not expected to have a material adverse effect
on our business, results of operations or financial condition.
Revenue for the Lasertel segment for the third quarter and first nine months of
fiscal 2003 was $410,000 and $1.0 million, respectively, and primarily related
to the sale of products for defense industry applications. Product sales to
external customers for the third quarter and first nine months of fiscal 2002
were not material.
18
COST OF PRODUCTS SOLD
Cost of products sold consists of the cost of material, labor and overhead,
shipping and handling costs and warranty expenses. Cost of products sold for the
Digital Imaging Products segment were $11.5 million or 60% of revenue and $36.2
million or 57% of revenue, for the third quarter and first nine months of fiscal
2003, respectively, a decrease of $300,000 and $1.0 million or 3%, as compared
to $11.8 million or 56% of revenue and $37.2 million or 61% of revenue, for the
comparable periods in fiscal 2002, respectively. These decreases are primarily
the result of decreased production costs as a result of decreased sales volume.
Gross margin (defined as total revenue less cost of products sold) as a
percentage of total revenue for the Digital Imaging Products segment was 40% for
the third quarter and 43% for the first nine months of fiscal 2003,
respectively, as compared to 44% and 39% for the third quarter and first nine
months of fiscal 2002, respectively. The reduction in gross margin in the third
quarter of 2003 was primarily the result of an unfavorable product mix. In the
first nine months of fiscal 2002, gross margin was unfavorably impacted by a
$4.0 million charge related to inventory write-downs and other charges for
discontinued programs.
Cost of products sold for the Lasertel segment was $623,000 and $2.4 million for
the third quarter and first nine months of fiscal 2003, respectively, a decrease
of approximately $862,000 or 58% and $2.4 million or 50%, as compared to $1.5
million and $4.8 million for the third quarter and first nine months of fiscal
2002, respectively. The decrease in cost of products sold relates primarily to
yield improvements, as well as a reduction in inventory write-downs for
discontinued programs as a result of a $688,000 charge recorded in the second
quarter of fiscal 2002.
RESEARCH AND PRODUCT DEVELOPMENT
Research and product development expenses consist primarily of payroll and
related expenses for personnel, parts and supplies, and contracted services
required to conduct our equipment, consumables and high-powered laser diode
product development efforts.
Research and product development expenses for the Digital Imaging Products
segment were $1.5 million and $4.8 million or 8% of revenue, for the third
quarter and first nine months of fiscal 2003, respectively, a decrease of
$500,000 and $2.4 million as compared to $2.0 million or 10% of revenue and $7.2
million or 12% of revenue for the comparable periods in fiscal 2002,
respectively. These decreases relate primarily to a reduction in the number of
development programs which resulted in reduced expenditures in salaries and
benefits, parts and supplies, and professional and contractor services.
Presstek's product development cycle centers around major industry trade shows,
and as a result, our research and product development expenses vary in
accordance with our product development cycle.
Research and product development expenses for the Lasertel segment were $151,000
and $670,000, for the third quarter and first nine months of fiscal 2003,
respectively, an increase of $135,000 and $581,000, as compared to $16,000 and
$89,000 for the comparable periods in fiscal 2002, respectively. These increases
relate primarily to additional research and product development activities
undertaken in the industrial markets.
SALES, MARKETING AND CUSTOMER SUPPORT
Sales, marketing and customer support expenses consist primarily of payroll and
related expenses for personnel, advertising, trade shows, promotional expenses,
and travel costs related to our sales, marketing and customer support
activities.
Sales, marketing and customer support expenses for the Digital Imaging Products
segment were $2.8 million or 15% of revenue and $8.5 million or 13% of revenue,
for the third quarter and first nine months of fiscal 2003, respectively, an
increase of $500,000 and $600,000, as compared to $2.3 million or 11% of revenue
and $7.9 million or 13% of revenue for the comparable periods in fiscal 2002,
respectively.
19
These increases relate primarily to an increase in salaries and related
benefits, as well as, professional fees associated with promotional activities
directed at product distribution, offset in part by reduced travel and related
expenses for customer support activities.
Sales and marketing expenses for the Lasertel segment were $74,000 and $247,000
for the third quarter and first nine months of fiscal 2003, respectively, an
increase of $52,000 and $67,000, as compared to $22,000 and $180,000 for the
comparable periods in fiscal 2002, respectively. These increases were the result
of increased promotional activities related to trade shows held in the second
quarter of fiscal 2003.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of payroll and related
expenses for personnel, and contracted professional services necessary to
conduct our finance, information systems, human resources and administrative
activities.
General and administrative expenses for the Digital Imaging Products segment
were $1.8 million or 9% of revenue and $6.3 million or 10% of revenue, for the
third quarter and first nine months of fiscal 2003, respectively, a decrease of
$300,000 and $400,000, as compared to $2.1 million or 10% of revenue and $6.7
million or 11% of revenue for the comparable periods in fiscal 2002,
respectively. These decreases relate primarily to decreased legal fees as a
result of the resolution of patent litigation with Creo Products, Inc., as well
as decreases in salaries and benefits as a result of a decrease in head count in
the second quarter of fiscal 2003.
General and administrative expenses for the Lasertel segment were $271,000 and
$787,000, for the third quarter and first nine months of fiscal 2003,
respectively, a decrease of $179,000 and $313,000, as compared to $450,000 and
$1.1 million, for the comparable periods in fiscal 2002, respectively. These
decreases relate primarily to a decrease in professional services and fees.
DISCONTINUED OPERATIONS
During the third quarter of fiscal 2003, we filed a joint motion for dismissal
of a lawsuit that PPG, Inc. ("PPG") brought against our subsidiary Delta V
Technologies, Inc., ("Delta V") whose operations were discontinued in fiscal
1999. As a result of the dismissal, we reversed all previously recorded
liabilities associated with this discontinued operation in the third quarter of
fiscal 2003, resulting in net income of $1.4 million from discontinued
operations in the quarter.
DISCONTINUED PROGRAMS AND SPECIAL CHARGES
In the second quarter of fiscal 2003, we recorded special charges of $550,000
related to severance and fringe benefit costs associated with the reduction of
approximately 43 employees, primarily in manufacturing, research and development
and administration in April 2003, of which $471,000 was recorded by the Digital
Imaging Products segment and $79,000 by the Lasertel segment.
In fiscal 2002, we initiated various repositioning actions to reduce costs. As a
result of the repositioning programs, we recorded a charge of $4.7 million to
cost of products sold in the second quarter of fiscal 2002, of which $4.0
million was recorded by the Digital Imaging Products segment and $688,000 by the
Lasertel segment. In addition, the Digital Imaging products segment recorded
$6.0 million in special charges in the second quarter of fiscal 2002. These
charges included inventory, equipment and other asset write-downs, severance and
fringe benefit costs, and executive and other contractual obligations.
OTHER INCOME (EXPENSE), NET
Other income (expense), net consists primarily of net interest expense, and
other miscellaneous expenses. Interest expense, net was $97,000 and $369,000 for
the third quarter and first nine months of
20
fiscal 2003 respectively, a decrease of $127,000 and $310,000, respectively, as
compared to $224,000 and $679,000 for the comparable periods in fiscal 2002.
Interest income was $82,000 and $233,000 for the third quarter and first nine
months of fiscal 2003, an increase of $27,000 and $115,000, respectively, as
compared to $55,000 and $118,000 for the comparable periods in fiscal 2002.
These increases are a result of increased cash balances available for
investment.
Interest expense was $179,000 and $602,000 for the third quarter and first nine
months of fiscal 2003, a decrease of $100,000 and $195,000, respectively, as
compared to $279,000 and $797,000 for the comparable periods in fiscal 2002.
These decreases are a result of lower average debt balances and lower interest
rates on borrowings.
PROVISION FOR INCOME TAXES
We did not record a provision for federal or state income taxes for the third
quarter and first nine months of fiscal 2003, as a result of the utilization of
net operating loss carryforwards. We did not record a provision for federal or
state income taxes for the third quarter and first nine months of fiscal 2002 as
a result of tax losses incurred in the nine months ended September 28, 2002.
INCOME (LOSS) FROM CONTINUING OPERATIONS
As a result of the foregoing, we had income from continuing operations of $1.0
million and $4.6 million for the third quarter and first nine months of fiscal
2003, as compared to income from continuing operations of $621,000 for the third
quarter of fiscal 2002 and a loss from continuing operations of $10.7 million
for the first nine months of fiscal 2002.
INCOME FROM DISCONTINUED OPERATIONS
As a result of the dismissal of the lawsuit that PPG brought against our
subsidiary Delta V, whose operations were discontinued in fiscal 1999, we
reversed all previously recorded liabilities associated with this discontinued
operation in the third quarter of fiscal 2003, resulting in net income of $1.4
million from discontinued operations for the third quarter and first nine months
of fiscal 2003. There was no income or loss from discontinued operations for the
third quarter and first nine months of fiscal 2002.
LIQUIDITY AND CAPITAL RESOURCES
We finance our operating and capital investment requirements primarily through
cash flows from operations and borrowings. At September 27, 2003, we had cash
and cash equivalents of $26.7 million and working capital (defined as total
current assets less total current liabilities) of $37.8 million as compared to
cash and cash equivalents of $17.6 million and working capital of $28.6 million
at December 28, 2002. The increase in cash and cash equivalents of $9.1 million
for the first nine months of fiscal 2003 was primarily due to net cash provided
by operating activities of $12.2 million, offset by cash of $3.1 million used in
investing and financing activities.
Net cash provided by operating activities of continuing operations was $12.2
million for the first nine months of fiscal 2003, and is due primarily to income
from continuing operations of $4.6 million, non-cash charges of depreciation,
amortization, and other charges of $9.6 million, including $550,000 in special
charges as a result of head count reductions, and an increase in accounts
payable of $941,000, offset primarily by increases in accounts receivable, and
other assets of $1.7 million and a decrease in accrued and other expenses of
$1.2 million. The increase in accounts receivable is attributable primarily to
the timing of sales later in the third quarter of fiscal 2003. The increase in
accounts payable is primarily the result of an increase in equipment payable at
the end of the third quarter of fiscal 2003. The decrease in accrued expenses is
primarily related to the reversal of all previously recorded liabilities
associated with our discontinued operation, Delta V, in the third quarter of
fiscal 2003.
Net cash used in investing activities was $1.0 million for the first nine months
of fiscal 2003, and consisted primarily of additions to property, plant and
equipment used in the business.
21
Net cash used in financing activities was $2.1 million for the first nine months
of fiscal 2003, and consisted primarily of payments on the mortgage term loans
and the equipment lease line of credit facility.
In October 2003, we renegotiated our existing credit facilities, entering into a
$50.0 million senior secured credit facility jointly with two lenders. This new
credit facility includes a $35.0 million revolving line of credit (the
"Revolver") and a $15.0 million term loan (the "Term Loan"). These credit
facilities are secured by all our assets, and bear interest, at our election, at
either the Prime rate or the LIBOR rate, plus an applicable margin based on
certain financials ratios, ranging from a minimum of .25% to a maximum of 2.5%.
The Revolver is a five-year loan, expiring in September 2008, under which we may
borrow a maximum of $35.0 million, reduced by the amount of all letters of
credit outstanding. Advances under the Revolver may be used to finance working
capital requirements, capital expenditures, and future acquisitions as permitted
under the loan agreement. At October 15, 2003, we had $35.0 million available
under the revolving line of credit loan, reduced by $5.5 million outstanding
under standby letters of credit.
The Term Loan is a five-year loan in the amount of $15.0 million. Under the Term
Loan, principal and interest payments will be made in nineteen quarterly
installments of $535,714 plus interest, with a final payment of all remaining
principal, and accrued and unpaid interest due on September 30, 2008. At October
15, 2003, the effective interest rate was 3.65%. Proceeds from the Term Loan
were used to re-finance all debt outstanding under our previous credit
facilities.
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 and minimum fixed charge coverage convents. As of September 27,
2003, we were in compliance with all financial covenants.
We have future contractual payment obligations through 2010 that primarily
relate to debt, royalty obligations, executive contractual obligations and
operating leases. The following table represents our future commitments at
September 27, 2003 and December 28, 2002:
(In thousands) September 27, December 28,
2003 2002
--------------------------------------- --------------- ------------
Credit facilities $ 14,365 $ 16,707
Royalty obligation 11,567 11,900
Executive contractual obligations 2,695 3,100
Lease agreements 10 121
--------------------------------------- --------------- ------------
Total contractual obligations $ 28,637 $ 31,828
======================================= =============== ============
Heidelberg announced in March 2003 that it planned to introduce a competitive
plate product, as an alternative to Presstek's PEARLdry for the Quickmaster DI.
While the impact to our business from this competitive plate has not been
material to date, it is still too early to estimate the impact this plate may
have on our business in the future. The introduction of a competitive plate
could reduce the revenue generated by Presstek under its agreements with
Heidelberg, including the OEM agreements entered into in July 2003. It could
also lead to downward pricing pressure on our full line of spooled consumable
products, which could have a material adverse effect on our business, results of
operations or financial condition.
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, will be available on acceptable terms.
EFFECT OF INFLATION
Inflation has not had, and is not expected to have, a material impact upon our
operations.
22
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
----------------------------------------------------------
We are exposed to market risk from changes in interest rates primarily as a
result of our borrowing activities, and to a lesser extent, our investing
activities. The majority of our long-term borrowings are in variable rate
instruments. We have entered into interest rate swap agreements related to our
new credit facility. We currently have no material exposure to interest rate
fluctuations on our short-term investments.
We have limited exposure to foreign currency exchange rate risk. While
substantially all of our transactions are currently denominated in U.S. dollars,
a limited number of sales transactions are denominated in our customers'
currency. To date, the currency exposure related to these transactions has not
been material. Furthermore, some of our customers and strategic partners are not
located in the United States, and are themselves subject to fluctuations in
foreign exchange rates. If the home country currency of these customers and
strategic partners were to decrease in value relative to the United States
dollar, their ability to purchase and/or 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, some of our 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 September 27, 2003, we have, under the supervision and with the
participation of the Presstek's management, including its Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness of Presstek's
disclosure controls and procedures pursuant to Rule 13a-15(b) promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based upon
that evaluation, Presstek's Chief Executive Officer and Chief Financial Officer
concluded that, as of September 27, 2003, Presstek's disclosure controls and
procedures are effective in ensuring that material information relating to
Presstek (including its consolidated subsidiaries) required to be disclosed by
Presstek in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms, including ensuring
that such material information is accumulated and communicated to Presstek's
management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control over Financial Reporting
There were no changes in Presstek's internal control over financial reporting
over our last fiscal quarter that have materially affected, or are reasonably
likely to materially affect our internal control over financial reporting.
23
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Part I - Item 3 of the Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 2002 filed with the Commission on March 28, 2003 for a
description of certain legal proceedings involving the Company. All of such
information is hereby incorporated by reference in response to this item.
On September 16, 2003, Presstek filed an action against Fuji Photo Film
Corporation, Ltd. in the District Court of Mannheim, Germany for patent
infringement, alleging a disputed value tentatively estimated at 1,000,000.00
euros. 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, or from possessing such infringing
material.
In August 2003, the Company was served with a lawsuit filed on June 2, 2003, in
the United States District Court for the District of New Hampshire against the
Company and two of its former officers, captioned "James B. Zouras v. Robert
Hallman et al." The lawsuit allegedly was filed on behalf of all purchasers of
the Company's common stock between December 10, 1999 and July 16, 2001 and
alleges, among other things, that misstatements were made to the investing
public regarding an arbitration proceeding commenced in 1999 and concluded in
2001 with one of the Company's customers. The complaint does not specify the
amount of any damages being claimed. The Company disputes all material
allegations of the complaint and intends to vigorously defend the litigation.
In December 1999, PPG, Inc. ("PPG") brought suit against Delta V and Presstek.
The suit alleged that Delta V sold to PPG certain vacuum coating equipment that
did not meet certain product specifications. PPG sought damages in excess of
$7.0 million. PPG sought to hold Presstek liable for the alleged breach of
contract by its subsidiary, Delta V, on a theory of indirect liability. Presstek
and Delta V answered PPG's complaint. Delta V asserted a counterclaim against
PPG for PPG's failure to make the final installment payment in excess of
$400,000 for Delta V's work, and also asserted a cross-claim against Circonix, a
Delta V subcontractor for the vacuum coater project. Circonix filed cross-claims
against Presstek and Delta V. On February 1, 2002, Circonix filed a voluntary
petition of bankruptcy in the United States Bankruptcy Court, staying the
litigation of the claims against, and asserted by, Circonix. In November 2002,
the U.S. District Court granted summary judgment in favor of Presstek, because,
as a matter of law, PPG was unable to demonstrate any grounds upon which to hold
Presstek liable for any alleged breach of contract by Delta V. In August 2003,
PPG and Delta V reached a settlement in this matter and the suit was dismissed
with prejudice.
24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1* OEM Consumables Supply Agreement by and between Presstek, Inc. and
Heidelberg Druckmaschinen, AG., dated July 1, 2003 (filed herewith).
10.2* OEM Consumables Supply Agreement by and between Presstek, Inc. and
Heidelberg U.S.A., Inc. dated July 1, 2003 (filed herewith).
10.3 Credit Agreement by and among Presstek, Inc., Lasertel Inc., Citizens
Bank New Hampshire and Keybank National Association dated October 15,
2003 (filed herewith).
10.4 Revolving Note dated October 15, 2003 made by Presstek, Inc. in favor of
Citizens Bank New Hampshire (filed herewith).
10.5 Revolving Note dated October 15, 2003 made by Presstek, Inc. in favor of
KeyBank National Association (filed herewith).
10.6 Term Note dated October 15, 2003 made by Presstek, Inc. in favor of
Citizens Bank New Hampshire (filed herewith).
10.7 Term Note dated October 15, 2003 made by Presstek, Inc. in favor of
KeyBank National Association (filed herewith).
10.8 Swing Line Note dated October 15, 2003 made by Presstek, Inc. in favor of
Citizens Bank New Hampshire (filed herewith).
10.9 Security Agreement by and between Presstek, Inc. and Citizens Bank New
Hampshire dated October 15, 2003 (filed herewith).
10.10 Security Agreement by and between Lasertel Inc. and Citizens Bank New
Hampshire dated October 15, 2003 (filed herewith).
10.11 Security Agreement (Intellectual Property) by and between Presstek, Inc.
and Citizens Bank New Hampshire dated October 15, 2003 (filed herewith).
10.12 Security Agreement (Intellectual Property) by and between Lasertel Inc.
and Citizens Bank New Hampshire dated October 15, 2003 (filed herewith).
10.13 Mortgage and Security Agreement between Presstek, Inc. and Citizens Bank
New Hampshire dated October 15, 2003 (filed herewith).
10.14 Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
by and among Presstek, Inc., First American Title Insurance Company and
Citizens Bank New Hampshire dated October 15, 2003 (filed herewith).
31.1 Certification Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
31.2 Certification Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
25
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
* Confidential treatment requested as to omitted portions pursuant to Rule 24b-2
promulgated under the Securities and Exchange Act of 1934, as amended.
(b) Reports on Form 8-K
A Form 8-K was filed on July 24, 2003 furnishing information pursuant
to Item 9 and 12 relating to the press release of Presstek, dated July
24, 2003 reporting Presstek's financial results for the fiscal quarter
June 28, 2003.
26
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: November 12, 2003 /s/ Edward J. Marino
----------------------------------------
By: Edward J. Marino
President and Chief Executive Officer
(Principal Executive and Duly Authorized
Officer)
Date: November 12, 2003 /s/ Moosa E. Moosa
----------------------------------------
By: Moosa E. Moosa
Vice President - Finance,
Chief Financial Officer, Treasurer and
Secretary (Principal Financial and
Accounting Officer)
27
EXHIBIT INDEX
10.1* OEM Consumables Supply Agreement by and between Presstek, Inc. and
Heidelberg Druckmaschinen, AG., dated July 1, 2003 (filed herewith).
10.2* OEM Consumables Supply Agreement by and between Presstek, Inc. and
Heidelberg U.S.A., dated July 1, 2003 (filed herewith).
10.3 Credit Agreement by and among Presstek, Inc., Lasertel Inc., Citizens
Bank New Hampshire and Keybank National Association dated October 15,
2003 (filed herewith).
10.4 Revolving Note dated October 15, 2003 made by Presstek, Inc. in favor of
Citizens Bank New Hampshire (filed herewith).
10.5 Revolving Note dated October 15, 2003 made by Presstek, Inc. in favor of
KeyBank National Association (filed herewith).
10.6 Term Note dated October 15, 2003 made by Presstek, Inc. in favor of
Citizens Bank New Hampshire (filed herewith).
10.7 Term Note dated October 15, 2003 made by Presstek, Inc. in favor of
KeyBank National Association (filed herewith).
10.8 Swing Line Note dated October 15, 2003 made by Presstek, Inc. in favor of
Citizens Bank New Hampshire (filed herewith).
10.9 Security Agreement by and between Presstek, Inc. and Citizens Bank New
Hampshire dated October 15, 2003 (filed herewith).
10.10 Security Agreement by and between Lasertel Inc. and Citizens Bank New
Hampshire dated October 15, 2003 (filed herewith).
10.11 Security Agreement (Intellectual Property) by and between Presstek, Inc.
and Citizens Bank New Hampshire dated October 15, 2003 (filed herewith).
10.12 Security Agreement (Intellectual Property) by and between Lasertel Inc.
and Citizens Bank New Hampshire dated October 15, 2003 (filed herewith).
10.13 Mortgage and Security Agreement between Presstek, Inc. and Citizens Bank
New Hampshire dated October 15, 2003 (filed herewith).
10.14 Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
by and among Presstek, Inc., First American Title Insurance Company and
Citizens Bank New Hampshire dated October 15, 2003 (filed herewith).
31.1 Certification Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
31.2 Certification Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
* Confidential treatment requested as to omitted portions pursuant to Rule 24b-2
promulgated under the Securities and Exchange Act of 1934, as amended.